Heading in the right direction

Dear Lemminkäinen shareholders,

In 2015, our result improved from the previous year and we were able to strengthen our financial position.

Our balance sheet is lighter than in 2014, and the cash flow from our business operations remained positive throughout the year. Our interest-bearing net debt decreased from EUR 214 million to EUR 127 million and our operating capital from EUR 590 million to EUR 475 million. In spring 2015, we carried out a partial repurchase of our first hybrid bond. We continued to streamline our portfolio and divested non-strategic businesses. These actions will improve our competitiveness going forward.

During 2015 we updated our strategy to align it with changes in the operating environment and our risk tolerance. The area with the best growth outlook in our market is still in infrastructure construction in Scandinavia, and this is where our Infra projects segment seeks growth. In addition, we decided to postpone the start of new residential development projects in Russia for the time being.

We are concerned about the traffic policy debate in our home market Finland. The government’s plan to cut the funding for new major traffic projects in the coming years will affect Finland’s competitiveness as well as the functionality and comfort of living in urban growth centres. Many studies show that an investment in a well-planned infrastructure project pays itself back many times over in the form of taxes to the society, as new traffic arrangements enable residential and commercial construction in their immediate surroundings.

We still have a lot to do to achieve the profit targets of the current strategy period. We will focus even stronger on improving our operational efficiency in our businesses. In the paving business, we will use the new operating model to pursue more transparency and efficiency in our business and ability to react faster to changes in the market. The Infra projects operating model will be developed to support profitable growth in the Scandinavian market. In Building construction, Finland, we will harmonise our ways of working and shorten project lead times without compromising quality.

Unfortunately, our accident frequency rate increased slightly compared to the previous year. In 2016 we will concentrate on turning the trend to the right direction. The sustainability project launched in 2015 helps us to better define the environmental impact of our operations in our markets. We are making determined efforts to reduce the environmental impact of our operations by focusing especially on energy and material efficiency.

We published our new vision in autumn 2015: we want to be a best-in-class construction company. For us, this means, first and foremost, satisfied customers, employees and shareholders. We want to employ the best talent in the industry and, together with our customers, develop the construction industry.

I would like to thank our customers, employees and shareholders for the good cooperation in 2015. We want to retain your trust also in the coming years.

Casimir Lindholm
President and CEO