Lassila & Tikanoja plc: Interim Report 1 January–30 September
2023
Lassila & Tikanoja plc Stock exchange release 26 October
2023 at 8:00 a.m.
Lassila & Tikanoja plc: Interim Report 1 January–30
September 2023
SOLID PROFIT PERFORMANCE IN A CHALLENGING BUSINESS
CYCLE
Unless otherwise mentioned, the figures in brackets refer to the
corresponding period in the previous year.
- Net sales for the third quarter were EUR 200.9 million (204.4).
Net sales decreased by 1.7%.
- Adjusted operating profit for the third quarter was EUR 21.2
million (20.3) and operating profit was EUR 21.1 million (20.2).
Earnings per share were EUR 0.41 (0.38).
- Net sales for January–September totalled EUR 601.2 million
(634.0). Net sales excluding the renewable energy sources business
were on a par with the comparison period. Adjusted operating profit
was EUR 31.8 million (31.3) and operating profit was EUR 31.7
million (30.0). Earnings per share were EUR 0.65 (0.53).
- In January–September, net cash flow from operating activities
after investments per share was strong at EUR 0.74 (0.03).
- The operating profit of Facility Services Finland improved
substantially year-on-year.
Outlook for the year 2023
Net sales and adjusted operating profit in 2023 are estimated to
be at the same level as in the previous year even though the
comparison period includes net sales from the renewable energy
sources business in the amount of EUR 35.4 million.
PRESIDENT AND CEO EERO HAUTANIEMI:
“Net sales excluding the renewable energy sources business were
on a par with the comparison period. Adjusted operating profit was
EUR 31.8 million (31.3). Profit performance was solid in spite of
the challenging business cycle.
In the Environmental Services division, the focus was heavily on
B2B customers and producer responsibility organisation customers,
whose number grew in the third quarter. The division improved its
position in municipal contracts for waste management.
In the Industrial Services division, demand was stable in
hazardous waste services and environmental construction. In process
cleaning, the demand for annual maintenance break related work was
strong, and significant new customer accounts were won in that
business line.
The general level of economic activity continued to decline
during the period under review. This reduced waste volumes
particularly in the construction and retail segments. The prices
and demand for recycled raw materials were lower than in the
comparison period, which had a negative impact on net sales and
profit in Environmental Services and Industrial Services.
Improvements in operational efficiency largely compensated for the
weaker market conditions.
The measures initiated in Facility Services Finland in the
second half of 2022 to streamline the cost structure and improve
operational efficiency continued and had a positive effect on the
result. In Facility Services Sweden, the effort to simplify
operating models and adapt them to the changed business environment
continued according to plan.
Net cash flow from operating activities was strong, as was the
company’s financial position.”
GROUP NET SALES AND FINANCIAL PERFORMANCE
July–SeptemberNet sales for the third quarter
amounted to EUR 200.9 million (204.4), representing a year-on-year
decrease of 1.7%. Adjusted operating profit was EUR 21.2 million
(20.3), which corresponds to 10.6% (9.9%) of net sales. Operating
profit was EUR 21.1 million (20.2), or 10.5% (9.9%) of net sales.
Earnings per share were EUR 0.41 (0.38).
Net sales decreased in Environmental Services, Facility Services
Finland and Facility Services Sweden. Net sales were on a par with
the comparison period in Industrial Services. Operating profit
improved in Environmental Services and Facility Services Finland,
and declined in Industrial Services and Facility Services
Sweden.
The result for the third quarter was affected positively by
L&T’s EUR 0.3 million share of the profit of the joint venture
Laania Oy.
January–SeptemberNet sales for
January–September amounted to EUR 601.2 million (634.0), a decrease
of 5.2% year-on-year. Excluding the effect of the renewable energy
sources business, net sales increased by 0.4%, and the rate of
organic growth was 0.3%. Adjusted operating profit was EUR 31.8
million (31.3), representing 5.3% (4.9%) of net sales. Operating
profit was EUR 31.7 million (30.0), or 5.3% (4.7%) of net sales.
Earnings per share were EUR 0.65 (0.53).
Net sales increased in Industrial Services and decreased in
Facility Services Finland and Facility Services Sweden. Net sales
were on a par with the comparison period in Environmental Services
(excluding the effect of the renewable energy sources business).
Operating profit improved in Facility Services Finland and
decreased in Environmental Services, Industrial Services and
Facility Services Sweden.
The result for the review period was affected positively by the
fair value of EUR 1.3 million of an interest rate swap being
recognised in financial items due to the termination of the
interest rate swap. The result for the review period was also
affected positively by L&T’s EUR 2.5 million share of the
profit of the joint venture Laania Oy.
Financial summary
|
7-9/2023 |
7-9/2022 |
Change % |
1-9/2023 |
1-9/2022 |
Change % |
1-12/2022 |
|
|
|
|
|
|
|
|
Net sales, EUR
million |
200.9 |
204.4 |
-1.7 |
601.2 |
634.0 |
-5.2 |
844.1 |
Adjusted
operating profit, EUR million |
21.2 |
20.3 |
4.7 |
31.8 |
31.3 |
1.7 |
40.9 |
Adjusted
operating margin, % |
10.6 |
9.9 |
|
5.3 |
4.9 |
|
4.8 |
Operating
profit, EUR million |
21.1 |
20.2 |
4.6 |
31.7 |
30.0 |
5.7 |
42.9 |
Operating
margin, % |
10.5 |
9.9 |
|
5.3 |
4.7 |
|
5.1 |
EBITDA, EUR
million |
36.7 |
34.1 |
7.6 |
75.3 |
71.8 |
4.9 |
98.3 |
EBITDA, % |
18.3 |
16.7 |
|
12.5 |
11.3 |
|
11.6 |
Earnings per
share, EUR |
0.41 |
0.38 |
6.8 |
0.65 |
0.53 |
22.7 |
0.83 |
Net cash flow
from operating activities after investments per share, EUR |
0.23 |
0.15 |
49.7 |
0.74 |
0.03 |
|
1.08 |
Return on
equity (ROE), % |
|
|
|
14.9 |
12.9 |
|
14.6 |
Capital
employed, EUR million |
|
|
|
425.1 |
440.1 |
-3.4 |
437.2 |
Return on
capital employed (ROCE), %1 |
|
|
|
11.7 |
9.4 |
|
10.4 |
Equity ratio,
%1 |
|
|
|
35.8 |
33.2 |
|
34.3 |
Gearing,
% |
|
|
|
77.9 |
95.0 |
|
75.9 |
1 The figures for the first three quarters of 2022 have been
adjusted. More detailed information on the restatements are
provided in the section on financial indicators in this interim
report.
NET SALES AND OPERATING PROFIT BY DIVISION
Environmental Services
July–SeptemberThe division’s net sales for the
third quarter decreased to EUR 74.1 million (75.0). Operating
profit was EUR 11.7 million (11.1).
January–SeptemberThe net sales of Environmental
Services decreased to EUR 214.8 million (250.1) in
January–September. Operating profit was EUR 23.5 million (24.1).
Excluding the effect of the renewable energy sources business, net
sales were on a par with the comparison period. The renewable
energy sources business was reported as a part of the Environmental
Services division until the end of the second quarter of 2022.
The focus of the Environmental Services division is heavily on
B2B customers and producer responsibility organisation customers,
and their number grew during the period under review. The division
improved its position in municipal contracts for waste
management.
The decline in general economic activity was reflected in lower
waste volumes during the review period. Waste streams decreased
particularly in the construction and retail segments. The demand
and prices of recycled raw materials were at a low level. The
division’s profitability remained stable. The division improved the
efficiency of its operations in response to cost inflation. Change
negotiations were held in the division, which led to the employment
relationships of 19 employees being terminated.
There is a significant systems renewal project under way in
Environmental Services, which will also include the deployment of a
new ERP system. The systems renewal project will be reflected in
higher fixed costs in the division throughout the year. The
supplier of the ERP system was changed in 2022 and, during the
period under review, the previous supplier paid a one-off
compensation relating to the termination of the co-operation. A
part of the expenses capitalised during the co-operation with the
previous supplier were written down during the review period. The
net impact on the division’s operating profit of the one-off
compensation, the costs related to it and the write-down was not
significant.
Industrial Services
July–SeptemberThe division’s net sales for the
third quarter totalled EUR 39.0 million (38.9). Operating profit
was EUR 6.1 million (7.0).
January–SeptemberThe Industrial Services
division’s net sales for January–September grew to EUR 103.1
million (95.7). Operating profit was EUR 10.2 million (10.4).
In the Industrial Services division, demand was stable in
hazardous waste services and environmental construction, although
operating profit decreased from the particularly high level seen in
the comparison period. In process cleaning in Finland, the demand
for annual maintenance break related work was strong, and
significant new customer accounts were won in that business line.
Resource allocation for annual maintenance breaks was successful.
In Sweden, demand in the process cleaning business was solid
despite being lower when compared to the high level seen in the
comparison period.
Facility Services Finland
July–September The division’s net sales for the
third quarter totalled EUR 58.8 million (60.2). Operating profit
was EUR 3.2 million (2.0).
January–September The net sales of Facility
Services Finland decreased to EUR 188.6 million (191.7). Operating
profit improved to EUR 3.4 million (-1.3).
Unprofitable customer agreements ended in Facility Services
Finland during the period under review. The measures initiated in
the second half of 2022 to streamline the cost structure and
improve operational efficiency continued during the period under
review. In the cleaning business, the efficiency of production
improved and personnel turnover continued to decrease in the third
quarter. The rising costs caused by high inflation were, for the
most part, passed on to customer prices.
Facility Services Sweden
July–SeptemberThe division’s net sales for the
third quarter decreased to EUR 30.3 million (31.9). Operating
profit was EUR 0.2 million (0.2). Operating profit before the
amortisation of purchase price allocations of acquisitions was EUR
0.5 million (0.7).
January–SeptemberThe net sales of Facility
Services Sweden totalled EUR 98.7 million (100.7) in
January–September. The decrease in net sales was due to the
depreciation of the Swedish krona. Net sales denominated in the
Swedish krona increased. Operating profit decreased to EUR -2.8
million (-0.1). Operating profit before the amortisation of
purchase price allocations of acquisitions was EUR -1.9 million
(1.4).
Customer agreements in the Swedish business are mostly
fixed-price contracts, and the division has not been able to pass
the increased production costs on to customer prices. The division
has a programme under way to simplify operating models and adapt
them to the changed business environment. The results are expected
to become visible by the end of 2024.
FINANCING
Net cash flow from operating activities amounted to EUR 58.5
million (38.7) in January–September. Net cash flow after
investments totalled EUR 28.1 million (1.0). In the comparison
period, net cash flow after investments was reduced by
acquisitions, which had a total impact of approximately EUR 13
million. A total of EUR 12.3 million in working capital was
committed (EUR 22.3 million committed).
At the end of the review period, interest-bearing liabilities
amounted to EUR 200.6 million (229.6). Net interest-bearing
liabilities totalled EUR 174.9 million (199.9). The average
interest rate on long-term loans, excluding lease liabilities, with
interest rate hedging, was 4.0% (2.5%). In the second quarter, the
company refinanced a EUR 50 million bank loan that would have
matured in the third quarter of 2024. The new bank loan is in the
amount of EUR 40 million and will mature in the third quarter of
2026. In addition to the usual financial covenants, the new bank
loan is linked to sustainability targets, namely L&T’s carbon
footprint and accident frequency. The interest rate swap used by
the company to convert part of the EUR 50 million bank loan into a
fixed interest loan was terminated in connection with the
refinancing of the bank loan. The fair value of the interest rate
swap, EUR 1.3 million, was recognised in financial income in the
second quarter. In the third quarter, the company repaid the
remaining amount of EUR 17.7 million of the bond issued in
2018.
Of the EUR 100.0 million commercial paper programme, EUR 10.0
million (15.0) was in use at the end of the review period. The
account limit totalling EUR 10.0 million and the committed credit
limit totalling EUR 40.0 million were not in use, as was the case
in the comparison period.
Net financial expenses amounted to EUR -4.2 million (-4.2).
Financial expenses increased due to the rising general interest
rate level, which was compensated by the fair value of EUR 1.3
million of an interest rate swap being recognised due to the
termination of the interest rate swap. The effect of exchange rate
changes on net financial expenses was EUR -0.1 million (-0.2). Net
financial expenses were 0.7% (0.7%) of net sales.
The equity ratio was 35.8% (33.2%) and the gearing ratio was
77.9% (95.0%). The Group’s total equity was EUR 224.5 million
(210.5). Translation differences caused by the depreciation of the
Swedish krona affected equity by EUR -2.4 million. Cash and cash
equivalents at the end of the period amounted to EUR 25.6 million
(29.7).
DIVIDEND DISTRIBUTION The Annual General
Meeting held on 23 March 2023 resolved that a dividend of EUR 0.47
per share, totalling EUR 17.9 million, be paid on the basis of the
balance sheet that was adopted for the financial year 2022. The
dividend was paid to shareholders on 3 April 2023.
CAPITAL EXPENDITURE
Gross capital expenditure for the first half of the year came to
EUR 46.0 million (45.8). The capital expenditure consisted
primarily of machine and equipment purchases, as well as
investments in information systems. Acquisitions accounted for
approximately EUR 22 million of the gross capital expenditure in
the comparison period.
SUSTAINABILITY
Environmental responsibility
Climate benefits for customers created by L&T
|
Q1–Q3/2023 |
Q1–Q3/2022 |
2022 |
Target |
|
|
|
|
|
Carbon handprint (tCO2e) |
-339,200 |
-397,000 |
-534,500 |
growth
faster than net sales |
The carbon handprint illustrates the climate benefits of a
product, process or service, i.e. the emission reduction potential
for the user. L&T’s carbon handprint reduces the customer’s
carbon footprint. Our services generated emission reductions for
customers through, for example, customers replacing virgin raw
materials with secondary raw materials, and fossil fuels with solid
recovered fuels.
The carbon handprint of the renewable energy sources business
and the joint venture Laania is not reported as part of L&T’s
carbon handprint for 2022.
Progress towards science-based emission reduction targets, using
2018 as the baseline
|
Q1–Q3/2023 |
Q1–Q3/2022 |
2022 |
Target |
Target to be achieved by |
|
|
|
|
|
|
Carbon footprint (tCO2e) |
23,400 |
26,000 |
34,200 |
24,400 |
2030 |
L&T’s strategic objective is to halve the carbon footprint
of its operations by 2030, using 2018 as the baseline, and to
reduce the indirect emissions generated by its supply chain. The
emission reduction target set by L&T has been validated by the
Science Based Targets initiative. The achievement of this objective
will be promoted by switching to zero-emission transport
technologies and fuels and by opting for renewable energy at
L&T’s properties. Transport operations account for 95 per cent
of the emissions generated by L&T’s own operations. The use of
renewable fuels increased significantly year-on-year, particularly
in the Industrial Services division’s fleet of heavy vehicles.
The fuel distribution obligation was adjusted in 2022 by
reducing the biofuel component by 7.5 percentage points. The change
was not taken into account in the emissions calculations reported
in L&T’s annual report published in March 2023, as Statistics
Finland had not yet updated its fuel classification data in
accordance with the change. Statistics Finland published the
updated fuel classification data later in spring 2023, and they
have been taken into account in the emission calculations in this
report.
Social responsibility
Total recordable incident frequency (TRIF)
|
Q1–Q3/2023 |
Q1–Q3/2022 |
2022 |
Target |
Target to be achieved by |
|
|
|
|
|
|
Total recordable incident
frequency |
23 |
23 |
23 |
15 |
2030 |
|
|
|
|
|
|
|
L&T eliminates hazards and improves its own safety as well
as the safety of customers and other stakeholders through effective
proactive measures, such as risk assessments, safety observations,
Safety Walks and occupational safety sessions. L&T has provided
training on building workplace safety culture to over 80% of the
company’s supervisors in Finland as part of the “Safety under the
helmet” training initiative.
Well-being at work
|
Q1–Q3/2023 |
Q1–Q3/2022 |
2022 |
Target |
Target to be achieved by |
|
|
|
|
|
|
Occupational health rate (proportion of
employees with no sickness-related absences) |
48 |
47 |
40 |
57 |
2026 |
Sickness-related absences
(%) |
4.9 |
5.5 |
5.6 |
4 |
2030 |
The objective of L&T’s personnel policies and plans is to
ensure that the number, competence and retention of personnel are
at the level required for effective performance. For a
labour-intensive company, employees’ ability to work and function
and maintain it throughout their careers until retirement on
old-age pension is important.
PERSONNEL
In January–September, the average number of employees converted
into full-time equivalents was 6,707 (7,382). At the end of the
review period, L&T had 8,540 (8,637) full-time and part-time
employees. Of these, 7,197 (7,251) worked in Finland and 1,343
(1,386) in Sweden.
SHARES AND SHARE CAPITAL Traded volume
and price
The volume of trading in L&T’s shares in January–September
was 3.8 million shares, which is 10.1% (20.9%) of the average
number of outstanding shares. The value of trading was EUR 40.0
million (89.9). The highest share price was EUR 11.84 and the
lowest EUR 9.53. The closing price was EUR 9.74. At the end of the
review period, the market capitalisation excluding the shares held
by the company was EUR 371.6 million (380.3).
Own shares At the end of the period, the
company held 644,772 of its own shares, representing 1.7% of all
shares and votes. Share capital and number of
shares The company’s registered share capital was EUR
19,399,437 and the number of outstanding shares was 38,154,102 at
the end of the period. The average number of shares excluding the
shares held by the company was 38,125,851.
Shareholders At the end of the review period,
the company had 25,218 (23,944) shareholders. Nominee-registered
holdings accounted for 9.5% (8.2%) of the total number of
shares.
Flagging notifications
On 26 June 2023, Lassila & Tikanoja plc received a
notification indicating that Mandatum Life Insurance Company
Limited’s shareholding in Lassila & Tikanoja fell below the 5%
threshold on 26 June 2023. Authorisations for the Board of
Directors The Annual General Meeting held on 23 March 2023
authorised Lassila & Tikanoja plc’s Board of Directors to
decide on the repurchase of the company’s own shares using the
company’s unrestricted equity. In addition, the Annual General
Meeting authorised the Board of Directors to decide on a share
issue and the issuance of special rights entitling their holders to
shares. The Board of Directors is authorised to purchase a maximum
of 2,000,000 company shares (5.2% of the total number of shares).
The repurchase authorisation is effective for 18 months. The Board
of Directors is authorised to decide on the issuance of new shares
or shares that may be held by the company through a share issue
and/or issuance of option rights or other special rights conferring
entitlement to shares, referred to in Chapter 10, Section 1 of the
Finnish Companies Act, so that under the authorisation, a maximum
of 2,000,000 shares (5.2% of the total number of shares) may be
issued and/or conveyed. The authorisation is effective for 18
months.
RESOLUTIONS BY THE ANNUAL GENERAL MEETING
The Annual General Meeting of Lassila & Tikanoja plc was
held on 23 March 2023. The resolutions of the Annual General
Meeting were announced in more detail in a stock exchange release
on 23 March 2023.
BOARD OF DIRECTORS The members of Lassila &
Tikanoja plc’s Board of Directors are Teemu Kangas-Kärki, Laura
Lares, Sakari Lassila, Jukka Leinonen, Anni Ronkainen and Pasi
Tolppanen. Lassila & Tikanoja plc’s Annual General Meeting held
on 23 March 2023 elected Jukka Leinonen as the Chairman of the
Board and Sakari Lassila as the Vice Chairman. In its constitutive
meeting held after the Annual General Meeting, the Board of
Directors elected the members of the Audit Committee and the
Personnel and Sustainability Committee from amongst its members.
Sakari Lassila (Chairman), Teemu Kangas-Kärki and Anni Ronkainen
were elected to the Audit Committee. Jukka Leinonen
(Chairman), Laura Lares and Pasi Tolppanen were elected to the
Personnel and Sustainability Committee.
The company announced the composition of Lassila & Tikanoja
plc’s Nomination Board on 19 September 2023. Lassila & Tikanoja
plc’s three largest shareholders, who are entitled to appoint a
representative to Lassila & Tikanoja plc’s Shareholders’
Nomination Board are the Evald and Hilda Nissin Säätiö foundation,
a group of shareholders (Chemec Oy, CH-Polymers Oy, Maijala Eeva,
Maijala Hannele, Maijala Heikki, Maijala Juhani, Maijala Juuso,
Maijala Miikka, Maijala Mikko, Maijala Roope and Maijala Tuula),
and Nordea Funds Ltd (through 11 funds managed by it). These
shareholders have appointed Juhani Lassila, Miikka Maijala and
Tanja Eronen as their representatives in Lassila & Tikanoja’s
Nomination Board. The Chairman of Lassila & Tikanoja plc’s
Board of Directors, Jukka Leinonen, acts as the fourth member of
the Nomination Board. The Chairman of the Nomination Board is
Juhani Lassila.
CHANGES IN THE GROUP EXECUTIVE BOARD
On 31 March 2023, the company announced that Tina Hellstadius,
the Senior Vice President for Facility Services Sweden, will leave
Lassila & Tikanoja on 31 March 2023.
On 18 April 2023, the company announced that Mikko Taipale
(Master of Laws) has been appointed Senior Vice President, Facility
Services Sweden and a member of the Group Executive Board effective
from 19 April 2023.
EVENTS AFTER THE REVIEW PERIOD
On 25 October 2023 the company announced that Lassila &
Tikanoja plc has completed a strategy review and decided to focus
on its circular economy businesses, in addition the company
initiates an evaluation of strategic alternatives for Facility
Services Finland and Facility Services Sweden.
NEAR-TERM RISKS AND UNCERTAINTIES
General economic uncertainty may affect the level of economic
activity among customers, which may reduce the demand for L&T’s
services.
Higher costs, such as the rising prices of fuel and energy, and
potential interest rate hikes may have a negative impact on the
company’s financial performance.
The company has several ERP system renewal projects under way.
Temporary additional costs arising from system deployments and
establishing the operating model may weigh down the company’s
result.
Production costs may be increased by challenges related to
employee turnover and labour availability.
The geopolitical situation involves continued uncertainty due to
Russia’s war of aggression. The indirect impacts on overall
economic activity in Finland and Sweden may have a negative impact
on net sales and profit.
The Group company Lassila & Tikanoja FM AB is a claimant and
a defendant in legal proceedings in Sweden concerning unpaid
receivables invoiced from a former customer of the Group. In June
2022, Lassila & Tikanoja FM AB took legal action in the
District Court of Solna against the former customer company of
L&T, demanding payment of approximately SEK 18 million for
unpaid receivables. In March 2023, the former L&T customer
company in question rejected Lassila & Tikanoja FM AB’s claims
and the payment obligation, and brought a counterclaim demanding
compensation totalling approximately SEK 102 million from Lassila
& Tikanoja FM AB. The dispute is still pending. Lassila &
Tikanoja considers the counterclaim to be without
merit.
More detailed information on Lassila & Tikanoja’s risks and
risk management is provided in the 2022 Annual Review and in the
Report by the Board of Directors and the consolidated financial
statements.
Helsinki, 25 October 2023
LASSILA & TIKANOJA PLC
Board of DirectorsEero HautaniemiPresident and CEO
For additional information, please contact:Eero Hautaniemi,
President and CEO, tel. +358 10 636 2810Valtteri Palin, CFO, tel.
+358 40 734 7749
Lassila & Tikanoja is a service company that is putting the
circular economy into practice. Together with our customers, we
keep materials, manufacturing sites and properties in productive
use for as long as possible and we enhance the use of raw materials
and energy. This is to create more value with the circular economy
for our customers, personnel and society in a broader sense.
Achieving this also means growth in value for our shareholders. Our
objective is to continuously grow our actions’ carbon handprint,
our positive effect on the climate. We assume our social
responsibility by looking after the work ability of our personnel
as well as offering jobs to those who are struggling to find
employment, for example. With operations in Finland and Sweden,
L&T employs approximately 8,300 people. Net sales in 2022
amounted to EUR 844.1 million. L&T is listed on Nasdaq
Helsinki.
Distribution:Nasdaq HelsinkiMajor mediawww.lt.fi/en
- LT-Interim report Q3 2023
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