Lassila & Tikanoja plc: Interim report 1 January-31 March 2012

Helsinki, Finland, 2012-04-26 07:00 CEST (GLOBE NEWSWIRE) --
Net sales for the first quarter EUR 171.3 million (EUR 159.5 million)
Operating profit EUR 4.9 million (EUR 6.5  million)
Operating profit excluding non-recurring items EUR 5.0 million (EUR 6.8 million)
Earnings per share EUR 0.07 (EUR 0.10)
Full-year net sales in 2012 are expected remain at the 2011 level. Operating profit, excluding non-recurring items, is expected to remain at the 2011 level or improve slightly.


CEO PEKKA OJANPÄÄ:

“Our performance in the first quarter was disappointing. We will therefore adopt an accelerated schedule of profitability-enhancement measures, such as planned price increases and fixed cost cuts. Key projects associated with logistics and production optimisation, as well as with the development of procurement operations, will be carried out as scheduled during 2012.


GROUP NET SALES AND FINANCIAL PERFORMANCE

Lassila & Tikanoja’s net sales for the first quarter increased by 7.4% to EUR 171.3 million (EUR 159.5 million).
Operating profit was EUR 4.9 million (EUR 6.5 million), representing 2.9% (4.1%) of net sales, and operating
profit excluding non-recurring items was EUR 5.0 million (EUR 6.8 million). Earnings per share were EUR 0.07
(EUR 0.10).

Acquisitions made in the previous year contributed to the growth in net sales.

Financial performance was adversely affected by higher fuel, repair and overtime costs than in the comparison period, as well as declining profitability in international operations. Price competition taxed the profitability of commissioned wintertime assignments in property maintenance services. Similarly, the performance of the joint venture L&T Recoil weakened from the comparison period. Thanks to smaller depreciation and a trimmer cost structure, Renewable Energy Sources was able to improve its profitability.


Financial summary

* Breakdown of operating profit excluding non-recurring items is presented below the division reviews.


NET SALES AND FINANCIAL PERFORMANCE BY DIVISION
Environmental Services

The division’s net sales for the first quarter were up by 6.3% to EUR 77.0 million (EUR 72.4 million). Operating
profit totalled EUR 3.0 million (EUR 4.2 million) and operating profit excluding non-recurring items was EUR 3.0
million (EUR 4.2 million).

The division’s net sales growth could be primarily attributed to waste management services, half of this growth being organic.

Recycled raw material volumes remained healthy in the first quarter, as did the prices of secondary raw materials (fibres, plastics, metals). Meanwhile, demand for services provided to the industry, especially process cleaning services, was weaker than anticipated.

The quarter’s operating profit decreased from the comparison period due to higher fuel and repair costs and weaker profitability in international operations (Latvia, Russia). The rise in cost levels can be transferred to service prices during 2012.

The joint venture L&T Recoil also saw its performance deteriorate from the comparison period, due to the two-week shutdown in March. However, the plant’s reliability and operating rate improved from the comparison period.

Cleaning and Office Support Services

The division’s net sales for the first quarter totalled EUR 39.3 million (EUR 34.9 million), showing an increase of
12.8%. Operating profit totalled EUR 0.9 million (EUR 1.5 million) and operating profit excluding non-recurring
items was EUR 1.0 million (EUR 1.5 million).

Acquisitions made in the previous spring contributed to net sales growth.

Swedish operations were in the red, which significantly taxed the division’s operating profit. The result from Finnish operations was at the comparison period’s level, even though profitability was eroded by an increase in labour costs, which could not be fully transferred to service prices.

At the beginning of April, reorganisation of the Swedish operations and a savings programme were launched to improve profitability.

Property Maintenance

The division’s net sales for the first quarter were up by 3.5% to EUR 40.3 million (EUR 38.9 million). Operating
profit totalled EUR 0.8 million (EUR 1.9 million) and operating profit excluding non-recurring items was EUR 0.8
million (EUR 1.9 million).

Expansion of the damage repair service network and the resulting increase in workload contributed to the year-on-year increase in the division’s net sales.

Increasingly tough price competition and the rise in subcontracting and overtime costs eroded the operating profit in property maintenance services.

Renewable Energy Sources

First quarter net sales of Renewable Energy Sources (L&T Biowatti) were up by 9.8% to EUR 17.6 million
(EUR 16.0 million). The division recorded an operating profit of EUR 0.8 million (a loss of EUR 0.7 million), and
an operating profit excluding non-recurring items of EUR 0.8 million (a loss of EUR 0.4 million).

Net sales increased from the comparison period thanks to successful new sales. In the comparison period, a suspension in the payment of electricity production subsidy to power plants had a negative effect on the demand for wood-based fuels. 

Thanks to smaller depreciation and a trimmer cost structure, there was a marked improvement in the operating profit excluding non-recurring items.

BREAKDOWN OF OPERATING PROFIT EXCLUDING NON-RECURRING ITEMS
 

FINANCING

Cash flows from operating activities amounted to EUR 8.9 million (EUR 10.5 million). EUR 2.5 million was tied up in the working capital (EUR 1.9 million).

At the end of the period, interest-bearing liabilities amounted to EUR 159.0 million (EUR 141.8 million). Net interest-bearing liabilities amounted to EUR 151.2 million, showing an increase of EUR 24.0 million from the beginning of the year and an increase of EUR 19.2 million from the comparison period.

Net finance costs showed a slight decrease in January-March and amounted to EUR 1.0 million (EUR 1.1 million). Net finance costs were 0.6% (0.7%) of net sales. The average interest rate on long-term loans (with interest-rate hedging) was 3.1% (3.2%). Long-term loans totalling EUR 19.9 million will mature during the rest of the year.

The equity ratio was 39.7% (42.4%) and the gearing rate 75.4 (63.9). Liquid assets at the end of the period amounted to EUR 7.8 million (EUR 9.8 million).

Of the EUR 100 million commercial paper programme, EUR 46 million (EUR 25 million) was in use at the end of the period. Committed limits totalling EUR 45 million, were not in use, as was the case in the comparison period.


DISTRIBUTION OF ASSETS

The Annual General Meeting held on March 15 2012 resolved that the profit for 2011 be placed in retained earnings and that no dividend be paid. A capital repayment of EUR 0.55 per share would be paid for the financial year 2011. The capital repayment, totalling EUR 21.3 million, was paid to the shareholders on 27 March 2012.


CAPITAL EXPENDITURE

Capital expenditure totalled EUR 11.5 million (EUR 12.9 million) and was mainly comprised of machine and equipment purchases.

In the first quarter the property maintenance operations of IK Kiinteistöpalvelu Oy, the business of Jyvässeudun Talonmiehet Oy and Kiinteistöhuolto Markku Hyttinen Oy were acquired into Property Maintenance.


PERSONNEL

In January-March the average number of employees converted into full-time equivalents was 8,119 (7,520). The total number of full-time and part-time employees at the end of the period was 9,229 (8,725). Of them 7,257 (6,989) people worked in Finland and 1,972 (1,736) people in other countries.


SHARE AND SHARE CAPITAL

Traded volume and price
The volume of trading excluding the shares held by the company in Lassila & Tikanoja plc shares on NASDAQ OMX Helsinki in January-March was 2,728,251 which is 7.1% (8.5%) of the average number of outstanding shares. The value of trading was EUR 31.4 million (EUR 44.1 million). The trading price varied between EUR 10.70 and EUR 12.15. The closing price was EUR 11.03. At the end of the period, the company held 113,305 of its own shares. The market capitalisation excluding the shares held by the company was EUR 426.7 million (EUR 492.0 million) at the end of the period.
Own shares
At the end of the period the company held 113,305 of its own shares, representing 0.3% of all shares and votes.
Share capital and number of shares
The company’s registered share capital amounts to EUR 19,399,437, and the number of outstanding shares to 38,685,569 shares. The average number of shares excluding the shares held by the company totalled 38,685,569.

Share option scheme 2008
In 2008, 230,000 share option rights were issued, each entitling its holder to subscribe for one share of Lassila & Tikanoja plc. 33 key persons hold 168,000 options and L&T Advance Oy 62,000 options.

The exercise price is EUR 15.65. It was reduced by EUR 0.55 as of 20 March 2012. The price was reduced with the amount of capital repayment in accordance with the terms and conditions of the share option scheme. The exercise period in NASDAQ OMX Helsinki is from 1 November 2010 to 31 May 2012.

As a result of the exercise of the outstanding 2008 share options, the number of shares may increase by a maximum of 168,000 new shares, which is 0.4% of the current number of shares.

Share-based incentive programme 2012
Lassila & Tikanoja plc’s Board of Directors decided on 14 December 2011 on a new share-based incentive programme. Rewards will be based on the EVA result of Lassila & Tikanoja group without L&T Recoil. They will be paid partly as shares and partly in cash. The part paid in cash will cover the taxes caused by the reward.  Based on the programme a maximum of 65,520 shares of the company can be granted. The company will buy the shares from the stock market. The programme covers 22 persons.

Shareholders
At the end of the period, the company had 9,460 (9,665) shareholders. Nominee-registered holdings accounted for 15.1% (11.2%) of the total number of shares.

Notifications on major holdings
On 8 March 2012, Tapiola Mutual Pension Insurance Company announced that its holding of the shares and votes in Lassila & Tikanoja plc had fallen to 3.9%. 

Authorisation for the Board of Directors
The Annual General Meeting held on 15 March 2012 authorised Lassila & Tikanoja plc’s Board of Directors to make decisions on the repurchase of the company’s own shares using the company’s unrestricted equity.

The Board of Directors is authorised to purchase a maximum of 500,000 company shares, which is 1.3% of the total number of shares. The share issue authorisation will be effective for 18 months


RESOLUTIONS BY THE GENERAL MEETING

The Annual General Meeting of Lassila & Tikanoja plc, which was held on 15 March 2012, adopted the financial statements for the financial year 2011 and released the members of the Board of Directors and the Presidents and CEOs from liability.

The AGM resolved that the profit for 2011 be placed in retained earnings and that no dividend be paid. A capital repayment of EUR 0.55 per share, as proposed by the Board of Directors, would be paid for the financial year 2011 on the basis of the balance sheet adopted. The capital repayment, totalling EUR 21.3 million, payment date was resolved to be on 27 March 2012.

The Annual General Meeting confirmed the number of the members of the Board of Directors five. The following Board members were re-elected to the Board until the end of the following AGM: Heikki Bergholm, Eero Hautaniemi, Hille Korhonen, Sakari Lassila and Miikka Maijala.

KPMG Oy Ab, Authorised Public Accountants, was elected auditor. KPMG Oy Ab has announced that it will name Lasse Holopainen, Authorised Public Accountant, as its principal auditor.

The resolutions of the Annual General Meeting were announced in more detail in a stock exchange release on 15 March 2012.


BOARD OF DIRECTORS

The members of the Board of Directors are Heikki Bergholm, Eero Hautaniemi, Hille Korhonen, Sakari Lassila and Miikka Maijala. In its constitutive meeting the Board elected Heikki Bergholm as Chairman of the Board and Eero Hautaniemi as Vice Chairman.

From among its members, the Board elected Eero Hautaniemi as Chairman and Sakari Lassila and Miikka Maijala as members of the audit committee. Heikki Bergholm was elected as Chairman of the remuneration committee and Hille Korhonen as member of the committee.


SUMMARY OF STOCK EXCHANGE RELEASES PURSUANT TO ARTICLE 7, CHAPTER 2 OF THE SECURITIES MARKETS ACT

In a release published on 13 January 2012 the company announced that Antti Tervo has been appointed Chief Procurement Officer and Group Executive of Lassila & Tikanoja plc as of 14 February 2012.

In a release on 9 February 2012 the company announced that Lassila & Tikanoja plc has redeemed the remaining 30 percent of share capital of L&T Biowatti Oy as agreed in an agreement signed 18 December 2006.


EVENTS AFTER THE PERIOD

In a release published on 26 April 2012 the company announced that Lassila & Tikanoja is launching a new operational enhancement programme to improve its profitability and to adapt operations to the current market environment. The planned actions are estimated to improve profitability at least by EUR 4 million annually, over half of this in 2012.

The programme involves fixed cost cuts, price increases, holiday pay arrangements and other efficiency improvement measures.

L&T will record approximately EUR 1.0 million in non-recurring adjustment costs associated with the programme for the second quarter.


NEAR-TERM UNCERTAINTIES

Economic uncertainty may cause remarkable changes in the Environmental Services division’s secondary raw material markets and in industrial customer relationships.

Any disturbances in L&T Recoil plant’s production could have a negative effect on the Environmental Services division’s performance. End-product and raw material price fluctuations, as well as the plant's supply volumes, have a major effect on L&T Recoil’s performance.

Uncertainties associated with the government subsidies for renewable fuels and their continuity could affect demand for the Renewable Energy Sources division's services.

More detailed information on L&T's risks and risk management is available in the Annual Report for 2011, in the report of the Board of Directors, and in the consolidated financial statements.


OUTLOOK FOR THE REST OF THE YEAR

Despite the economic uncertainty, the outlook for Environmental Services is, by and large, stable, but any weakening in demand for industrial services and in new construction may give a reason to make operational adjustments. Secondary raw material price developments and the operational reliability of L&T Recoil’s plant in particular will affect the division’s profitability.

The business environment for Cleaning and Office Support Services and Property Maintenance is expected to remain stable, though price competition is expected to remain tough.

Demand for L&T Biowatti's wood-based fuels is expected to grow slightly from the comparison period, and the division's profitability is likely to improve.

Full-year net sales in 2012 are expected remain at the 2011 level. Operating profit excluding non-recurring items, is expected to remain at the 2011 level or improve slightly.

CONDENSED FINANCIAL STATEMENTS 1 JANUARY-31 MARCH 2012


CONSOLIDATED INCOME STATEMENT
 

Earnings per share for profit attributable to the equity holders of the company:

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION
 

CONSOLIDATED STATEMENT OF CASH FLOWS
 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY   

A = Share capital
B = Share premium reserve
C = Currency translation differences
D = Revaluation reserve
E = Hedging reserve
F = Invested unrestricted equity reserve
G = Retained earnings
H = Equity attributable to equity holders of the company
I = Non-controlling interest
J = Total equity

KEY FIGURES
 

ACCOUNTING POLICIES

This financial statements release is in compliance with IAS 34 standard. The same accounting policies as in the annual financial statements for the year 2011 have been applied. The following new, revised or amended IFRS standards and IFRIC interpretations that have become effective in 2012 have not had an impact on the financial statements:

IFRS 7 (amendment) Financial Instruments: Disclosures - Derecognition
IAS 12 (amendment) Income taxes - Deferred tax
annual improvements to IFRS.
The preparation of financial statements in accordance with IFRS require the management to make such estimates and assumptions that affect the carrying amounts at the balance sheet date for the assets and liabilities and the amounts of revenues and expenses. Judgements are also made in applying the accounting policies. Actual results may differ from the estimates and assumptions. 

The interim report has not been audited.

SEGMENT INFORMATION

Net sales

Operating profit

Other segment information

INCOME STATEMENT BY QUARTER
 

BUSINESS ACQUISITIONS

Business combinations in aggregate

Consideration

Recognised amounts of identifiable assets acquired and liabilities assumed

Acquisitions by Property Maintenance
1 January 2012, the property maintenance operations of IK Kiinteistöpalvelu Oy.
1 February 2012, the business of Jyvässeudun Talonmiehet Oy and Kiinteistöhuolto Markku Hyttinen Oy.

The figures for these acquired businesses are stated in aggregate, because none of them is of material importance when considered separately. Fair values have been determined as of the time the acquisition was realised. No business operations have been divested as a consequence of any acquisition. All acquisitions have been paid for in cash. With share acquisitions, L&T was able to gain 100% of the voting rights. The conditional consideration is tied to the transfer of the customer contracts to Lassila & Tikanoja plc, and the estimates of the fair values of considerations were determined on the basis of probability-weighted final acquisition price. The estimates for the conditional consideration have not changed between the time of acquisition and the balance sheet date. Trade and other receivables have been recorded at fair value at the time of acquisition. Individual acquisition prices have not been itemised because none of them is of material importance when considered separately. Profit for the period includes changes allocated to acquisition prices amounting to EUR 140 thousand.

By net sales, the largest acquisition was the business of Jyvässeudun Talonmiehet Oy (EUR 858 thousand).
It is not possible to itemise the effects of the acquired businesses on the consolidated net sales and profit for the period, because L&T integrates its acquisitions into the current business operations as quickly as possible to gain synergy benefits.

The accounting policy concerning business combinations is presented in Annual Report under Note 2 of the consolidated financial statements and under Summary on significant accounting policies.


CHANGES IN INTANGIBLE ASSETS

CHANGES IN PROPERTY, PLANT AND EQUIPMENT

CAPITAL COMMITMENTS
 

 
RELATED-PARTY TRANSACTIONS
(Joint ventures)

CONTINGENT LIABILITIES

Securities for own commitments

Other securities are security deposits.
The Group has given no pledges, mortgages or guarantees on behalf of outsiders.

Operating lease liabilities

Liabilities associated with derivative agreements

Interest rate and currency swaps
 

* The interest rate and currency swaps are used to hedge cash flow related to a floating rate loan, and hedge accounting under IAS 39 has been applied to it. The hedges have been effective, and the changes in the fair values are shown in the consolidated statement of comprehensive income for the period. On the balance sheet date, the value of foreign currency loans was EUR 0.3 million positive. The fair values of the swap contracts are based on the market data at the balance sheet date.

** Hedge accounting under IAS 39 has not been applied to these interest rate swaps. Changes in fair values
have been recognised in finance income and costs.

Commodity derivatives

Commodity derivative contracts were concluded, for hedging of future diesel oil purchases. IAS 39 -compliant hedge accounting will be applied to these contracts, and the effective change in fair value will be recognised in the hedging reserve within equity. The fair values of commodity derivatives are based on market prices at the balance sheet date.

Currency derivatives

Hedge accounting under IAS 39 has not been applied to forward contracts. Changes in fair values have been recognised in finance income and costs.


CALCULATION OF KEY FIGURES  

Earnings per share:
profit attributable to equity holders of the parent company / adjusted average basic number of shares

Earnings per share, diluted:
profit attributable to equity holders of the parent company / adjusted average diluted number of shares

Cash flows from operating activities/share:
cash flow from operating activities as in the statement of cash flows / adjusted average number of shares

EVA:
operating profit - cost calculated on invested capital (average of four quarters)
WACC 2011: 7.7% and WACC 2012: 7.1%

Equity per share:
equity attributable to equity holders of the parent company / adjusted basic number of shares at end of period

Return on equity, % (ROE):
(profit for the period / equity (average)) x 100

Return on investment, % (ROI):
(profit before tax + finance costs) / (total equity and liabilities - non-interest-bearing liabilities (average)) x 100

Equity ratio, %:
equity / (total equity and liabilities - advances received) x 100

Gearing, %:
net interest-bearing liabilities / equity x 100

Net interest-bearing liabilities:
interest-bearing liabilities - liquid assets

Operating profit excluding non-recurring items:
operating profit +/- non-recurring items


Helsinki, 25 April 2012

LASSILA & TIKANOJA PLC
Board of Directors


Pekka Ojanpää
President and CEO

For additional information please contact:
Pekka Ojanpää, President and CEO, tel. +358 10 636 2810,
Ville Rantala, CFO, tel. +358 50 385 1442 or
Keijo Keränen, Head of Treasury & IR, tel. +358 50 385 6957.


Lassila & Tikanoja specialises in environmental management and property and plant support services. L&T is a significant supplier of wood-based biofuels, recovered fuels and recycled raw materials. With operations in Finland, Sweden, Latvia and Russia, L&T employs 9,500 persons. Net sales in 2011 amounted to EUR 652 million. L&T is listed on NASDAQ OMX Helsinki.

Distribution:
NASDAQ OMX Helsinki
Major media
www.lassila-tikanoja.com