Lassila & Tikanoja plc: Interim Report 1 January–31 March 2022
Lassila & Tikanoja plc
Stock exchange release
27 April 2022 at 8:00 a.m.
Lassila & Tikanoja plc: Interim Report 1 January–31 March 2022
NET SALES GREW CLEARLY – OPERATING PROFIT AFFECTED BY HIGH SICKNESS-RELATED ABSENCE AND INCREASED FUEL PRICES
Unless otherwise mentioned, the figures in brackets refer to the corresponding period in the previous year.
- Net sales for the first quarter were EUR 210.4 million (192.0). Net sales increased by 9.6%. Organic growth was 5.2%.
- Adjusted operating profit was EUR 0.0 million (3.6) and operating profit was EUR -0.3 million (3.7). Earnings per share were EUR -0.02 (0.07). Cash flow from operating activities remained on the same level at EUR 13.9 million (13.5).
- Adjusted operating profit was negatively affected by sickness-related absence caused by the coronavirus pandemic and increased fuel prices. The company estimates the cost impact to have been EUR 5.2 million in the first quarter. The negative annual impact of rising fuel prices will be offset by price increases and cost savings implemented in February–April.
- Industrial Services expanded into the Swedish process cleaning market and strengthened its market share in hazardous waste business in Finland.
Outlook for the year 2022
Net sales and adjusted operating profit in 2022 are estimated to be at the same level as in the previous year.
PRESIDENT AND CEO EERO HAUTANIEMI:
“Net sales grew both organically and due to acquisitions during the review period. Adjusted operating profit fell short of the comparison period (3.6), amounting to EUR 0.0 million. The company estimates that the increase in sickness-related absence caused by the coronavirus pandemic and the impact of higher fuel prices on adjusted operating profit amounted to EUR -5.2 million in the first quarter.
Conditions in the first quarter were exceptional. The coronavirus pandemic significantly increased employees’ sickness-related absence in Finland, and there was heavy snowfall in Southern Finland, which increased production costs in Environmental Services and Facility Services Finland’s property maintenance.
The immediate effects of the war in Ukraine on Lassila & Tikanoja are minor. L&T does not operate in Russia, Belarus or Ukraine or have significant customer relationships with a Russian background. The impact of the war on the Company is indirect and caused by the rise in fuel prices. The negative annual impact of rising fuel prices will be offset by price increases and cost savings implemented in February–April.
The implementation of the strategy and development projects progressed according to plan in January-March and we were able to grow in our core businesses by strengthening our market share.
The organisational structure of Environmental Services was revised and the building of a new ERP system proceeded. The new organisational structure gives more commercial responsibility to the regional organisation and strengthens the major customer sales organisation’s expertise in environmental responsibility management and consulting. Industrial Services expanded into the Swedish process cleaning market through an acquisition. In addition, the Industrial Services division strengthened its position in hazardous and non-hazardous waste recycling services by acquiring Fortum’s hazardous waste SME business in Finland.
In Facility services Finland, the cost efficiency improvement measures implemented in Finland in the last quarter of 2021 and the revised organisational structure compensated for the cost burden caused by high sickness-related absence rates in January-March. Energy efficiency services in Finland continued to grow in Technical Services.”
GROUP NET SALES AND FINANCIAL PERFORMANCE
January–March
Lassila & Tikanoja's net sales for the first quarter totalled EUR 210.4 million (192.0), an increase of 9.6% year-on-year. The rate of organic growth was 5.2%. Adjusted operating profit was EUR 0.0 million (3.6), representing 0.0% (1.9) of net sales. Operating profit was EUR -0.3 million (3.7), representing -0.1% (1.9) of net sales. Earnings per share were EUR -0.02 (0.07).
Net sales increased in Environmental Services, Industrial Services and Facility Services Finland. Net sales decreased in Facility Services Sweden. Operating profit declined in Environmental Services and Facility Services in Finland and Sweden. Operating profit was unchanged from the comparison period in Industrial Services.
The increase in sickness-related absence caused by the coronavirus pandemic and rising fuel prices had an estimated negative effect of EUR 5.2 million on the Group's adjusted operating profit. Profit for the period was affected negatively by the increase in net financial expenses to EUR -1.0 million (-0.6).
Financial summary
| 1–3/2022 | 1–3/2021 | Change % | 1–12/2021 | |
| Net sales, EUR million | 210.4 | 192.0 | 9.6 | 812.5 |
| Adjusted operating profit, EUR million | 0.0 | 3.6 | -99.9 | 42.4 |
| Adjusted operating margin, % | 0.0 | 1.9 | 5.2 | |
| Operating profit, EUR million | -0.3 | 3.7 | -107.5 | 42.2 |
| Operating margin, % | -0.1 | 1.9 | 5.2 | |
| EBITDA, EUR million | 13.5 | 16.4 | -17.7 | 95.1 |
| EBITDA, % | 6.4 | 8.5 | 11.7 | |
| Profit before tax, EUR million | -1.2 | 3.2 | -138.8 | 39.0 |
| Earnings per share, EUR | -0.02 | 0.07 | -128.9 | 0.90 |
| Net cash flow from operating activities after investments per share, EUR | -0.16 | 0.11 | -240.4 | 0.05 |
| Return on equity (ROE), % | -1.5 | 5.6 | 17.1 | |
| Invested capital, EUR million | 413.0 | 363.4 | 13.7 | 406.0 |
| Return on invested capital (ROI), % | -0.3 | 4.1 | 10.8 | |
| Equity ratio, % | 30.4 | 31.6 | 33.7 | |
| Gearing, % | 103.3 | 84.9 | 79.4 |
NET SALES AND OPERATING PROFIT BY DIVISION
Environmental Services
January–March
Net sales of Environmental Services grew to EUR 87.3 million (76.2) in the first quarter. Operating profit declined to EUR 2.9 million (4.5).
The number of corporate customers and waste volumes increased as a result of active sales to new customers. The demand for recycled raw materials and prices rose. The organisational structure of Environmental Services was revised. The new organisational structure gives more commercial responsibility to the regional organisation and strengthens the major customer sales organisation, which will be supported with stronger expertise in environmental responsibility management and consulting.
Production costs of Environmental Services increased due to the snowy winter in Southern Finland, as well as the high level of sickness-related absence due to the coronavirus pandemic and the sharp rise in fuel prices. The increase in fuel prices will be shifted to customer prices by price increases implemented in February and April. In renewable energy sources, the heavy snowfall decreased the heating value of stored wood fuels, which had a negative impact on the sales margin.
Industrial Services
January–March
The Industrial Services division’s net sales for the first quarter increased to EUR 23.1 million (19.6). Operating profit was EUR 0.2 million (0.2).
In February, Industrial Services entered the Swedish process cleaning market by acquiring 70 per cent of the shares of Sand & Vattenbläst i Tyringe AB (“SVB”) that offers process cleaning services in Sweden. Operating in Southern Sweden, SVB’s net sales in the last fiscal year were approximately EUR 10 million and the company has approximately 60 employees. The integration of the Swedish business proceeded according to plan and the performance was good in the first quarter. In addition, the Industrial Services division strengthened its position in hazardous and non-hazardous waste recycling services by acquiring Fortum’s hazardous waste SME business in Finland at the beginning of February.
Industrial Services continued active method development. Tuusula site commissioned a new system for the treatment of septic tank sands that reduces the amount of waste to be disposed of and transported. More new projects were started in the environmental construction business line than in the comparison period, and the treatment centres’ performance was strong. Sickness-related absence caused by the coronavirus and the rise in the price of fuels increased production costs. The increase in fuel prices will be shifted to customer prices by price increases implemented in February and April.
Facility Services Finland
January–March
Facility Services Finland’s net sales for the first quarter grew to EUR 68.3 million (61.2). Operating profit decreased to EUR -2.3 million (-1.3).
The cleaning business grew and its market position improved. In the property maintenance organisation, roles and responsibilities were revised. The goal is a structure that corresponds to the cleaning business line, allowing supervisors to focus on supporting employees and customer managers on interacting with customers. Energy efficiency services continued to grow in Technical Services.
The coronavirus pandemic significantly increased sickness-related absence, which increased production costs in all business lines, especially in cleaning. The rise in the price of fuels increased production costs. The cost savings brought about by the measures implemented in Finnish property maintenance and technical services last year materialised as expected and compensated for the significant increase in production costs, especially as a result of the coronavirus pandemic.
Facility Services Sweden
January–March
Facility Services Sweden’s net sales for the first quarter decreased to EUR 32.9 million (36.2). Operating profit declined to EUR -0.2 million (0.4). Operating profit before amortisation of purchase price allocations of acquisitions was EUR 0.3 million (1.0).
The coronavirus pandemic caused a high level of sickness-related absence in January and February, which increased production costs and weakened the sale of high-margin additional services. The level of sickness-related absence normalised in March. The increase in fuel prices increased production costs. Several new customer contracts were signed in technical services.
FINANCING
Cash flow from operating activities remained on the same level at EUR 13.9 million (13.5). Net cash flow from operating and investing activities amounted to EUR -6.0 million (4.3). Net cash flow after investments was reduced by acquisitions, which had a total impact of approximately EUR 13 million. A total of EUR 2.5 million in working capital was released (1.8 released).
At the end of the period, interest-bearing liabilities amounted to EUR 220.8 million (184.6). Net interest-bearing liabilities totalled EUR 198.5 million (151.7). Average interest rate on long-term loans, excluding IFRS 16 liabilities, with interest rate hedging, amounted to 1.1% (1.3).
Of the EUR 100.0 million commercial paper programme, EUR 20.0 million (11.0) was in use at the end of the period. A committed credit limit totalling EUR 40.0 million was not in use, as was the case in the comparison period. The Company signed a credit limit linked to sustainability targets during the review period. The credit limit will mature in the first quarter of 2025.
Net financial expenses amounted to EUR -1.0 million (-0.6). Net financial expenses increased due to the increase in interest bearing debt caused by acquisitions. The effect of exchange rate changes on net financial expenses was EUR 0.0 million (0.2). Net financial expenses were 0.5% (0.3) of net sales.
The equity ratio was 30.4% (31.6) and the gearing ratio was 103.3% (84.9). Cash and cash equivalents at the end of the period amounted to EUR 22.3 million (32.9). Overdue trade receivables and credit losses have not increased as a result of the coronavirus pandemic or the war in Ukraine.
DISTRIBUTION OF ASSETS
The Annual General Meeting held on 17 March 2022 resolved that a dividend of EUR 0.46 per share, totalling EUR 17.5 million, be paid on the basis of the balance sheet that was adopted for the financial year 2021. The dividend was paid to shareholders on 28 March 2022.
CAPITAL EXPENDITURE
Gross capital expenditure for the first quarter totalled EUR 28.5 million (9.4). Acquisitions accounted for approximately EUR 21 million of the capital expenditure. Other capital expenditure consisted primarily of machine and equipment purchases, as well as investments in information systems and buildings.
SUSTAINABILITY
Environmental responsibility
Climate benefits for customers created by L&T
| Q1/2022 | Q1/2021 | 2021 | Target | Target to be achieved by | |
| Carbon handprint (tCO2e) | 364,000 | 361,000 | 1,100,000 | 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 biofuels and solid recovered fuels.
Progress towards science-based emission reduction targets, using 2018 as the baseline
| Q1/2022 | Q1/2021 | 2021 | Target | Target to be achieved by | |
| Carbon footprint (tCO2e) | 8,500 | 9,550 | 37,800 | | |
| Carbon footprint intensity (gCO2e/km) | 710 | 836 | 767 | 476 | 2030 |
L&T’s strategic objective is to halve the carbon footprint of its operations by 2030 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. The carbon footprint during the review period was affected by the change in the renewable fuel distribution obligation, which lowered diesel emissions in particular.
Social responsibility
Overall accident frequency
Q1/2022 | Q1/2021 | 2021 | Target | Target to be achieved by | |
Overall accident frequency (TRIF) | 26 | 26 | 24 | 20 | 2024 |
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.
Well-being at work
| Q1/2022 | Q1/2021 | 2021 | Target | Target to be achieved by | |
| Occupational health rate (proportion of employees with no sickness-related absences) | 67 | 77 | 45 | 45 | 2024 |
| Sickness-related absences (%) | 6.5 | 5.4 | 5.0 | 4.5 | 2024 |
In the first half of the year, sickness-related absence increased year-on-year as a result of the coronavirus pandemic, reaching a high level of 6.5 (5.4) per cent.
Current issues related to sustainability
In February, Lassila & Tikanoja published its Annual Review 2021, which includes a sustainability report in accordance with the Global Reporting Standard (GRI) as well as a report on risks and opportunities related to climate change in line with the Task Force on Climate-related Financial Disclosures (TCFD) recommendations. L&T published a review related to the EU taxonomy on the proportion of L&T's net sales, investments and operating expenses related to the mitigation of, and adaptation to, climate change. L&T’s EU taxonomy eligibility is 56 per cent of net sales, 57 per cent of investments and 54 per cent of operating expenses. The company announced that it had signed a revolving credit facility tied to sustainability targets during the first quarter.
PERSONNEL
In the first quarter, the average number of employees converted into full-time equivalents was 7,055 (6,846). At the end of the period, L&T had 8,367 (8,033) full-time and part-time employees. Of these, 7,015 (6,577) worked in Finland and 1,352 (1,456) in Sweden.
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. As a labour-intensive company, employees’ ability to work and function and maintaining it throughout their careers until retirement on old-age pension is essential.
Several projects were launched to ensure the availability of personnel. Co-operation with municipal employment services and state organisations was intensified and channels for recruiting foreign labour were opened. In cooperation with Staffpoint, L&T also provides jobs for refugees from Ukraine. L&T continued to develop its recruitment practices and employer image. Extensive digital marketing increased potential jobseekers’ awareness of the permanent and summer jobs available at L&T. The Group signed 682 new employment contracts in January–March. Of these, 539 were valid until further notice. L&T offers more than 950 summer jobs in summer 2022 for people in the early stages of their careers across Finland and Sweden.
SHARES AND SHARE CAPITAL
Traded volume and price
The volume of trading in L&T’s shares in January–March was 4.7 million shares, which is 12.2% (11.0) of the average number of outstanding shares. The value of trading was EUR 55.1 million (61.0). The highest share price was EUR 13.62 and the lowest EUR 10.26. The closing price was EUR 10.82. At the end of the review period, the market capitalisation excluding the shares held by the company was EUR 412.6 million (542.4).
Own shares
At the end of the period, the company held 661,874 of its own shares, representing 1.7% 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 was 38,137,000 at the end of the period. The average number of shares excluding the shares held by the company was 38,128,554.
Shareholders
At the end of the period, the company had 24,318 (23,944) shareholders. Nominee-registered holdings accounted for 7.4% (8.9) of the total number of shares.
Authorisations for the Board of Directors
The Annual General Meeting held on 17 March 2022 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 which 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, which was held on 17 March 2022, adopted the financial statements and consolidated financial statements for 2021, released the members of the Board of Directors and the President and CEO from liability, and approved the Remuneration Report for the Governing Bodies.
The Annual General Meeting resolved that a dividend of EUR 0.46 per share, totalling EUR 17.5 million, be paid on the basis of the balance sheet adopted for the financial year 2021. It was decided that the dividend be paid on 28 March 2022.
The Annual General Meeting confirmed the number of members of the Board of Directors as six. Teemu Kangas-Kärki, Laura Lares, Sakari Lassila, Jukka Leinonen, Laura Tarkka and Pasi Tolppanen were re-elected to the Board until the end of the following Annual General Meeting.
The Annual General Meeting elected PricewaterhouseCoopers Oy, Authorised Public Accountants, as the auditor until the close of the next Annual General Meeting. PricewaterhouseCoopers Oy announced that it will name Samuli Perälä, Authorised Public Accountant, as the principal auditor.
The Annual General Meeting resolved to amend the third sentence of Section 4 of the Articles of Association so that the General Meeting elects the Chairman and the Vice-Chairman of the Board.
The resolutions of the Annual General Meeting were announced in more detail in a stock exchange release on 17 March 2022.
BOARD OF DIRECTORS
The members of Lassila & Tikanoja plc’s Board of Directors are Teemu Kangas-Kärki, Laura Lares, Sakari Lassila, Jukka Leinonen, Laura Tarkka and Pasi Tolppanen. At its constitutive meeting after the Annual General Meeting, the Board of Directors elected Jukka Leinonen as Chairman of the Board and Sakari Lassila as Vice Chairman.
Sakari Lassila was elected as the Chairman of the Audit Committee and Teemu Kangas-Kärki and Laura Tarkka as the members of the committee. The Board elected Jukka Leinonen as the Chairman of the Personnel and Sustainability Committee, with Laura Tarkka and Pasi Tolppanen as the members of the committee.
KEY EVENTS DURING THE REVIEW PERIOD
On 1 February 2022, the company announced that the Industrial Services division has acquired 70 per cent of the shares of Sand & Vattenbläst i Tyringe AB (”SVB”) that offers process cleaning services in Sweden. Through the acquisition, L&T’s Industrial Services division entered the Swedish process cleaning market.
On 23 March 2022, the company announced that Tina Hellstadius (M.Sc./Technology) had been appointed Senior Vice President, Facility Services Sweden and a member of the Group Executive Board effective 19 April 2022. Hellstadius succeeded Erik Sundström, who will retire on 30 June 2022.
On 28 March 2022, the company announced that it had signed a revolving credit facility of EUR 40 million tied to sustainability targets. The revolving credit facility matures in the first quarter of 2025. The agreement includes a one-year extension option. The agreement was signed with Danske Bank.
EVENTS AFTER THE REVIEW PERIOD
The company’s management is not aware of any events of material importance after the review period that might have affected the preparation of the interim report.
NEAR-TERM RISKS AND UNCERTAINTIES
The measures and recommendations issued by the authorities to restrict the COVID-19 pandemic, and the resulting customer-specific production restrictions and adjustment measures, are still expected to cause disruptions in service production during 2022. More contagious variants of COVID-19 have increased the number of sickness-related absences during the first quarter and can continue to do so in the near term, which can cause disruptions in L&T’s service production and increase costs.
The company has no operations or holdings in Russia, Belarus or Ukraine, and there are no significant Russian-owned companies in the customer base, so the immediate effects of the war in Ukraine will be minor. However, indirect impacts on overall economic activity in Finland and Sweden may have a negative impact on net sales and profit.
Higher costs, especially fuel prices, have had a negative impact on the company’s financial performance during the first quarter and can continue to do so in the near term. Fluctuations in the price of oil influence both fuel costs and the prices of oil-based secondary raw materials, such as recycled plastic and regenerated lubricants.
Any increase in interest rates may increase the company’s interest costs.
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.
Challenges related to the availability of labour may increase production costs.
More detailed information on Lassila & Tikanoja’s risks and risk management will be provided in the 2021 Annual Report and in the Report of the Board of Directors and the consolidated financial statements.
Helsinki, 26 April 2022
LASSILA & TIKANOJA PLC
Board of Directors
Eero Hautaniemi
President and CEO
For additional information, please contact:
Eero Hautaniemi, President and CEO, tel. +358 10 636 2810
Valtteri 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 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 8,171 people. In 2021, the company’s net sales amounted to EUR 812.5 million. L&T is listed on Nasdaq Helsinki.
Distribution:
Nasdaq Helsinki
Major media
www.lt.fi/en/
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