Lassila & Tikanoja plc: Financial statements 1 January-31 December 2011

Helsinki, Finland, 2012-02-02 07:00 CET (GLOBE NEWSWIRE) --  

• Net sales for the final quarter EUR 167.0 million (EUR 151.5 million); operating loss EUR 7.9 million (operating profit EUR 8.6 million); operating profit excluding non-recurring items EUR 9.6 million (EUR 9.1 million); earnings per share EUR -0.18 (EUR 0.14)


• Full-year net sales EUR 652.1 million (EUR 598.2 million); operating profit EUR 25.6 million (EUR 40.2 million); operating profit excluding non-recurring items EUR 44.3 million (EUR 45.5 million); earnings per share EUR 0.44 (EUR 0.68)
• Full-year net sales is expected to remain at the 2011 level and operating profit excluding non-recurring items is expected to remain at the 2011 level or to improve slightly in 2012.
• Distribution of assets: The Board of Directors proposes a capital repayment of EUR 0.55 per share.

GROUP NET SALES AND FINANCIAL PERFORMANCE

Final quarter
Lassila & Tikanoja’s net sales for the final quarter increased by 10.2% to EUR 167.0 million (EUR 151.5 million). Operating losses totalled EUR 7.9 million (operating profit EUR 8.6 million), representing 4.7% (5.6%) of net sales. Operating profit excluding non-recurring items was EUR 9.6 million (EUR 9.1 million). Earnings per share were EUR 0.18 negative (earnings per share EUR 0.14).

With the exception of Renewable Energy Sources, all divisions reported continued net sales growth, approximately half of this growth being organic. Increased waste and recycling volumes and the sustained healthy workload in Property Maintenance prompted demand. In the cleaning business, growth was generated by acquisitions made in the first half.

The year-on-year improvement in operating profit excluding non-recurring items could be primarily attributed to the healthy workload in maintenance services for technical systems and damage repair services. Operating losses excluding non-recurring items sustained by the Renewable Energy Sources division and the joint venture L&T Recoil, grew from the comparison period.

An impairment loss of EUR 17.1 million for the goodwill and other assets of the Renewable Energy Sources division was recognised as a non-recurring cost in the final quarter (an impairment of EUR 17.8 million was announced on 15 December 2011). The impairment loss is due to the weakening competitiveness of wood-based fuels in the long term and a significant decline in government subsidies for promoting the use of forest energy.

Year 2011
Lassila & Tikanoja's full-year net sales grew by 9.0% to EUR 652.1 million (EUR 598.2 million). Operating profit was EUR 25.6 million (EUR 40.2 million), representing 3.9% (6.7%) of net sales, and operating profit excluding non-recurring items was EUR 44.3 million (EUR 45.5 million). Earnings per share were EUR 0.44 (EUR 0.68).

Net sales grew from the comparison period, as demand for Environmental Services and industrial cleaning services perked up. The workload for Property Maintenance remained strong throughout the year. In addition, the acquisitions made in the first half boosted net sales. Acquisitions generated almost half of net sales growth. Meanwhile, the sale of wood-based fuels fell clearly short of the comparison period’s level, due to their weak competitiveness.

Full-year operating profit excluding non-recurring items remained at the comparison period's level. Higher salary, subcontracting and fuel costs, as well as the temporary rise in waste disposal costs in the first half, eroded profitability. All divisions implemented price increases to match the rise in costs.

Full-year operating profit was taxed by the non-recurring impairment loss of EUR 17.1 million recognised for the goodwill and other assets of the Renewable Energy Sources division (an impairment of EUR 17.8 million was announced on 15 December 2011). In the comparison period, non-recurring costs of EUR 3.4 million were recognised for the discontinuation of the wood-pellet business.

The Group's tax rate was 19.2 per cent. A general decrease in the tax rate in Finland, as well as the Administrative Court’s decision on the tax deductibility of dissolution loss write-off, lowered the tax rate.
Financial summary

* Breakdown of operating profit excluding non-recurring items is presented below the division reviews.
** Proposal by the Board of Directors
*** Dividend/share, EUR

NET SALES AND FINANCIAL PERFORMANCE BY DIVISION
Environmental Services

Final quarter
The division’s net sales for the final quarter increased by 13.5% to EUR 84.0 million (EUR 74.0 million). Operating profit amounted to EUR 8.3 million (EUR 8.2 million), and operating profit excluding non-recurring items was EUR 8.3 million (EUR 8.2 million).

All services were able to grow their net sales, thanks to higher waste volumes and service demand. Recycling volumes remained robust, even though prices of secondary raw materials fell somewhat from the previous quarter.

New long-term service agreements were signed during the quarter. Of particular importance was expansion of the coverage of an agreement on the recycling of beverage containers with a refund value. The renewed agreement will enter into force in the first half of 2012.

The division's operating profit remained at the comparison period's level, primarily due to volume growth. In waste management, prices of services were revised at the turn of the year to match higher production costs.

The performance of the joint venture L&T Recoil deteriorated from the comparison period due to reduced demand for the end-product and lower prices. However, the plant's reliability improved following a scheduled maintenance shutdown in early autumn.

Although net sales generated by the division’s international operations remained largely unchanged from the comparison period, profitability declined mainly due to weaker profitability in Latvia.

Year 2011
The division’s full-year net sales increased by 12.4% to EUR 325.9 million (EUR 290.0 million). Operating profit amounted to EUR 34.0 million (EUR 33.7 million), and operating profit excluding non-recurring items was EUR 34.0 million (EUR 34.0 million).

The division's net sales growth was primarily organic and could be attributed to the increase in waste volumes and healthy demand for industrial services. Similarly, the volumes and price level of secondary raw materials improved until the early autumn, but prices started to fall slightly at the year-end. The acquisition of Papros Oy in the second quarter strengthened the division’s position in the recycled fibre markets.

The division's operating profit was at the comparison period's level. In the first half, profitability was affected by lower than planned operating rates of recycling plants, a temporary increase in waste disposal costs, and increased production costs. The division did not entirely succeed in adapting its process cleaning services to fluctuations in demand, but extensive service shutdown-related assignments in the summer months were completed successfully.

The joint venture L&T Recoil was able to improve its net sales from the comparison period. The plant's operating rate and reliability improved towards the year-end, even though the end-product supply failed to reach the target level. The joint venture was able to decrease its losses from the comparison period despite two, almost month-long maintenance shutdowns during the year.

The division’s year-on-year net sales from international operations remained unchanged but operating profit declined slightly. The competitive environment for Environmental Services in Latvia has become increasingly tight, which hampered business development and eroded profitability.

During the year, several extensive service agreements were signed with retail chains and producer liability organisations. A new Managreen service was successfully launched on the market. This concept offers customers the ability to manage their environmental management agreements and the related network partners.

Cleaning and Office Support Services

Final quarter
The division’s net sales for the final quarter totalled EUR 40.1 million (EUR 34.6 million); an increase of 16.0%. Operating profit amounted to EUR 0.9 million (EUR 0.2 million), and operating profit excluding non-recurring items was EUR 1.1 million (EUR 0.3 million).

The division’s net sales growth could be attributed to acquisitions made in the first half. Furthermore, commissioned assignments in Finland sold better than a year earlier.

The division's operating profit rose from the comparison period, thanks to the Finnish operations. Meanwhile, the result from international operations was clearly in the red, due to the integration costs affecting Swedish operations and because of lost customers.  A new operational enhancement programme was launched in Sweden, with the objective of improving profitability and operational efficiency.

Year 2011
The Cleaning and Office Support Services division's full-year net sales grew by 11.8% to EUR 157.3 million (EUR 140.6 million). Operating profit amounted to EUR 7.1 million (EUR 7.5 million), and operating profit excluding non-recurring items was EUR 7.5 million (EUR 8.0 million).

The division’s year-on-year net sales growth could be primarily attributed to acquisitions made in the first half (Hansalaiset in Finland and Östgöta Städ in Sweden). Sales of commissioned assignments also grew from the comparison period.

Start-up costs of new projects in the first half and higher-than-expected integration costs associated with the acquisitions made in the second quarter had a negative impact on the division's profitability.

In the comparison period, the EUR 0.7 million credit loss recognised for Russian operations weakened the operating profit.

Property Maintenance

Final quarter
The division’s net sales for the final quarter increased by 5.9% to EUR 33.5 million (EUR 31.6 million). Operating profit amounted to EUR 1.9 million (EUR 0.6 million), and operating profit excluding non-recurring items was EUR 1.9 million (EUR 0.6 million).

Strong demand for maintenance services for technical systems and in damage repair services contributed to sustained net sales growth. In property maintenance, the lack of snow in early winter restricted demand for commissioned assignments.

Operating profit improved clearly from the comparison period, thanks to demand for maintenance services for technical systems and damage repair services.

Year 2011
The Property Maintenance division’s full-year net sales increased by 9.0% to EUR 134.6 million (EUR 123.5 million). Operating profit amounted to EUR 8.2 million (EUR 7.8 million), and operating profit excluding non-recurring items was EUR 8.2 million (EUR 7.9 million).

The division’s net sales grew from the comparison period, thanks to successful sales of commissioned assignments of property maintenance in the first half and the strong workload in maintenance services for technical systems and damage repair services. Heavy snowfall in the first half and more extensive partnerships with insurance companies helped boost sales of commissioned assignments.

The division's full-year operating profit rose despite increased production and overtime costs. The profitability of commissioned assignments was also weaker than a year earlier.

Renewable Energy Sources

Final quarter
Final-quarter net sales for Renewable Energy Sources (L&T Biowatti) were down by 17.6%, to EUR 12.6 million (EUR 15.3 million). Operating loss amounted to EUR 18.2 million (a loss of EUR 0.4 million), and operating loss excluding non-recurring items was EUR 1.1 million (EUR 0.0 million).

Wood-based fuels continued to generate weak net sales in the final quarter, due to intense competition and the mild and humid weather. 

The division's operating profit excluding non-recurring items fell, even though fixed costs were clearly lower than in the comparison period. In addition to low demand, higher subcontracting costs also taxed profitability.

An impairment loss of EUR 17.1 million for goodwill and other assets was recognised as a non-recurring cost for the quarter. The impairment is due to the weakening competitiveness of wood-based fuels in the long term and a significant decline in government subsidies for promoting the use of forest energy.

Year 2011
The full-year net sales of Renewable Energy Sources (L&T Biowatti) were down by 17.6% to EUR 45.4 million (EUR 55.1 million). Operating loss amounted to EUR 21.3 million (a loss of EUR 6.6 million), and operating loss excluding non-recurring items was EUR 3.8 million (a loss of EUR 3.1 million).

The competitiveness of wood-based fuels was weak throughout the year. In the first half of the year, power plant customers did not receive any subsidy for electricity generation from forest processed chips. As a result, several power plants replaced forest processed chips with fossil fuels. The warm weather in the autumn and in the early winter also curbed demand for forest processed chips. Besides lower demand, profitability was also eroded by higher collection and logistics costs.

A reorganisation programme involving fixed cost cuts and operational efficiency enhancement measures was launched to improve the division’s competitiveness.

An impairment loss of EUR 17.1 million for the division's goodwill and other assets was recognised as a non-recurring cost. In the comparison period, the non-recurring costs of EUR 3.4 million related to the discontinuation of the wood-pellet business reduced operating profit.


BREAKDOWN OF OPERATING PROFIT EXCLUDING NON-RECURRING ITEMS
 

FINANCING

Cash flows from operating activities amounted to EUR 74.5 million (EUR 63.8 million). EUR 3.2 million was released from the working capital (EUR 2.2 million tied up).

At the end of the year, interest-bearing liabilities amounted to EUR 135.2 million (EUR 126.8 million). Net interest-bearing liabilities amounted to EUR 127.2 million, showing an increase of EUR 14.8 million from the beginning of the year.

Net finance costs in 2011 amounted to EUR 4.6 million (EUR 4.2 million). Net finance costs were 0.7% (0.7%) of net sales. The average interest rate on long-term loans (with interest-rate hedging) was 3.1% (3.3%). Long-term loans totalling EUR 24.5 million will mature during 2012.

The equity ratio was 44.5% (46.5%) and the gearing rate 58.3 (50.3). Liquid assets at the end of the period amounted to EUR 8.1 million (EUR 14.5 million).

The commercial paper programme was expanded to EUR 100 million (previously EUR 50 million) during the second half of the year. Of the commercial paper programme, EUR 17 million (EUR 5.0 million) was in use at the end of the year.

A new three-year EUR 30 million committed limit agreement was signed during last quarter. The earlier EUR 15.0 million committed limit will mature in June 2012. Committed limits were not in use, as was the case in the comparison period.


DIVIDEND

The Annual General Meeting held on 17 March 2011 resolved on a dividend of EUR 0.55 per share. The dividend, totalling EUR 21.3 million, was paid to the shareholders on 29 March 2011.


CAPITAL EXPENDITURE

Capital expenditure totalled EUR 70.6 million (EUR 39.3 million) in 2011, a third of this consisting of acquisitions.

In the first quarter, Pentti Laurila Ky and businesses of Matti Hossi Ky and PPT Luttinen Oy were acquired into Environmental Services. The business of Kestosiivous Oy was acquired into Cleaning and Office Support Services and the business of KH-Kiinteistöhuolto Oy was acquired into Property Maintenance.

In the second quarter, the Environmental Services division acquired Papros Oy and Full House Oy. The Cleaning and Office Support Services division acquired Savon Kiinteistöhuolto- ja Siivouspalvelu Oy, Varkauden Kiinteistönhoito ja Siivouspalvelu Oy, Jo-Pe Huolto Oy, Östgöta Städ Ab and WTS-Palvelut Oy. The Cleaning and Office Support Services and the Property Maintenance divisions acquired the Hansalaiset Oy group including its subsidiaries.

In the final quarter the Environmental Services division acquired Paraisten Puhtaanapito Oy. The Cleaning and Office Support Services division acquired Palvelusiivous Ulla Haavisto Oy and the Property Maintenance division acquired Nastolan Talohuolto Oy.

After the period, the Property Maintenance division acquired the property mainantenance businesses of IK Kiinteistöpalvelu Oy and the business of Jyvässeudun Talonmiehet Oy and Kiinteistöhuolto Markku Hyttinen Oy.


PERSONNEL

In 2011 the average number of employees converted into full-time equivalents was 8,513 (7,835). The total number of full-time and part-time employees at the end of the period was 9,357 (8,732). Of them 7,381 (6,849) people worked in Finland and 1,976 (1,883) people in other countries.


PROPOSAL FOR THE DISTRIBUTION OF ASSETS

According to the financial statements, Lassila & Tikanoja plc's unrestricted equity amount to EUR 111,645,234.28 with the operating profit for the period representing EUR 11,521,380.63. There were no substantial changes in the financial standing of the company after the end of the period, and the solvency test referred to in Chapter 13, section 2 of the Companies Act does not affect the amount of distributable assets.

The Board of Directors proposes to the Annual General Meeting that the profit for 2011 be placed in retained earnings and that no dividend be paid.

The Board of Directors proposes to the Annual General Meeting that, based on the balance sheet to be adopted for 2011, a capital repayment of EUR 0.55 per share be made. Capital is repaid from the reserve for invested unrestricted equity. Capital is repaid to shareholders included in the company shareholder register maintained by Euroclear Finland Oy on the record date, 20 March 2012. The Board proposes to the Annual General Meeting that the capital repayment be made on 27 March 2012.
No dividend shall be paid on shares held by the company on the dividend payment record date of 20 March 2012. On the day the proposal for the distribution of assets was made, the number of shares entitling to capital repayment was 38,685,569, which means the total amount of the capital repayment would be EUR 21,277,062.95.


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 2011 was 8,915,140 which is 23.0% (20.0%) of the average number of outstanding shares. The value of trading was EUR 108.2 million (EUR 111.1 million). The trading price varied between EUR 9.49 and EUR 15.18. The closing price was EUR 11.49. 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 444.5 million (EUR 570.6 million) at the end of the period.
Own shares
At the beginning of the period, the company held 60,758 of its own shares and at the end 113,305 of its own shares, representing 0.3% of all shares and votes. Based on the authorisation given by the Annual General Meeting 2010, the company repurchased 50,000 shares in the period from 12 September to 23 September 2011 at a total acquisition cost of EUR 0.5 million. On 5 April 2011, a total of 2,547 shares of Lassila & Tikanoja plc were returned to the company free of consideration, by virtue of the terms of the share-based incentive programme of 2009.

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 38,721,908.

Share option scheme 2005
The exercise period for the 2005C options ended on 31 May 2011.

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 16.20. It was reduced by EUR 0.07 as of 22 March 2011. The exercise price of the share options shall, as per the dividend record date, be reduced by the amount of dividend which exceeds 70% of the profit per share for the financial period to which the dividend applies. However, only such dividends whose distribution has been agreed upon after the option pricing period and which have been distributed prior to the share subscription are deducted from the subscription price. The exercise price shall, however, always amount to at least EUR 0.01. The exercise period 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. The 2008 options have been listed on NASDAQ OMX Helsinki since 1 November 2010.

Share-based incentive programme 2009
Lassila & Tikanoja plc’s Board of Directors decided on 24 March 2009 on a share-based incentive programme. The programme included three earnings periods one year each, of which the first one began on 1 January 2009 and the last one ended on 31 December 2011. No rewards were paid for the year 2011. Rewards were based on the EVA result of Lassila & Tikanoja group. The programme covered 23 persons.

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 financial period, the company had 9,365 (9,151) shareholders. Nominee-registered holdings accounted for 13.0% (12.2%) of the total number of shares.

Authorisation for the Board of Directors
The Annual General Meeting held on 31 March 2010 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 and on the issuance of these shares.

The Board of Directors is authorised to transfer 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 four years and it revokes the authorisation to issue shares issued by the Annual General Meeting 2009. The authorisation for the repurchase of the company’s own shares has ended.

The Board of Directors is not authorised to launch a convertible bond or share option rights.


RESOLUTIONS BY THE GENERAL MEETINGS

The Extraordinary General Meeting of Lassila & Tikanoja plc, which was held on 8 September 2011, resolved on decreasing the share premium reserve of the balance sheet at 31 December 2010 by EUR 50,672,564.52 by transferring all the funds in the share premium reserve to the unrestricted equity reserve. The resolutions of the Extraordinary General Meeting were announced in more detail in a stock exchange release on 8 September 2011.

The Annual General Meeting of Lassila & Tikanoja plc, which was held on 17 March 2011, adopted the financial statements for the financial year 2010 and released the members of the Board of Directors and the President and CEO from liability. The AGM resolved that a dividend of EUR 0.55 per share, a total of EUR 21.3 million, as proposed by the Board of Directors, be paid for the financial year 2010. The dividend payment date was resolved to be 29 March 2011.

The Annual General Meeting confirmed the number of the members of the Board of Directors six. The following Board members were re-elected to the Board until the end of the following AGM: Heikki Bergholm, Eero Hautaniemi, Matti Kavetvuo, Hille Korhonen and Miikka Maijala. Sakari Lassila was elected as a new member for the same term.

PricewaterhouseCoopers Oy, Authorised Public Accountants, was elected auditor.

The resolutions of the Annual General Meeting were announced in more detail in a stock exchange release on 17 March 2011.


BOARD OF DIRECTORS

The members of the Board of Directors are Heikki Bergholm, Eero Hautaniemi, Matti Kavetvuo (until 27 December 2011), Hille Korhonen, Sakari Lassila and Miikka Maijala. In its constitutive meeting the Board elected Heikki Bergholm as Chairman of the Board and Matti Kavetvuo 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 Matti Kavetvuo and Hille Korhonen as members of the committee.

Matti Kavetvuo, Vice Chairman of the Board, announced his resignation from the Board of Directors on 27 December 2011 and Eero Hautaniemi was elected as the new Vice Chairman of the Board.


CHANGES IN THE MANAGEMENT OF THE COMPANY

On 13 June 2011, the Board of Directors of Lassila & Tikanoja plc appointed Pekka Ojanpää as President and CEO of the company. Mr Ojanpää assumed his position as Lassila & Tikanoja’s President and CEO on 1 November 2011. Ville Rantala, CFO of Lassila & Tikanoja, appointed as acting President and CEO as of 13 June. Other changes in the management of the company are presented below.


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

In a release published on 22 March 2011, the company announced that M.Sc. (Econ.) Ville Rantala has been appointed as Managing Director of L&T Biowatti Oy and Vice President, Renewable Energy Sources division, as of 22 March 2011. Rantala will also continue as CFO of Lassila & Tikanoja plc. Tomi Salo, Managing Director of L&T Biowatti, will not continue in the company.

In a release published on 5 April 2011, the company announced that a total of 2,547 shares of Lassila & Tikanoja plc have been returned to the company free of consideration, by virtue of the terms of the share-based incentive programme of 2009.

In a release published on 13 June 2011, the company announced that the Board of Directors of Lassila & Tikanoja plc has appointed Pekka Ojanpää as President and CEO. Pekka Ojanpää acts as President of Kemira’s Municipal & Industrial segment. He previously worked as President of the Kemira Performance Chemicals business area, and has held various executive positions at Nokia Corporation. On 27 October 2011, the company announced that Mr Ojanpää assumed his position as Lassila & Tikanoja’s President and CEO on 1 November 2011. The Board of Directors and Jari Sarjo, former President and CEO, agreed that Sarjo will leave his position as President and CEO immediately. Ville Rantala, CFO of Lassila & Tikanoja, was appointed as acting President and CEO as of 13 June.

In a release published on 7 December, the company announced that as of 1 January 2012, Kirsi Matero has been appointed HR Director and Group Executive of Lassila & Tikanoja plc. Inkeri Puputti, current HR Director, will leave the company.

In a release published on 15 December the company announced that it will recognise an impairment loss of EUR 17.8 million for the goodwill of business operations and other assets of the Renewable Energy Sources division in the final quarter. The impairment loss is due to the weakening competitiveness of wood-based fuels in the long term and a remarkable decline in government subsidies for promoting the use of forest energy. The impairment loss is treated as a non-recurring expense and it does not have cash flow effect.

In a release published on 16 December the company announced that Tuomas Mäkipeska has been appointed Business Development Director and Group Executive of Lassila & Tikanoja plc as of 16 February 2012, at the latest.

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

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 2010, in the report of the Board of Directors, and in the consolidated financial statements.


OUTLOOK FOR THE YEAR 2012

The markets in which L&T primarily operates are mainly low-cyclical, and the majority of the company's net sales comes from long-term service agreements. However, general economic developments reflect on L&T's operations, particularly commissioned environmental and support service assignments.

Despite the economic uncertainty, the outlook for Environmental Services is, by and large, stable. The secondary raw material price development and the operational reliability of L&T Recoil’s plant in particular will affect the division’s profitability.

Prospects for Cleaning and Office Support Services and for Property Maintenance are stable, but economic uncertainty is keeping competition tough in both divisions.

Demand for L&T Biowatti's wood-based fuels is expected to grow slightly and the division's profitability is expected to improve. Any changes in the government subsidies for renewable fuels could, however, impact L&T Biowatti's raw material procurement costs and demand for the end-product.

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


CONDENSED FINANCIAL STATEMENTS 1 JANUARY-31 DECEMBER 2011


CONSOLIDATED INCOME STATEMENT