CEO Outlook

President and CEO Eero Hautaniemi in Financial Statements Release 2024

“Net sales for year 2024 totalled EUR 770.7 million (802.1). Adjusted operating profit was EUR 43.2 million (37.9). Environmental Services, Industrial Services and Facility Services Finland improved both their relative and absolute profitability despite the challenging business cycle. The company’s balance sheet and financial position remained strong.

In circular economy businesses, solid performance continued in 2024. Both Environmental Services and Industrial Services improved their profitability, and net sales of the divisions in total grew compared to the previous year. In Environmental Services, net sales were on par with the comparison period. In Industrial Services, net sales increased by 2.9 per cent from the previous year.

In Environmental Services, the challenging business environment was reflected in the demand for recycling and waste management services throughout the financial period. Especially in the construction industry customer segment, the demand decreased compared to the comparison period. In addition, the municipalisation of collection of packaging material waste from housing properties continued in 2024. Through the efficiency improvement measures implemented in the first half of the year, the costs of service production were successfully adapted to the current market situation. The division's market position remained solid in corporate and producer responsibility organisation customers and the position in the municipal contracts strengthened.

In Industrial Services, the hazardous waste business line saw strong demand throughout the year. In the process cleaning business, the annual maintenance breaks were carried out as planned and resourcing was successful. In the environmental construction business, the weak economic situation in the Finnish construction market was reflected in a decrease in the volumes of material flows delivered to material treatment centres. In Sweden, Industrial Services expanded to the Gävleborg region through an acquisition.

In facility services businesses, the year 2024 was twofold. In Finland, the net sales of facility services decreased as planned due to the termination of unprofitable customer agreements, and the operating profit more than doubled compared to the previous year. In Sweden, the adjusted operating loss of facility services increased as net sales decreased by 16.0 per cent from the comparison period.

In Facility Services Finland, all business lines achieved a better result than in the comparison period. Performance of the cleaning business was particularly strong. Measures to streamline the cost structure and the efficiency of the operations continued. The number of employees in the division has decreased by more than 450 people compared to the comparison period.

In Facility Services Sweden, the decline in net sales and the increase in the adjusted operating loss were impacted by the discontinuation of a significant customer relationship in late 2023 as well as two public-sector customer agreements turning unprofitable during 2024. The measures to simplify operating models and adjust the cost level continued throughout 2024. The number of employees in the division decreased by 155 people from the comparison period. The turnaround in Facility Services Sweden progressed more slowly than expected, but the new customer accounts won towards the end of the year as well as the additional measures initiated to improve profitability create conditions for achieving a turnaround during 2025.

In December 2024, the company initiated the planning of the possible separation of its circular economy businesses Environmental and Industrial Services and facility services businesses into two independent listed companies. The plan is to separate the circular economy businesses into a newly listed company through a partial demerger of Lassila & Tikanoja plc. It is expected that the separation of the circular economy and facility services businesses could increase shareholder value by enabling both businesses to pursue their own strategies and growth opportunities more effectively.

Lassila & Tikanoja renewed its operating model in 2024. Continuing the operating model work, the company launched an efficiency programme aiming for improved performance at the beginning of 2025, encompassing both the circular economy and facility services businesses. The efficiency programme aims for an annual performance improvement of at least EUR 8 million by the end of 2026 compared to the 2023 level, including the impact on the annual cost level of having two separate listed companies. The efficiency programme focuses on, among other things, simplifying procedures and improving the efficiency of direct and indirect procurement and fleet usage.”

President and CEO Eero Hautaniemi in Interim Report Q3 2024

“Net sales for the third quarter amounted to EUR 192.3 million (200.9). Adjusted operating profit was EUR 20.0 million (21.2). The business operations in Finland achieved a solid result despite the challenging business environment.

In Environmental Services, the challenging business environment was reflected in the demand for recycling and waste management services throughout the review period. The division's market share remained strong in corporate and producer responsibility organisation customers. The efficiency improvement measures implemented in the first half of the year have successfully adapted the costs of service production to the current market situation.

In Industrial Services, the hazardous waste business line saw strong demand. In the process cleaning business line, the annual maintenance breaks were carried out as planned and resourcing was successful. In the environmental construction business line, two extensive soil remediation projects were successfully completed. The weak economic situation in the construction customer segment was reflected in a decrease in the volumes of material flows delivered to the material treatment centres.

In Facility Services Finland, all business lines achieved a better result than in the comparison period, and the division's operating profit improved. Measures to streamline the cost structure continued during the period under review. The number of employees in the division has decreased by more than 600 people compared to the comparison period. In Facility Services Sweden, a significant customer relationship ended in late 2023, and the loss of that significant account was not fully offset by new customer accounts during the review period. The division has a programme under way to simplify operating models and adapt the cost level. The number of employees in the division has decreased by approximately 120 compared to the comparison period.

L&T’s key sustainability indicators, carbon footprint and total recordable incident frequency developed favourably.

We launched work to renew our operating model in accordance with the strategy updated in autumn 2023, and the new Group Executive Board started its work at the beginning of the third quarter. The aim of the measures is to support the growth of circular economy business operations by intensifying cooperation between Environmental Services and Industrial Services and improving the efficiency of business operations.

In autumn 2023, the Board of Directors of Lassila & Tikanoja decided, in connection with their strategy review, to evaluate the strategic alternatives for the Facility Services Finland and Facility Services Sweden divisions as part of the development of the business portfolio. The strategic review continued during the review period.”

Information:

President and CEO Eero Hautaniemi in Half-Year Report H1 2024

"Net sales in January–June totalled EUR 384.2 million (400.2). The challenging business environment and the political strikes in Finland in the first quarter had a negative impact on the demand for L&T’s services. Adjusted operating profit grew to EUR 12.7 million (10.6). Operating profit improved in Industrial Services and Facility Services Finland.

In Environmental Services, the challenging business environment and the political strikes in Finland in the first quarter, reduced the demand for recycling and waste management services. The demand and price level of recycled raw materials stabilised in the first quarter and remained stable in the second quarter. The municipalisation of the collection of packaging waste from housing properties continued, but the measures initiated in the fourth quarter of 2023 to improve the efficiency and profitability of operations largely compensated for the impact of municipalisation. Our position in municipal contracts strengthened.

Demand was strong in all of the Industrial Services division’s business lines. Political strikes in Finland postponed maintenance and other services from the first quarter to the second quarter. However, annual maintenance breaks in industry were carried out to the planned extent during the period under review and resourcing of the projects was successful. In Sweden, the Industrial Services division expanded to the Gävleborg region through an acquisition.

In Facility Services Finland, all business lines achieved a better result than in the comparison period. Measures to streamline the cost structure continued and the division's operating profit improved. In Facility Services Sweden, a significant customer relationship ended in late 2023, and the loss of that significant account was not fully offset by new customer accounts during the review period. The division has a programme under way to simplify operating models and adapt them to the changed business environment. The results of the programme are expected to become visible by the end of 2024.

In the customer satisfaction survey conducted in Finland in April, all divisions improved their results and customer satisfaction (NPS) was at a high level, being above 40 in both circular economy businesses. Occupational safety also improved and the total recordable incident frequency (TRIF) decreased by two points year-on-year, which is a significant achievement.

In line with the strategy that was updated in autumn 2023, we began the renewal of our operating model in May and changed the composition of the Group Executive Board. The aim of the measures is to support the growth of circular economy businesses.

The new operating model will be built on L&T’s existing strengths. Environmental Services and Industrial Services have a broad shared customer base and they operate in different parts of the same material value chains. Closer cooperation will make it possible to respond to customer needs more flexibly and increase material value more efficiently. Stronger cooperation between the divisions and Group functions will provide a foundation for more efficient operations.

In autumn 2023, the Board of Directors of Lassila & Tikanoja decided, in connection with the strategy update, to evaluate the strategic alternatives for the Facility Services Finland and Facility Services Sweden divisions as part of the development of the business portfolio. This strategic assessment continued as planned in the first half of the year.”

President and CEO Eero Hautaniemi in Interim Report Q1 2024

"The high interest rates, along with the decrease in industrial production and the weak market situation in the construction industry, combined with political strikes in Finland, had a negative impact on the L&T service demand in the first quarter. In the first quarter, net sales decreased by 4.0% and adjusted operating profit was EUR 0.0 million (1.4). The impact of the political strikes on L&T’s result was approximately EUR 0.3 million negative.

In Environmental Services, the economic recession and political strikes reduced the demand of recycling and waste management services while the market share of the division strengthened slightly. The demand and prices of recycled raw materials stabilised during the first quarter. The municipalisation of the collection of packaging waste from housing properties continued, but the measures initiated in the fourth quarter of 2023 to improve the efficiency and profitability of operations largely compensated for the impact of municipalisation.

Net sales increased in Industrial Services. Political strikes in Finland weakened the demand in the Hazardous waste business line to a small extent, and some process cleaning work was postponed from the first quarter to the second quarter. The process cleaning business in Sweden was expanded to the Gävleborg region through an acquisition in line with the strategy. Industrial Services currently has approximately 100 employees in Sweden, and process cleaning services are offered in southern and central Sweden.

In Facility Services Finland and Facility Services Sweden, measures are under way to improve the efficiency of operations and streamline the cost structure. The result of the Facility Services Finland for the first quarter was negatively affected by provisions of EUR 0.6 million booked for potential disability pension contributions. The result of the Facility Services Finland Cleaning business line improved year-on-year. In Facility Services Sweden, a significant customer relationship ended in the end of 2023, and the loss of that significant account was not fully compensated by new customer accounts during the review period.

The Group reduced its factoring financing by EUR 10 million as planned which reduced cash flow after investments in the first quarter. The company’s financial position is strong."