Lamor Corporation Oyj (LAMOR) Earnings Call Transcript & Summary

Good morning, everybody. Welcome to Lamor's Financial Statements Release Webcast. Today, we will walk through our financial statements review. And together with me, we have our CFO -- CEO, Mika Pirneskoski; and CFO, Timo Koponen. Our agenda for today will be, Mika will be highlighting the operational highlights in the beginning. Then, Timo will continue with the financial update and guidance. Then we will walk through quickly our updated strategy, which we launched in November. And then, we will go to the Q&A session, one of the most interesting parts of this webcast. Please provide your questions already during the session, we will receive them already during our presentation. Welcome, everybody. So Mika, which were the main growth drivers for '22 for Lamor?

Okay. So if you look at our strong market areas, Middle East and Africa, and then South America or Americas market area as we speak, we had 3 major projects in the Middle East, 2 in Kuwait, 1 in Saudi Arabia. The projects in Kuwait were in buildup phase last year. Saudi Arabia moved more towards the maintenance phase, but they provided great revenue stream for us already in '22. Then if we look at our business in the Americas region, it was very much dominated by the spill projects both in Peru and Ecuador. And those were the largest individual projects. Obviously, we saw quite a lot of improvement in the activity level of the traditional equipment sales market. And hopefully, that will continue in '23 as well. I mean, there was a significant dip during the COVID -- during the pandemic. And we still see glimpses that the smaller projects are not moving forward as they were before the pandemic, but we are seeing things picking up. And of course, if you look at from order intake perspective, the spill projects were in and out nice revenue stream, but then, of course, the 3 tenders that we won in Bangladesh was a great opening for our Asia business, and we hope to capitalize on them later on as well.

Good. We'll come back to those projects in a bit more in detail shortly. Then, we launched a new strategy, updated strategy in November. Anything you would like to highlight there?

I mean, if we look at the big picture and the way we phrase things in the new updated strategy, and we talk about environmental protection, material recycling, I mean, if you look at the environmental protection first, I think the aim with this new branding is to show that we are not just an oil spill response company. We look at environmental protection from a larger perspective, aiming towards a more holistic solutions for a bigger portfolio. And then, again, material recycling really highlights that whatever we do in terms of waste or water or any other type of resource, we aim for recycling. We aim for reuse. So whatever we do, it should be sustainable and contributing towards the circular economy.

Excellent. We'll come back to the strategy a bit more in detail later in the end of the webcast. Then, one more thing, which somehow highlights this year is that the management team was actually updated twice in '22. Why is that? And what does that mean?

I mean, if you look at Lamor historically, and we go back to 2020, I mean, we were approximately EUR 40 million company, EUR 45 million, if I don't recall incorrectly. And if we look at the size of business in '22 and then we compare it to the long-term financial target that we've set at EUR 250 million, it is obvious that we can't run the business in the same manner that we used to run it. I mean, even last year, it was 3 Lamors, if you like. So 3x EUR 40 million is around where we landed. So of course, we need more management near the customer, near the operations. And hence, the new operating model where we have 3 market areas. And then, we also have the global function, which will ensure that the portfolio that we offer in the different market areas and the project execution process, and also the sort of tender preparation, order intake, sourcing project is modular, which will allow us to scale up more easily and more profitably. So those were sort of the main drivers. I mean, we still want to ensure that we are locally global -- globally local -- I mean, you get mixed up with that. So we have more presence locally through the market areas. And then, we have the global perspective through the offering and execution part.

And do you think that this will support our business in '23?

I mean, if I didn't believe in that, I mean, we probably wouldn't have done the [ change ] on the investments. But we already see how much more sales funnel we can create by having targeted people running the business in the area. I mean, the model that we had before that we had a Chief Commercial Officer that was looking at the wholesales funnel globally. And if you look at the extent of our business, I mean, the Eastern most part is Japan, and then the Western most part is Mexico -- or the U.S., depending how you see it. So it is impossible for one person to manage such a huge team, such a huge market area. So now, we have in-area resources, we have in-area business development and salespeople. So I strongly believe that this type of approach is better for the order intake, but also for the project execution capabilities. So we have locally someone who's high enough in the organization that has the credibility to bring the voice of the corporation to our important clients.

Excellent. Good. Then, the quarterly development of revenue and adjusted EBIT margin, anything specific you would like to highlight here?

Okay. I mean, if we look at Q1, and this is already old news, very much dominated by the spill projects both in Peru and Ecuador. When we started the year, I mean, we started with the guidance of more than EUR 105 million revenue. So that was where we were targeting to land. And then, already in Q2, we saw that we're going to land a little bit higher. So Q2 was more on the line that we had forecasted the year to begin with. And then, Q3, Q4 more or less aligned. We had some -- I mean, delay is not the right word, but we had some revenue moving from Q4 to Q1 that we had anticipated earlier that might land there, but nothing really significant. But then again, I mean, all in all, 2.5x roughly the revenue that we turned in 2021. So can't be happy about the achievement. I mean, amazing stretch from the organization. So all in all, very happy. And then again, if we look at the adjusted EBIT, I mean, -- it is not where we want to be, I mean, 9.9%. The long-term target is 14%. But like I said, I mean, we did the big turnaround in terms of our operating model late last year. We started the investments in Q2. We are already seeing the results from sales funnel perspective. So all in all, I mean, had we optimized for our profitability, I mean, it could have been significantly better. But I think we anticipated a bit the growth. And it is part of the business. I mean, you need to invest in order to grow. I mean, it is not as scalable as SaaS business that without heavy investment in new resources, you can grow almost organically. This is still a traditional business where each sales project is quite demanding. And if you look at the project size where we're moving towards, I mean, it requires a rather significant team to even take part in the tender. And then, when we move from the tender phase to the project execution phase, it requires a lot more resources to do that in a professional manner. So all in all, I mean, we've strengthened the organization significantly. Those investments can be seen in fixed expenses, but we believe that in the long term, this is the right thing to do.

Good. Then we will walk through shortly some of the biggest projects ongoing. And let's start with the Bangladesh new project, which we won last year, or '22. Why is this one critical to us?

Okay. So if you look at the business split that we currently have, I mean, Americas region is very much solution dominated. I mean, some equipment sales, Middle East, Africa, completely solution-dominated. But then, if we look at Eurasia, I mean, it is mostly equipment sales, and it is, in a sense, scattered equipment sales. I mean, we don't have a stronghold in that area if you don't take China into account where we have been active for the past many years. So really this project and this market has been a target for us for many years. And even in the IPO prospectus, we highlighted the potential in that particular market. So showing that we can establish ourselves through an anchor contract in a growing market is obviously very important to us. And we believe that this equipment supply project will also generate some solution-related revenues for us in years to come and, of course, cement our position in the local market for the future upcoming tenders.

Anything specific you would like to tell about the scope of the project?

So I mean, it is quite diverse. And if you look at the scope from a technology perspective, it really shows the synergy between sort of the traditional technology that Lamor has provided, oil spill response equipment, there are vessels and we see a lot of potential in providing built-for-purpose environmental protection vessels in other market areas as well, and then again, waste reception facilities. So material recycling technology, so showing that really the clientele that we serve within these 2 business segments, if you like, I mean, segments from IFRS perspective business, different parts of the offering. They are very complementary. And typically, the clientele is the same. So I think it highlights really the synergy that we have between the environmental protection and material recycling offering.

Excellent. We mentioned in the IPO process about the potential in Bangladesh. How is this referring to that?

I mean, this is one part of the potential that we identified already years ago. There is significant infrastructure extension or expansion projects in the country upcoming. And obviously, we monitor the development of those projects quite keenly, and we have a good understanding of what's going on. And when the time comes, we'll communicate the market more. But we still do believe in the potential of the market and see a great continuation of our business success there.

Excellent. Then, Saudi Arabia has been something that has been on the table during each of the webcast, I can't leave it out this time either. What is the current status of the project? Any updates from Saudi?

I mean, we are in maintenance phase, and Saudi Arabia is going through so many changes, and we could do a webcast on those changes alone. I mean, this recent 2030 strategy and all the investments related to that, all the new strategic business entities that are established take that vision forward, and sell the subsidiary of SIRC owned by Public Investment Fund is one of them. So the operative part has been transferred to sale from NCEC, which is the sort of the regulator in the country, the National Center for Environmental Compliance. So now it's more operational. It's more business-driven rather than regulation driven. So for us, it is a good way to market ourselves to the de facto environmental solution market force, if you like. So we know that PIF has a significant interest in enforcing the sustainable business in the Kingdom, and they've allocated that role to Saudi Investment Recycling Company. So we believe that, for example, the training that we did for 1,200 people now in 2022 is a great marketing tool for us to show and highlight what we can really do. And if you read the news that they probably come out every week, one investment project larger than the other, but in this field, if you look at their targets to expand the capacity to 530,000 barrels by the end of '24-'25 depending on which source -- public source you believe, we see a great potential there. I mean, it is roughly 6x larger the total market that we do today. So hopefully, we've done such a good work, and we believe that -- or I believe that we've done that we'll take a significant chunk of that. And if you go back to the strategy and the operating model change that we did, now we have a permanent establishment there in the region. We have permanent people there in the region. We have a constant dialogue with the end customers. So from that perspective, at least, we can say that the change in the operating model has worked wonders.

We've been talking quite a lot -- quite a many times also about the challenges relating to collecting the receivables from the Saudi project. What is the current status on that?

I mean, step by step getting better. Hopefully, for Q1, we can share some exciting news about the really turn of events. I mean, like you said, it's been more capital -- or working capital intensive that we anticipated to begin with. Some people could say that, okay, that's to be expected from Saudi Arabia, and we were a bit [ polite ] walking into the contract and, in a sense, I can relate to that. But all in all, I mean, we are in maintenance phase. The operational part is going great. We have a great relationship with the end client. So hopefully, in Q1, we have some great news to share about the working capital part as well.

Excellent. Good. Then about the plastics initiative, which was published during the summer term. What is the current status? Where are we now?

So we did the first closing just before the end of the year. So now, we are finalizing everything related to the process design, doing enabling works for the permitting part, doing the final technology selection. So we are moving forward with full speed. And hopefully soon, we also have more to share about these projects. So -- there were some delays, and I think we were a bit too optimistic about the time schedule to begin with, doing something completely new in Finland and taking into account that, for example, from EU taxonomy perspective, I mean, chemical recycling is not something that is well recognized. So when we talk to financiers, project funders, it is, in a sense, a more time-consuming process that we anticipated. But all in all, first closing done, everything moving forward. And hopefully, we have great things to share this year about the project. And then again, if we relate this to our strategy, if we look at the megatrends -- more on the megatrends in the strategy slides, but this is exactly the type of business that we want to be involved with. I mean, it is material recycling. It has to do with the scarce resources. We see a great potential on a local scale. We definitely do believe that it needs to be a distributed solution. There is no point in transporting the plastic waste, huge distances. I mean, basically, we are transporting 50% air. So distributed solution, like communicated earlier, our target is 40,000 tonnes in Finland by '25-'26, and then a bigger portfolio globally of 100 kilotonnes during the strategy period.

Good. Then, the last project I would like to highlight here is the soil remediation projects in Kuwait. I guess, there has been quite a preparations ongoing last year. Where are we now?

Yes. So if you look at the whole process schedule, I mean, there was a 17-month enabling works period, and we finalized that last Thursday. So the project is going from operational perspective as planned. Now, we are really moving towards the remediation part where we are going to start seeing bigger revenues, bigger turnover coming in, also a huge effect on the number of personnel. I mean, this year, we're going to employ some 1,500 people there in Kuwait. Obviously, everything will not consolidate to our numbers. But it is an impressive operation. And it is a demanding project also from admin perspective. I mean, it is UN sanctioned project. So there are certain milestones that need to be covered. I mean, the paperwork needs to be flawless, and maybe that was sort of the thing that we weren't well enough prepared for, but it's been a learning process. And all in all, I mean, we were able to complete the enabling works in time and now move towards the remediation part. So -- and from a strategic perspective, I mean, it is a great reference to us. I mean, wherever we go to whomever we talk, I mean, everybody knows about this bill. Everybody knows about this project. So of course, from a brand building marketing perspective, it's been super important for us.

Anything you would like to comment about the market potential in Kuwait?

I mean, there is a continuation for the Kuwait excavation, transportation and remediation project. What we've seen is a bit of a price erosion. So the prices are not where we'd like them to be. But then again, I mean, if we look at the technological part that we've developed for this project, I mean, we see a great potential for us to work with these projects, if not as the main contractor, then as a technology provider or solution provider. So definitely strongly believe that there will be some business for us there. But then again, if you look from a strategic perspective that now we've established ourselves in Kuwait, and we have a lot bigger portfolio to sell, KOC is investing heavily in environment protection as well. I mean, in relation to this project, they have their first sustainability targets. I mean, maybe they are not as challenging or as ambitious that we have here in Europe, but for Middle East, it is a significant step change. And we see that also in the upcoming tenders that there is a great demand for these type of solutions in the country.

Excellent. Good. Then let's have a look at a short update about what is actually ongoing Kuwait. So let's see a short video from Kuwait. [Presentation]

So there you saw a short update about what is ongoing in Kuwait currently, and the progress is quite significant for this year as well. Then, I hand over to Timo, who will continue with the financial update and guidance, and we'll start with a brief summary of our key figures. Please go ahead.

Good morning from my side as well. And as Johanna referred to, let's have a little bit deeper dive in the numbers in terms of the performance as well. So when we look at the last quarter of '22, the revenue we achieved was EUR 28 million, and which was pretty much where we expected that to be. In terms of the adjusted EBIT, we landed at EUR 1.2 million. And there, I have to make a comment already that the Q4 performance in terms of the profitability was heavily burdened by the depreciation of U.S. dollar and the linked currencies, and it actually had a twofold effect. It affected our EBIT, but also heavily impacted our EPS, earnings per share, and that was done by the reevaluation of the accounts receivable and, on the other hand, and then also reevaluation of the loan receivables. And in a historical perspective, or however you see it, of course, this fast and rather strong depreciation during the 2 to 3 months was something we couldn't anticipate. And that's why the Q4 numbers were as they were. Then when looking at the full year, as already mentioned by Mika, we achieved EUR 127.7 million, which indeed is roughly 2.5x on a year-on-year basis. And then, when looking at the profitability there, EUR 12.6 million. As you might remember, the guidance was from EUR 11 million to EUR 13 million, we are very much in that bracket. And for the full year, adjusted EBIT, that is then 4.5x year-on-year, which is a significant achievement as we see it. Maybe then, a couple of highlights later on. The number of personnel, you can see that the number of personnel at the end of the period, 508 versus the average personnel during the year, 604. And why is it so? Of course, in 604, there's a significant impact of the earlier oil spill response and cleanup projects in Peru and Ecuador, whereas the full year growth is heaviest impacted by the Kuwait increase. And as we also heard, that increase will continue going forward.

Any comments on the dividends?

As we have said in our long-term financial targets, whilst we aim to share dividend, the growth is -- and funding the growth is still the priority, and that is the view our Board of Directors have maintained, and then that's why the decision not to share any dividend for '22.

Good. Then let's move on to the order backlog. What is the -- what are the main growth drivers? And what would you like to highlight here?

No, of course, we can still see that the order backlog remains to be on a very good level, EUR 203 million at the end of the period. And out of that EUR 203 million, EUR 85 million is expected to be revenue recognized or delivered in '23, which, of course, gives us a very nice basis to start the year. In terms of the orders received, for the full year, we reached EUR 87 million, and for the last quarter, EUR 11.4 million. And out of that EUR 87 million, the biggest orders as we have communicated and repeated many times, of course, the early year, Peru especially and then the Bangladesh orders in Q3. And as we have also mentioned already, and we'll come back to that a little bit later on, there are several discussions for potential tender processes we are expecting to take place. And of course, that will then be also reflected in the order backlog as we go on.

Good. Then about the working capital, this is also something that we've been talking each and every quarter. Let's continue there. What do you see? It's coming down. How do you see it going forward?

Yes. I'm sure that this will remain on our agenda also going forward. That's the nature of the business we are in. Indeed, the growth has stabilized, and we didn't see any increase from Q3 to Q4, and then that is also reflected in the cash flow from the operations, which was EUR 0.7 million positive for the quarter. As we have also communicated in the release, few changes or big movements in the working capital. Obviously, the payroll that has been pending in terms of the payments, that has reached its final stages and almost all the receivables have been repatriated. On the other hand, Saudi was explained -- or commented by Mika. There, we can clearly see that now being close to the customer in all respects, also is having an impact here. And we see that payments behavior is going to normalize during the first half of this year. And then obviously, the biggest mover where we have seen still the growth is the Kuwaiti projects. And there, the tied-up capital has been somewhat higher than we have expected. But at the same time, we have to repeat that this invoicing is heavily tied to the remediation works, which we are about to start as of now.

Good. So I guess, you covered the -- how it's going to develop. Let's move on to the long-term financial targets. We will come back to the strategy targets shortly. But what are we aiming for during the strategy period from the financial perspective?

As we launched the new strategy and updated long-term financial targets in November, we are aiming to reach a revenue of EUR 250 million latest by the end of 2026. And in terms of the profitability, first of all, we have simplified a little bit our target setting, and from now on only looking at the adjusted operating profit -- or adjusted EBIT, and that remains to be at 14%, as we have said before. In terms of the capital structure, same story continues, in order to facilitate that growth, which is basically doubling from last year, again, we have to maintain a strong balance sheet. And also that remains as a priority in terms of the dividend policy. We aim to distribute dividends, but the growth is the priority.

How do you see it? Is it realistic? Anything you would like to highlight about long-term target? It's quite high.

It is ambitious, no doubt about that. But as I think we open up in our Capital Markets Day session as well, it is based on the firm opportunities and prospects as we see them. Obviously, some way to go, but we definitely see it realistic.

Good. Then, one of the most important parts of the release is, of course, the guidance for 2023. Could you summarize the guidance and the background for it?

So for 2023, we estimate the revenue being in the range of EUR 120 million to EUR 135 million. And in terms of the profitability, the adjusted operating profit margin would be in the range of 8% to 11%. And as customary, of course, a few remarks behind all those numbers, as we mentioned, we have a very strong order backlog also for '23. But as we have said before, a significant part of our revenue is generated by the large service project deliveries, and any changes in their progress obviously is having an impact both in revenue and profit. We already mentioned, there's several tendering discussions we see ahead. Obviously, once again, the timing of those discussions, the timings of the tender openings, the decisions is equally having an impact on our visibility. Thirdly, also mentioned that we have strengthened our organization to enable the growth ahead, and we have recruited several -- significant number of professionals in '22. And of course, we wouldn't do that if we wouldn't believe in the growth and that we need that support organization to facilitate the growth. But in the short term, in '23, the share of the fixed expenses is going to be higher than in the longer term. And then obviously, it's clear for everybody that in the geopolitical arena, there's a lot of uncertainty and, in many of our operating countries, that is the case. And any changes either for worse or better, obviously, would have an impact on our operations above.

Good. The revenue range is from EUR 120 million to EUR 135 million compared to current year's EUR 128 million. Anything you would like to comment there, the growth or the level of the estimated revenue?

Yes, maybe a little bit background, which was touched upon by Mika as well. In our first guidance a year ago, we said that we aim to achieve the EUR 105 million. And if we go a little bit even further down, we might remember that when doing the IPO, we said that we expect to achieve the annualized level of EUR 100 million as soon as possible. What happened in '22 was actually that we reached that EUR 100 million and beyond that, a little bit ahead of schedule, if you like. And the growth we now guide for '23, taking that into account, as well as also taking into account the significant impact of Peru operations in early part of '22, we see this still as a growing year when normalizing the developments.

Good. Thank you for summarizing the guidance. Then we will have just a few words about our updated strategy. If you want to know more about it, please go ahead and have a look at the Capital Markets Day recording where we describe it more in detail, but now just highlighting a couple of things before the Q&A session. First, in our strategy, we tell what is the world and what are we actually doing there? And I would actually like to highlight the megatrends, which are in the picture. So climate change, resource scarcity and decreasing biodiversity, how are our offering supporting to mitigate climate change and resource case?

So if we look at climate change, and that's mostly about emissions as we currently understand. And if you look at the environmental protection part, whether we have an oil spill or chemical spill or any other obnoxious or hazardous materials spill into the environment, it typically has a climate effect. It evaporates and creates carbon emission or some type of greenhouse gas emissions. So any solution that we provide is targeted to mitigate that risk. The faster you can collect that, the faster you can contain, the smaller the environmental impact is. And if you look at resource case, there we go to material recycling, utilizing the scarce resources that are in the waste streams that we handle, targeting all the technology selections in such a way that will minimize the land going to-- the waste going to landfills and reusing, reutilizing anything valuable in the waste stream. And then again, decreasing biodiversity. I mean, if we look at the projects in Kuwait, I mean, it is a restoration project, or remediation project in a bigger picture. And that also is about improving the biodiversity. And as I've mentioned in a few of these webcasts for some of the Kuwaitis, it is not about remediating the land, it is about getting the migrating birds returning to Kuwait, that being a way for some 30 years now. So that is sort of the big picture how we relate to the megatrends.

You talked about an example in Bangladesh, where the environmental protection and material recycling as we call the different business lines or how to say them. How do you see that they are interrelated with each other?

So I mean, in a way, I mean, you could see easily the project life cycle of a client, and it starts with planning and permitting where the environmental preparedness comes into play. In operative phase, you might have some type of incidents where we come in play during the response and the cleanup. But when it's more about the operational part, then it's recycling of waste and plastic recycling, reusing the water. And finally, at the end of the life cycle, you have the remediation and restoration. So in a sense, it is a cycle that starts from the beginning and ends at Omega. So it is, in a sense, a cradle to grave type of approach that we've chosen here. And all these pieces of our offering really come quite nicely into that life cycle.

Good. Why we succeed, I would only actually like to ask one question, what is the competitive advantage of Lamor?

I mean, if you look at our global network, we have a great local presence in our key markets. Then if we look at the approach that we've decided to take, we combine the local know-how with our global way of working, having structured processes in place, having a unified portfolio in place, being able to take that to the end customer in all of the market areas, I think that's by far the biggest advantage that we have. Then again, I mean, we have great references. We've built a great partner network during the year. So we believe that we are really in a great position when it comes to large turnkey solution projects. So those 3 things are the ones that I would highlight.

Good. And then the Vision '25, what are the 5 goals? What are we really aiming for?

So I mean, if we look at the current strategic markets, we look at Middle East and Africa and Americas -- South America especially, we want to be the #1 partner in this market for our customers. So whenever it's environmental solutions, environmental protection materials, recycling, we want our clients to think of Lamor. That's sort of the #1 target. We want to grow. I mean, as Timo mentioned, our strong term financial target, it is ambitious. So we want to open 3 new markets to create a positive environmental impact, so taking our full portfolio for those 3 new markets. As we know, I mean, the tender size or the project size is growing, and these projects have a very significant part of our growth strategy. So we want to be a part of solving 5 large-scale environmental projects during the strategy period. And then again, moving to more sustainable or recurring type of revenue business, we also want to build a portfolio of plastics recycling projects, the target is 100 kilotonnes during the strategy period. And in order for us to succeed in doing so we need to build a Lamor way of working an efficient and effective solution portfolio that looks and feels more or less the same everywhere we operate. So I know that this is sort of a bit cliche, but we want to be the type of McDonald's of this industry that -- wherever you go to McDonald's, I mean, it feels and is the same. Same with Lamor, wherever you see a Lamor product or a Lamor solution, it feels Lamor. Of course, there will be a certain amount of tailoring done locally, but that should remain as small as possible. That will allow us to learn from the experience that we have from different market areas, and then scale up our operations on a global scale, achieving efficiency and reaching our long-term financial target of adjusted EBIT of 14%.

Good. And then, I guess, all of this is, of course, built on our values and the great people we are having at Lamor. Good. Then we move on to the Q&A session. So Timo, will you join us as well?

Good. Let's start from the oldest ones. So those who have been waiting for longest will have their answers. How big share of the current personnel are dedicated for the future potential projects?

So I mean, if you look at the way our operating model is built, we have the market areas, we have the permanent people in our country units and then we have the project personnel. So I mean -- and we can't really disclose the ratio, or we've decided not to comment on the amount of people recruited for these global functions, for example, in '22. But if you look at where we started the year, that gives sort of an idea that what would be the level on a global scale where we started from. And now moving forward, most of the growth will come from the project personnel. So I strongly believe that we are, from a global organization perspective, quite close to where we need to be in order to reach the EUR 250 million revenue target. We need a bit of reinforcement in some of the market areas, but sort of from a global function perspective, the functions has been established, the process has been defined. So in that sense, I mean, the organization is ready and some people might be a bit disappointed with our profitability guidance for this year. But then, if you take into account that, okay, we could share EUR 200 million with the same cost base, then you see that. I mean, that's the route that we've decided to take, and that's sort of the investment in advance because we don't want to be chasing the tail all the time. I mean, we want to be more prepared when really the growth opportunities come, and we see that they are coming.

And I guess, the personnel recruited in '22 are not as such projects related in case they are not already delivering a project?

Correct. That's true. So you need to separate between the project personnel and then sort of the global infrastructure investments, if you like, organization investments. And maybe as a guidance, I mean, I've seen maybe too much of the billions, but maybe you could look from LinkedIn or some place like that, how much we've really recruited looking at the structure of the management team. You see the newcomers in '22. And then, you get a pretty good idea of the cost effect of those recruitments.

Good. Could you talk us through the current pipeline of ongoing and potential tenders, which ones you expect to be decided during '23, let's be careful?

All right. Let's be careful here. And maybe it's wisest to maybe go through some of the potential already disclosed in the prospectus. I mean, we highlighted the potential in Kuwait, Saudi Arabia, Bangladesh, a couple of projects in South America, and 1 in Asia. All of these projects still well alive, some hiccups in terms of how they develop and what is the expected time line. And I can safely say that we've added a few other prospects in different markets as well. But unfortunately, we won't be able to communicate -- or it's our chosen strategy not to communicate before we've taken part in the tender. But definitely, I can assure that there's a lot of interesting movement. And as Timo already said in the guidance, I mean, this year, we will be taking part in large scale tenders on a global scale.

Then a question to Timo. Your EBIT margin guidance range for '23 is relatively wide. What are the biggest moving parts within that range as you see it today?

No. The biggest moving element obviously is volume related. As we said there in the disclaimers, if you like, it really depends on the timing of the decisions and timing of -- or the progress on the existing projects, especially, of course, in Kuwait. And then, when it comes to the range and if it's wide or not, I mean, we can benchmark. I don't think it's significantly wider than used. Of course, I guess, that also demonstrate the uncertainty around us for all the companies, not only at Lamor. And if we look at sort of the historical profitability of the equipment business and you go through the old numbers of Lamor, you can see that what the gross margin has been like. So EUR 15 million swing in the revenue part can create a EUR 5 million swing in EBIT. So then, when you compare that range, I mean, it is not actually that wide because it really depends on the business split that we have for that incremental revenue.

Then, another question relating to guidance. Does the current guidance involve expectations of winning new tender offers for this year?

Yes. Obviously, we can do the math at EUR 85 million is in the backlog to be revenue recognized this year, and the guidance gives the range as discussed. And it means that we have to win orders and also deliver orders -- those orders this year. So yes.

Then about long-term financial targets, long-term financial target seem to be far away if we look at the guidance for '23. Have there been setbacks regarding reaching the target? Or is everything going in accordance to your plan?

Yes. I wouldn't say there are any setbacks. Of course, it would be nice to be closer, as also discussed both by Mika and myself, there were certain surprises at the end of last year that was not in the cards as we had them. But it still remains to be our target, and we see it realistic also very much supported by the scale, which we have demonstrated, so far growing the revenue 2.5x and at the same time growing the operating profit by 4.5x, that scale.

Then 1 comment from Q3 webcast. You were comfortable with the revenues going up double-digits in the following years. The guidance doesn't expect double-digit growth. Why is that? I guess we've walked through quite -- several times, but let's summarize it once more.

Can you repeat? Sorry.

So double-digit growth was expected in the Q3 webcast, and the guidance doesn't tell about it for this year. What's the story behind?

No. Yes, I guess it's the normal development when we get better visibility on the development. A lot of it is about the timing. Obviously, we have expectations always and try to scale them down and very much, of course, depends now. I know the numbers, of course, the official numbers, but I will a little bit refer to my earlier explanation about the basis, what is really the normalized growth as we see it?

And I think, if you look at certain individual points in the time series, you could say that, okay, for that change from 22% to 23% is not double-digit growth. And that's sure. I mean, it's a fact. But if we look at it over a longer time horizon, I think that's what Timo was referring to in his Q3 webcast. And there we're leading towards the new updated strategy during the Capital Markets Day, where we set the new long-term financial targets. I mean, at that point, I mean, the long-term financial guidance was to grow significantly faster than the market. And we had difficulty in explaining is that 5% or 7% or what is it? So we wanted to show our ambition level. And now with this new long-term financial target, we've shown, okay, it's to double within the next 4 years.

Then I guess a good last question would be, how often do you think that an environmental incident where a Lamor is part of normally happens? Anything, Mika, you can?

So I mean, if you look at it from a historical perspective, and we have quite a long time series, I mean, you could say that on a yearly basis, our spill incident-related revenue is like EUR 10 million a year. Some years, it comes from different projects. Other years, it comes from 1 project. So every year, there's an incident where we are involved in some years, it is a bigger involvement, sometimes it is just a supply of equipment. But every year, we are involved in environmental incidents many times. I mean, whether that's assisting our clients, whether that's giving consultation. So it is a yearly occurrence on an average EUR 10 million a year revenue. Last year was really great, but you can't anticipate the future. Can you?

Good. All right. Thank you all for the questions. Thank you for the answers. And thank you for all of you who have participated. In case you want to see this webcast later on, investors.lamor.com is the place to be. Thank you.

Thank you.

Thank you.