Good morning, everybody, and welcome to Lamor's Q3 interim report webcast. My name is Johanna Grönroos. I'm the CDO at Lamor and also responsible for the investor relations. Together with me, I have today our CEO, Mika Pirneskoski, and our CFO, Timo Koponen. Welcome, everybody. We will start with the operations, operational highlights, presented by Mika, and then we will go a bit more in details with the financials where Timo will take the stage. After that, of course, there will be a Q&A session. Happy to take all your questions. Please be active. You're welcome, Mika.
Thank you, Johanna. Okay. Another strong quarter from us during the third quarter as anticipated. If we look at the full year numbers, we've almost tripled our revenue during the first three quarters and we almost doubled our revenue during Q3 compared to the revenue of previous year. As also communicated earlier, I mean, the main growth drivers are the significant service agreements in the Middle East as well as the increased volume of our core business. I mean, the main driver for Q3 is the remediation project in Kuwait that has progressed well, and we anticipate that the actual remediation work will start in early 2023, which will obviously then have an even higher impact on our quarterly revenues.
The Saudi Arabian project is now in maintenance phase with the new contract party. As already disclosed in the CEO update, there are certain administrative things that need to be closed out within CEC and then we can proceed further with the new contract party and the potential that it gives us. I would say that the main message for today from the Middle East market is that it is super active. We've participated in significant tenders during the season and hopefully during the coming months there will be something to share with our investors.
The main significant contract that we signed in Q3 was in Bangladesh, three new significant contracts and maybe just to disclose to our investors and other stakeholders, it is the seventh-largest individual project that we are doing in the history of Lamor. Even if you look at the order intake numbers and compare it to 2021, where we had the two largest individual projects that we've ever signed in Kuwait, it's good to know that this type of significant equipment deal is not an everyday occurrence for us. What we've done in terms of the organization during the past three quarters and we've actually sped up a little bit during the last quarter is strengthening the management team.
COO Johan Grön started in May, and now SVP in the Middle East started in August. In addition to that, we've strengthened the teams of these respective gentlemen during the past few months. We really do believe that now we have the organizational structure in place to take our growth story even further. I mean, when you look at the last 12-month figures, we've almost reached EUR 120 million level, and our long-term financial target was to reach EUR 100 million revenue as soon as possible and then grow faster than the market thereafter.
We believe that there needs to be something done on these long-term financial targets and therefore the strategy update is ongoing and Johanna will then invite you to our Capital Markets Day later on where this will be published. If we look at the big numbers, the revenue in Q3 or the full year revenue up until the end of Q3 increased to EUR 99.7 million. That is a 183.2% increase year-over-year. Adjusted EBIT increased or more than quadrupled during the period to EUR 11.4 million. The adjusted EBIT margins stood at 11.4%, which is still a bit below our 14% long-term financial target.
What is very important to understand for our investors is that we've delivered projects and business worth almost EUR 100 million during the first three quarters of the year, but yet our order backlog has remained at the same level. If you compare the situation that we had during the IPO and during the early start to this year, I mean, we believe that this is an even greater demonstration that the level that we've achieved is sustainable in the long term and these interesting projects and large scale projects in our order backlog will definitely support the further growth that we are anticipating. A few words about the projects in Bangladesh. What is the aim of the project in Mongla Port?
To increase the oil spill response, the environmental preparedness of the port area. Improve the level of waste management in accordance with the International Convention for the Prevention of Pollution from Ships, which is called the MARPOL Convention. This is a continuation to a project that we did already in 2016 there in Bangladesh. Now with the extension in the port area and the port operations, there is increased need for environmental preparedness as well as this is the first port in Bangladesh with the modern technology to treat MARPOL waste. The total value of these three project is approximately EUR 25 million. We estimate them to be delivered within 18 months, with most part of the revenue being recognized in 2023. This is a significant opening for us in the Asian market.
We see a lot of potential not only in Bangladesh, but in the neighboring countries to start really building up the environmental protection capabilities and treatment capabilities in the region. I mean, if you look at our revenue split today, I mean, we have a very high focus on the Americas market as well as the Middle East and Africa, whereas Eurasia is lacking a bit behind. We see that this is a great opening to that market area, and we see a lot of potential not only in Bangladesh, but in the neighboring markets. I'll let Timo continue with the financial position.
All right. Let's have a few highlights of the financials for the period, the quarter and year to date. As already commented by Mika, the revenue for the quarter was extremely good, EUR 34.2 million, which is almost double the corresponding period last year. Adjusted operating profit, EBIT, at EUR 3.1 million, compared to 2.6 a year ago, which is also 18.6% higher. Adjusted EBIT margin for the quarter at 9%. The cumulative numbers, as already mentioned, EUR 99.7 million for the first three quarters, which is almost triple the levels of a year ago.
More importantly than the adjusted operating profit, adjusted EBIT at EUR 11.4 million, which also corresponds 11.4%, which is then almost 5x the level of last year. Also, earnings per share, EPS, had a significant improvement and was standing at 0.16 EUR at the end of the Q3 cumulatively. Personnel numbers have also developed, and the biggest contributor there is the project in Kuwait, where the personnel number has increased significantly, especially from the beginning of the year.
As we can see from the geographical split, the early part of the year was dominated by big spill operations in Latin America, Peru and Ecuador, whereas after summer, the start of the H2 and the H2 in general will be dominated by the progress in Kuwait. When then looking at the balance sheet side, the same story continued. The large projects continued to tie capital, and that happened despite of the significant customer payments received. Maybe a little bit worth opening up the development on the right-hand side.
When we look at the contract assets and receivables in the early part of the year, the big jump there was caused by the projects in Peru and Ecuador, where the work was completed, but then the settling, the invoicing, and the aftermath was taking time, which we tied the capital at that point. Even though the levels have remained the same, it is worth noting that now the contents are totally different, since now in Q3, it is especially the Kuwait project, where the POC has a significant impact on the contract assets and also on the receivable side. This is the same story as we have repeated for a year now.
The significant service projects will tie capital in the early part. For example, in Kuwait, the customer invoicing gets going really when the soil remediation work starts in early part of next year, as discussed. Financial position remains very strong. Equity ratio 49.9%. Net gearing at 20.3%. As you have seen, we have not changed the guidance for 2022. We still are shooting to reach the revenue level, so over EUR 120 million, and adjusted EBIT level more than EUR 14 million.
Obviously, at this time of the year, we have all the orders and deliveries in the backlog, but obviously any unpredictable delays in the progress could have an impact on the final results at the end of the year. Long-term financial targets, Mika already opened up the story. I'm not going to repeat this. As you can see, we have almost hit already the growth target as well as part of the profitability targets we have set. As part of our strategy process, we will renew also our long-term financial targets, but that is more of the story of next week. Back to Johanna for Q&A.
Yes. All right. Let's continue with a couple of questions here. For Timo, maybe the first question you talked about the working capital situation. Does receivables still include something from LATAM projects earlier this year or can we open it up?
There are still some tails included in there at end of September, but actually since then situation has changed already and both Peru and Ecuador starts to run out as we speak today.
Excellent. Another question also relating to working capital which is an interesting part. How do you expect working capital to develop in the next few quarters?
That is a good one. Obviously, our revenue recognition method is creating this increase in the contract assets, for example. Obviously, it is very project specific, and now that we are, for example, starting to execute Bangladesh project, there the pattern is going to be different since that is more technology-driven project, where we have also the significant advance payments and stage payments structure in the contracts.
Good. That was one of the questions as well covered. About Bangladesh, do you expect to have any revenue from the Bangladesh project already in Q4?
Yes. As mentioned, that is one of those projects that we are now starting up as we speak, and some of the revenue will already fall for this year.
Good. Mika, you mentioned about the potential about the new tendering processes upcoming and so forth. Any additional updates on that part?
We need to be careful here what I can
We know that.
disclose and what not. Maybe some words about the tender in Kuwait, which is a public tender. The information will be made public, but it seems to us that there are certain difficulties with some of the bidders that have taken part and there are certain market rumors which we can't really comment, but I'm slightly positive about the projects there in Kuwait and hopefully we'll be able to show some business from Kuwait for the second part as well. It's still open. It's ongoing. The technical evaluation is ongoing. I think this is the trend that we are also seeing elsewhere, that the competition is emerging.
We also believe that the barrier to entry to this kind of projects is not as simple. I mean, you look at the requirement that you need to have 300,000 tons of soil bioremediation and there aren't too many companies who can present that sort of experience, so I still believe that we are in a good position. Whether that guarantees anything or not, that remains to be seen.
Now that Mika mentioned Kuwait, there is a question from Kuwait as well. Unfortunately, I guess, also a question where we need to be careful. Could you disclose how much revenue was recognized from the Kuwaiti project in Q3? Should we expect a similar kind of level for Q4, or was there something exceptional happening in Q3?
In Q3 was a little bit exceptionally high. It was a significant part of the Q3 revenues. I don't think we have disclosed the exact number.
No, we haven't.
Let's keep it there.
Good. About inflation is still running high as we heard this week as well. How does this impact Lamor's business?
Obviously, we are not immune to that. We have seen some deterioration in our margins, even though we have tried to anticipate that also in our pricing. Some effects are, unfortunately, also visible in our numbers.
If I could comment on a more general level. We are seeing that the logistics prices have come down to a certain extent, so there is also an element of bright future, if you can use such a word. For example, the project in Kuwait is logistics heavy, and then we believe that this trend is favorable to us.
About the plastics initiative, chemical recycling, any update about the closing of the transaction?
We still remain confident that it will be closed by the end of the year. It has taken a little bit longer than anticipated to finalize the project funding scheme. We know that joint venture structures, especially 50/50 joint venture structures are not the exact favorites of, for example, senior financiers, so there has been a few delays, but we still remain confident that we'll be able to close the transaction by the end of the year.
Lamor has been talking about the chemical recycling. Any cooperation potential with the mechanical recycling part?
Yeah, that's a very good question. The way we see it is that everything that can be mechanically recycled and there is decent demand for that mechanically recycled part of the plastics, it should be mechanically recycled. Whatever we do in terms of chemical recycling is then just an addition to the whole recycling process of plastics. I mean, once again, if you look at the big numbers, I mean, the total consumption of plastics on a yearly basis is 350 million tons, and potentially of that demand, maybe one-third could be satisfied with just mechanical recycling. I mean, it is always downcycling, so we also need samecycling, upcycling possibilities and chemical recycling is at the moment the only available technology that can achieve that. Definitely we need both.
We need the mechanical recycling part, we need the chemical recycling part to reach the zero carbon targets and get rid of virgin fossil fuels in petrochemical industry.
Good. Going back to the Bangladesh deal which we announced during Q3, any kind of linkage about the Bangladesh project and with the potential that was mentioned in the prospectus, back to the IPO?
Yeah. In the prospectus we looked at the Bangladeshi market as a whole. I mean, there is another significant potential in Bangladesh in terms of the expansion of the Chittagong Port. The potential that we highlighted in our prospectus is considering these two projects, the one in Mongla Port and the other one in Chittagong. Anyone following very closely the Bangladeshi market situation probably knows that the amount of foreign reserves at the moment is not as high as it used to be. There's been a bit of difficulty on the currency and on the exchange rates, so that could possibly affect the expansion investments in Chittagong Port. We monitor the situation closely.
We believe that we have the best available solutions available also for that project, but the timing is still a bit unclear.
All right. So far the last question in the CEO update, it is mentioned that there is possible short-term effect of the investments on profitability. Anything to open up there?
Oh, very very good question. I mean, if you look at the announcement that we made over the past half a year, I mean, about the management team, for example, we've significantly strengthened the management team of the company. I'd like to link that with the potential that we see in the market. One could say that we've anticipated certain investments in resources, in personnel, what was previously anticipated. I mean, we've shown, we've communicated some of the potential in the Middle Eastern market. We see a significant demand, a significant potential in other of our markets.
Of course, these sort of investments will increase the fixed expenses in the short term, but we do believe that it will make us more ready, more prepared for the long term next growth step that we are aiming for. That is, of course, unfortunate in the short term, but we do believe that it will pay off in the longer term.
Excellent. Those are the questions for today. Thank you for the answers. Like Mika promised, I would like to once again invite you to our Capital Markets Day that will be held November 22, 2022, so next week starting at 2:00 P.M. Please join us to hear more about the strategy update and there will be other management team members as well telling about what are their ambition levels going forward. Welcome everybody, and thank you for this webcast.
Thank you.
Thank you.