Good morning, everyone, and welcome to Lassila & Tikanoja's Capital Markets Day. My name is Inka Leisio, and I am the Head of Communications for Lassila & Tikanoja. It's been four years since we last had our Capital Markets Day event, and we're delighted to be here to discuss our strategy together with you. Before we start today's program, a kind reminder, today's presentations contain forward-looking statements. This is our agenda for today. The first part of the event will focus on L&T's circular economy-related businesses.
Our first speaker is L&T's CEO, Eero Hautaniemi, and then he will give a short overview of L&T's renewed strategy, followed by presentations about Environmental Services and Industrial Services. We will end the first part with a Q&A with Eero Hautaniemi, Petri Salermo, and Antti Tervo. Questions can be asked here live at Hotelli Mestari, or by using the chat function if you are watching the broadcast online. Without further ado, Eero, the stage is yours.
Thank you, Inka, and welcome also on my behalf to this Capital Markets Day. Lassila & Tikanoja was founded 1905 in Vaasa as a textile wholesaler, and during the past decades, we have transformed the company into a circular economy company. We have four business segments: Environmental Services, Industrial Services, that form together our circular economy businesses, and then we have Facility Services in Finland and in Sweden. Our mission is to make circular economy a reality. Our businesses are in different phases. Our circular economy businesses have performed well during the past years in terms of sales growth and profitability. In our Facility Services businesses, we have had more challenges during the past years, but we have turnaround programs ongoing in Finland and Sweden, and we are making good progress. We have ambitious long-term targets.
In addition to financial targets, we also strive for excellent customer and employee satisfaction, and significant reduction in our CO2 emissions. Jorma Mikkonen will later talk about that in his part. The past three years have been turbulent, with COVID pandemic and war in Ukraine, and its consequences to the economy, and these exceptional times are obviously visible in our performance as well. In the background, we have made good progress towards our strategic targets, especially in our circular economy businesses. All in all, Lassila & Tikanoja is a stable and resilient company through economic cycles. Then, I move on to trends and drivers that affect our business, and especially in the background of circular economy business. Climate change and biodiversity loss are the two great challenges of our time.
We're using our scarce resources frivolously, and during the past 50 years, the use of natural resources has tripled and will almost double by 2060 if we continue on our current path. Our geopolitical situation has also changed. European Union and Finland are heavily dependent on import for most metals. Access to critical raw materials needs to be secure. Currently, circular economy is not a reality in Finland. You might be surprised to learn that secondary raw materials, this is recycled materials, accounts only less than 2% of all materials used in Finland. It's safe to say that there is significant upside in circular economy and recycling. The same applies for whole European Union. One big factor behind this is that in Finland, waste-to-energy capacity has increased significantly during the past 10 years.
We have built, mainly with public funding, overcapacity, and much of the material that could be, and should be, recycled is incinerated. In short, this. In short term, this offers, an upside for Lassila & Tikanoja, as the gate fees are expected to drop due to rapidly developing overcapacity in incineration. In the long term, this is of course not a sustainable development. For a circular economy to become reality, our linear business models and value chains have to change. We see Lassila & Tikanoja's role as an enabler. For example, we can pre-treat and process materials, and build natural cycles in remediation projects. This requires a level playing field with functioning markets and appropriate regulation. European Union and Nordic countries have taken up this challenge. We have ambitious targets for climate change mitigation and preserving the environment.
The regulatory field is changing fast, and current and intended legislation supports very well our renewed strategy. There is only one exception to this. This is the Finnish Waste Law Act of 2021, with its emphasis on the role of municipalities in B2C waste. However, the current government program states that the role of municipal waste companies will be limited to household waste only. Obviously, this remains to be seen. This long list of regulation aims to achieve three things: First, create the functioning markets for secondary raw materials, support their use, and encourage recyclability. Second, increase the role of recycling through waste taxes, emission trading, and export restrictions. And thirdly, increase the biodiversity and remediate areas affected by the people. In addition to regulation, there are also plenty of voluntary activities ongoing.
Main driver behind this is that consumers expect companies and brands to be more sustainable. Many international, Nordic, and Finnish brands have made ambitious circular economy commitments related to the use of secondary raw materials and recyclability of their products. This has a big impact on business models, as companies are not able to reach these targets alone. They need circular economy companies like us with real solutions. Today, we can see that these regulatory changes and consumer expectations turn into something tangible, as investments into circular economy are on the rise. The financial potential of circular economy is real, and it's significant. Another way to look at the market is divide it into material and energy values, and climate and nature values. When these forces are combined, it means that value creation is becoming more versatile.
Climate and nature value will also have financial value, and their importance in decision-making is growing. Players that can create solutions that meet both criteria will have an advantage in the future. We have already many solutions, and we want to create more of them in the future. Then, I'd like to move on and take a portfolio look into Lassila & Tikanoja's businesses. As I said in the beginning, our businesses, circular economy businesses and Facility Services businesses operate in different markets, and their operational performance differs. In circular economy business, we are a market leader in Finland, and this shows very well in our performance, which is at good level also in European context. The Facility Services market, on the other hand, is large but fragmented. Entry barriers are very low.
It is very price-driven, and cost efficiency is a key success factor. Our performance during the past few years has not been at the level it should have been. At the same time, the Facility Services market is changing, as facilities are becoming more technical and digital. This is clearly an area where we are strong. During the past 12 months, we have also been able to improve our cost competitiveness with efficiency programs, both in Finland and in Sweden. Another way to put the same thing, in Facility Services businesses, the turnaround programs are ongoing and progressing well. Finland is some 6-12 months ahead of Sweden. In our portfolio, Environmental Services and Industrial Services are, and will be, the center of our growth efforts.
As both circular economy and Facility Services business markets are undergoing a major change, there's clearly a need for investments to keep up with the development. In our renewed strategy, we have chosen to focus our investments into our circular economy businesses. We have a clear geographical focus in our circular economy business. We operate in Finland and in Sweden, where we entered in the beginning of 2022. These two markets have a lot in common, and maturity level is similar. Finland is our home market, and we want to strengthen our current position, increase our share of wallet with our existing customers, and expand our position in material value chains. Sweden, as a market, is much larger. We have a solid foothold in Industrial Services in southern Sweden. We consider Sweden a growth market for us.
Our focus will be initially in Industrial Services, and our target is to broaden the portfolio to other circular economy businesses in the future. Then let's move on to the value chain view of the business. Currently, we are very strong downstream in the customer front. We are also in the mechanical treatment of key material streams. This gives us an excellent platform to grow and move forward in the value chain. The key success going forward is still to have a strong position in the customer front. Our focus will be excellent service and helping our customers to reach their sustainability targets. This secures the access to the waste streams and ensures the needed understanding of the materials in circulation. But we also need to integrate better into our customers' processes and material chains.
In practice, this means further development of our capabilities in material processing and partnering with secondary material processing companies. Why do we want to do that? Simple answer is that the pretreatment and processing increase the value of the material. We have seen during the past decades the shift from landfilling to waste-to-energy. Now we are again at the tipping point where waste-to-energy emerge into material recycling and refining. As new technologies are developed, we are able to circulate new fractions and improve the recycling rates of existing streams. When today still many streams are incinerated, in the future, we will be able to use them to produce high-quality secondary raw materials. Good examples are plastics and wood waste, which are presented here. We see our role in these value chains as consolidator and operator.
We need to improve our capabilities in pretreatment and processing to secure reliable and high-quality raw material to our partners, who can then process the material further in the upstream. There are several circular economy solutions in the horizon, short term and long term. For example, demanding industrial side streams, secondary material upcycling, and nutrition regeneration and recovery. The starting point is always the customer need. Future solutions solve several customer and societal challenges at the same time. Secondary raw materials use reduces emissions, increases the recycling rate, and reduces the dependency on imported materials. Our goal is to build and integrate these solutions on top of our current operations and create a stronger position in the collection of materials. Creating these solutions requires systematic new business development and careful management of the development funnel.
We will focus on technologies with sufficient maturity and proof of commercial scalability. We will also closely monitor technical development, incorporate technologies matching our strengths, and collaborate with partners that complement our capabilities. We will not develop technologies ourselves, rather be agile in adopting new technologies. These new or adjacent markets have a large potential, as do our current markets. Successful entry into these new markets supports our position in our current service-based business. Our strength is also a very broad customer portfolio. In the following presentations, you will see some great examples how we have already been able to help our customers to reach their sustainability targets. So, to sum up my brief introduction to our strategy, in circular economy businesses, we will focus on development of service and methods portfolio.
Moving forward in the material value chain, build competencies for emerging circular economy markets, and growth in Sweden's industrial segments initially. In Facility Services, we will have a strong focus on selected customers and business areas. In these segments, customer acquisition and additional sales, efficiency, and resource management, and growth, especially in sustainability, energy, and digitalization. Thank you.
Thank you, Eero. Now it's time to invite Petri Salermo to the stage, and he will tell us a bit more about Environmental Services.
Good morning on my behalf as well. My name is Petri Salermo, and I'm responsible for Environmental Services. I've been 22 years in L&T and over 30 years in this industry. I have to say that Eero mentioned that we are in circular economy at the moment, but when I started 30 years ago, it was called waste management. We met basically our customers on their backyards or waste rooms, talking about, is it worth to separate paper or cardboard away from waste which goes to the landfills? Totally basic level. Nowadays we are kindly invited to visit our customer headquarters. We can go in front doors, and we talk their sustainability and how we can help to our customers achieve their environmental targets.
It's been huge change, and I think this will continue. And now I'd like to give you a short or brief presentation where we are now in our environmental business and where we are heading to. And looking at Environmental Services, this is largest division in L&T if you look at net sales and operating profit. And we are market leader in recycling and waste management business here in Finland. We have comprehensive service solutions. We have very good assets to help and serve our customers. We have over 700 waste trucks, 35 treatment sites overall in Finland, and our head count is 1,500 professionals. And we handle all kind of waste types and help all customer segments as well.
We have managed to achieve stable growth and good profitability despite this challenging market situation from 2019. Looking at our markets, Environmental Services has two main markets: waste management and material processing or recycling markets. In both markets, we have very strong position at the moment, and we are market leader or second largest operator in those markets. Especially we see growth potential in recycling and material processing markets because there is a increasing demand of recyclable materials and raw materials due to tightening legislation, and companies have higher recycling targets as well. If you look at our customer segments, we have been able to grow in three segments: B2B segments or sector, and municipal contracts, and producer responsibility market.
In the long term, all these segments will increase, of course, correlating GDP growth, despite the housing sector. That housing sector is the only one where we don't see growth potential, and I'll get back to that topic a bit later in this presentation. But the main thing, this wide coverage in different segments creates very stability over cycles for us. And then, Eero mentioned also value chain. If you look at our environmental value chain, there is three parts: collection, pre-treatment, and processing and material sales. And we operate widely every part of this value chain. And waste business is volume business by nature, and in collection, large customer amount or...
and volumes bring cost efficiency in route planning and large material volumes that are so critical in secondary raw material business. And our strong position in the whole chain is our competitive advantage. Then looking at first part of this value chain, it starts from customer's front, where customer's operations create waste. We serve tens of thousands customers in waste collection, and we have wide service portfolio everywhere in Finland. And we have efficient and skilled sales teams that offers solutions customer needs. We offer environmental consulting, and we have nationwide services for all waste fractions. And this is a key stage of the value chain. Then, looking at our B2B waste market, we have top quality expert who can help our customers to achieve their environmental or recycling targets.
We have great digital solutions, customer interface, and data management. And our top customer experience in our industry gives a good advantage for us. And as I mentioned earlier, housing segment is the only segment where we are not growing. And why is that? Municipalities have taken a larger role in housing waste collection over the past 10 years. Housing segment services accounted for slightly over 10% of environmental sales, net sales.
And that change is compensated increased efforts in B2B sector. And if you think about volumes, municipalization only affects a small part of Finnish material market. And the growth opportunities are in those other waste and side stream fraction. Let's see one example, how we can help Valmet Automotive to reach or achieve their environmental and recycling targets. Now, we have video.
Valmet Automotive vastuullisuustavoitteet perustuu meidän kestävän kehityksen strategiaan, mitä me ollaan määritetty seuraavan kuuden vuoden ajaksi, että mikä on se meidän tavoitetila sitten kuuden vuoden päästä. Pääpainopisteenä on materiaali, energiatehokkuus, kiertotalous, ja sitä ollaan lähdetty nyt sitten voimakkaasti edistämään. L&T valikoitui meidän kiertotaloustiekartan tueksi sen meidän pitkäaikaisen, niinku, yhteistyön kautta. Eli L&T on toiminut pitkään autotehtaalla jätehuollon kumppanina.
Täällä Uudenkaupungin autotehtaalla meillä syntyy paljon pakkausmateriaalijätettä, eli pahvia ja erilaisia muoveja. Meillä on paljon työntekijöitä ja sen myötä paljon hiljaista tietoa. L&T on tarjonnut apua tämän hiljaisen tiedon löytämiseen, ja yhdessä olemme työstäneet sitten tätä tietoa ja koostaneet tällaisen kiertotalouden tiekartan.
Kiertotalouden tiekartta on aikataulutettu toimenpidesuunnitelma, jonka avulla yritys voi muuttaa toimintansa kiertotalouden mukaiseksi. Tällaisen työn avulla Valmet Automotive voi saavuttaa lopulta asettamansa kiertotalouden tavoitteet. Ja jos ajattelee Valmet Automotivea, niin heillähän on laaja tehdaskompleksi, ja siellä on todennäköisesti satoja erilaisia toimenpiteitä, millä voidaan edistää kiertotaloutta.
Meillä on nyt se kiertotalouden tiekartta määritelty. Siellä on toimenpiteet, aikataulut, vastuuhenkilöt, priorisointi määritelty, ja nyt me lähdetään toteuttamaan sitten yhteistyössä Lassila & Tikanojan kanssa niitä toimenpiteitä ja seurataan sitten toimenpiteiden vaikuttavuutta sitten kvartaaleittain ja tehdään korjaavia toimenpiteitä, jos on tarve.
I think that was good description of how we can help our customers. It's a lot of different things and services, emptying and so on, but especially consulting is growing all the time. Then, going forward, second... Thanks. Second part of value chain. And after collection, we have to handle and treat all waste and recyclable materials. We have very strong network treatment sites in Finland, and our treatment centers gives a good platform to handle multiple materials and streams. And what we'll do, we have excellent platform to expanding the value chain, and we will develop capabilities in processing, and we will do more tighter integration to customer processes and partnerships as well.
This creates a great platform to expand our role. Our geographical coverage, it's very strong, I have to say unique, and we have widest network of waste terminals and treatment centers in Finland. We have four main sites where we process several materials. Those are, let's say, multi-material treatment sites, and we also have a plastic refinery near Pori, which is, by the way, one of the largest plastic waste processing capabilities in Finland at the moment. All in all, we have a strong network, and that enables stream consolidation as well. Looking at our current portfolio of material streams, that is unique as well, and we have substantial volumes and wide spectrum of fractions.
This creates good opportunity to maximize value of this portfolio. Looking at customer point of view, same thing. Already today, we can offer the best recycling rate in Finland to our customers, which is far higher than average recycling rate in Finland, which is approximately 40% only. This is competitive advantage to us, and of course, for our customers as well. Then looking at those materials, we see many available paths for increasing material value. Some markets are quite mature, for example, paper, but some markets are still developing fast. We have already large volumes in many streams, and there is still a significant growth opportunity to do things, volumes and values.
Thinking about industrial customers, those are key customers for us, of handling and treating our secondary materials. We can offer reliable delivery of material streams and consistent material quality as well. Thinking about those opportunities, there is many opportunities available, and we need to have disciplined approach for prioritizing and building up the opportunities. Here is some key points or criteria, how we're looking at these opportunities. We will focus on growth markets. We will utilize and build on existing mechanical pre-treatment and processing capabilities. We will seek mature enough technologies and commercial viability in the near future. If you think about developing, the business requires three things: maybe organic investments to capabilities, acquisitions, and partnerships, of course, as well.
Three examples, materials, which are very interesting and where we see big growth potential. First one is plastics. The current level of plastic recycling is not sufficient, and currently, plastic recycling is only mainly mechanical, but in the future it will be chemical as well, but both are needed. And despite development of chemical recycling, majority will be mechanical recycling. But as I mentioned, both are needed. And that chemical recycling will be done by industrial players, but L&T can provide pre-treated, high-quality materials to those players or industrial. And in mechanical recycling, we already have capabilities near Pori, for example, and of course, there is potential to expand. And then next one is wood waste, and at the moment in Finland, wood waste is mainly incinerated.
There is a quite big demand from customers and regulation for recycling solution. As I mentioned, we are quite level in recycling rate, but of course, some volumes at the moment are directed to, for example, particle board production, and we should continue to develop that kind of partnership as well. But in the future, we see other opportunities as well for higher value recycling, for example, biochar, and we are closely monitoring those technical development. So we are here seeking volume growth and higher material value. And then third one is metal, and this is a big market and quite major market already, but there is a lot of opportunities for L&T. And we can utilize our existing capabilities from sorting and pre-treatment and our wide network.
We will increase our competencies in pre-treatment, and maybe we can utilize group synergies, material flows, which comes from Industrial Services, for example. Then, summarizing that material processing part of this presentation, we see a lot of opportunities in short term and long term. Two things: volumes and values. L&T capabilities and in mechanical pre-treatment and processing will be utilized and expand those potential. Already, we have strong position in recycling, and we currently see the biggest potential in wood waste, metals, and plastics. Then, summarizing whole presentation. We have unique position on a growing market, and we have a solid platform to create more value and business. We have exceptional network, and service portfolio with solid market leader status.
We have good capability to invest in this business. Second point is, we see big potential in recycling and material processing market, which is growing all the time due to legislation and customer targets, which are increasing all the time. I think that would be all at this point. Thank you.
Thank you, Petri. So next, we will invite to the stage Antti Tervo, who will tell us a bit more about Industrial Services.
Thank you, Inka. Thank you, Petri and Eero. My name is Antti Tervo. I've been 11 years, more or less today, at L&T. I'm heading the Industrial Services today, and then started in supply chain some years ago. Background is from industry. I did work for supply chain and then sourcing for energy, contract manufacturing, and metal industry, also partially for building automation area. Industrial Services vision is to be the leading operator for our customers when it comes to circular economy services. Let's have a look first where we are today, and then we look at opportunities, what we see in the future, later in the presentation. Today, we are operating in 3 different lines, business lines.
So we are doing environmental construction, maybe a little bit odd word, for a wider audience, but basically it means that we do soil remediations, we have treatment centers for materials to treat and utilize side streams, as an example. Then we do process cleaning, so we help our customers to keep their processes operating, help them in a maintenance break when they do device changes, or we scan, for example, sewers for customers to prevent, for example, challenges what they have with their infrastructure. And then we have also strong role in hazardous waste. We are there actually in whole value chain, from collection to utilization. But I will come more in detail these businesses later on in my presentation.
Today, we have 650 professionals working in Finland and Sweden. We are operating in Finland nationwide, and in Sweden, as Eero earlier said, we are in southern Sweden at the moment. What we have succeeded lately, so we have had quite a solid growth, and same time, we have done it profitable, profitable way. I will leave it open how we see our competitive edges, and then how to keep the growth and profitability in the future as well. What comes to market, where we are today? We are, at the moment, in pole position or in a middle position in businesses where we are, and that's our target as well in the future.
How we see in the market, what trends and I would say tailwinds there are? There are quite many factors which also support our businesses, and it's also important to keep the close relationship with our customers, because they have a higher demand to fulfill their own targets, but we can help them in their operation as well. And those we'll see very important that we can respond in the future as well. So we'll see growth in this area in the future. What comes to market segments itself? So if we have a look on the side where we have a diagram, so actually industry is the biggest market where we operate, but also public sector, retail, logistics, and construction are important for us.
It's also worthwhile to say that these have a link as well to the industry. It's not such a pure construction sector or retail logistics. There are operators inside these segments which are kind of close to industrial players themselves. On the other hand, what are then the most important sub-segments for us? We can see is the process industry, whether it's a metal, bio, chemical industry, as examples, are very important for us, and where we have been able to grow in the past as well. Mining is one area where we see growth in the future, and also quite demanding targets ahead to make sure that the mining has the right reputation towards the future when it operates here in Nordic countries.
Construction sector, of course, right now, we can see some, some challenges, but other way around, if we have a look, remediation requirements, biodiversity, we can see growth in the future there as well. Well, what links our businesses together is the value chain where we are. So we work on site, daily basis, 24/7, today and tomorrow. So, for example, businesses like process cleaning, or we operate former landfill for customer, we are helping them on a daily basis. That gives an access to the waste and side streams on site. We have hazardous waste network nationwide, where we have from collection and utilization, the whole chain with us, so we can help customer directly when he has challenges or there is a new, for example, challenges with waste.
Actually, when we do process cleaning, where we use water, and we play with the industrial raw materials side streams, you generate also hazardous waste. So we have the support of our knowledge on hazardous waste for the process cleaning itself. Then when we have a look, the environmental construction, so actually where the side streams are, they are in process industry. And actually, where we have today still landfill, majority amounts are actually at the moment in process industry. But of course, the trend towards future is that they try to get rid of, to find out the ways to utilize, and also minimize the landfilling in the future. But as said, good position to be close to the customers.
Like Peter showed in a presentation, that we have a number of also values we can create together with Environmental Services, because we can give the full value chain reporting what comes to CO2 emissions, which is related to waste for the customers. And that's one benefit we have also together. And we have actually more than 50% common customers, and that's why we support very strongly each other. What comes to then our position, so of course it's very important to be competitive in businesses where we are, but the value chain is the one where we see is our competitive edge. And then I will later on show you how we see it in the future, but we see today that there is a value already, and quite strong at the moment.
When we compare to the market and areas, either whole value chain or different business lines, we don't actually have a competitor who is working in the same scale of the value chain where we are working at the moment. Yes, in different business lines, we have strong competitors existing, but we build our strength, the whole value chain also across businesses. So as we are close to customers today, our aim is to build on that in the future as well.
If we have a look, our value chain from on-site work to the logistics until the utilization, we'll see that our edge will be there, that we know the customer processes also in the future well, and we are part of their discussions when they are thinking how they will operate their mills in the future. We can bring new services, what we have done also in the past, to their main equipments, when it relates to operation, or when it relates to the new sites, what they are thinking, or maintenance breaks, when they change or will maintain main devices.
What comes to then, other support services like material handling, we are already operating on sites and helping them to increase the utilization of side streams, or also decreasing the amount of, hazardous, how to say, emissions or, or leaks, what might occur if waste is not properly, treated on-site. What it then requires? It requires that we will be forerunner in method development. I will show, shortly show, for example, what we have done in hazardous waste, but the same applies for industrial side streams. What comes to then future and requirements, what is, related to building environment or built environment, we'll see especially that the remediation business, where we can also make sure that the biodiversity, once used built environment, can be brought back to as close to the original status where it was.
So that's the area where we see already a demand, but we have already responses on that. The toolbox what we have is there from three dimensions. First of all, close cooperation with our customers, but also with our partners, and then own capability to develop solutions to customers. That's very important. But same time, of course, we look at market, what opportunities we have, regarding for example, selective acquisitions. As said, core is in our own organic development. Here are a couple of examples where we are today, and if I take one example, which we saw in a video at the beginning as well, that we have developed the boiler and energy sector cleaning on a different level where it used to be.
We used to clean them when the basically production was down during the maintenance break. But we have developed solutions where you can wash them, and during the operation, clean the boilers, so customer doesn't need to run the process down. Whereas for process industry, that's the worst thing what you would like to have. And there we have been able to create new solutions, and those we will also look at in the future. What comes to next steps, how we see it in the value chain on-site, we'll extend our existence there. So while we treat all of the boilers on during the operation, once we do then the maintenance break, we can also more do support services, for example, regarding services of those boilers. So we are then the partner overall for the whole chain, for the customer.
But it requires, of course, that we will bring the state-of-the-art solutions for our customers. Now, when we have been able to create methods and a new solution for customers, that was the base when we expanded to Sweden last year. And we are currently, as said, in the southern Sweden, but of course, we have a long-term plan to bring also this knowledge what we have to the market there. But positive thing is that we have a very good knowledge and professional colleagues in Sweden as well, and we have been very satisfied with the start what we have had there. We have been able to grow and take new customers in Sweden as well. And what this has made us, it has been open as a market, also other value chain parts where we are in Finland.
That, of course, it's our long-term, long-term plan ahead of us. Then when we come from the customer on-site operations, what we can create from the materials where we are working with or we are already actually having in our collection. Let's take first hazardous waste. In the past, the solution for hazardous waste used to be incineration. Last year, we got a recycling rate of 70%+, and this is great work from the team, I have to say, and that's the way where we wanna, we wanna be in the future as well, to increase and create those values for our customers. Couple of examples what we have, for example, at the moment in process or already existing. For example, paint waste used to be a metal can, and that used to be incinerated.
Nowadays, we can separate and treat it so that we will take the metal away and just, how to say it, the reject is then burned, where we also try to find a solution for the future. But we will create, and this way, maximize recycling for metal. We have glycol and other materials what we are recycling, and then we have created end-of-waste status. They are not anymore waste, but they are products, and that changes the game as well. What comes then, examples what Eero stated earlier, that we have Fit for 55 and other EU programs which are supporting a number of areas in sustainability.
If we take one, is a Zero Pollution Plan , and hazardous waste is having actually quite critical role here because that actually says that we, as operators, or industry as an operator, we should make sure that we will eliminate the harmful substances as much from the environment as possible. And there we are working as well. We actually created for the mobile tank cleaning, new ways to clean and ensure that water is recycled, but we'll take hazardous materials away, or substances. We are also having on-site treatment for waters and liquids, what we are developing, and we have also off-sites, where we have own facilities, sites where we are doing then most demanding cases. But as said, that's, that's we see.
It's not maybe that visible, but it's a very important element to develop and be involved nowadays and in the future. Then if we jump to the side streams and waste, if we look at from my angle point of view, right-hand corner, where we'll have a lot of discussion around waste. So for example, household waste or waste, which is actually owned by municipal companies like Petri showed us earlier. Actually, the amount of waste in tons is totally elsewhere. And how we see is that the shift must be, or it should go more and more to industry, construction, agriculture, and mining waste. And there, solutions are required. That's the way how we can create more and more possibilities to recycle materials and utilize it.
Taking also angle there, that is actually quite a big impact for environment and biodiversity as well, and it has a link to remediation as well, that once you use and do such things or use raw materials, there's also need to make sure that the environment can be remediated back in the future. Little bit describing tons, what we are talking about. So if we have a look at final deposit at the moment in Finland, we are talking about 64 million tons, and out of those waste streams nowadays utilize 27 million tons. So there are number of tons which are not yet optimized when it comes to recycling. As an example, green liquor dregs from the pulp and paper industry, just 50% is recycled, 50% is going to landfills.
I won't go in details, but maybe the key that there are already solutions available, but still there is need for development. As I said, there is a strong drive that there is a need to find ways to recycle these materials or side streams. I shortly mentioned earlier the remediation in my presentation already, and let's first have a look what we do in a remediation and soil remediation or contaminated soils nowadays. When there is a contaminated soil, how to say, either in old industrial area or for example, in a built environment in the cities. We'll take Pasila, for example, from Helsinki yard, where is nowadays a lot of households, where it used to be, how to say it, one industrial area.
We are strongly involved already, and we are actually helping our customers to plan and think about how that should be done when the operation ends, or they have investments to build new mills or extend existing mills. We are helping customers to do the groundwork, moving the soil, treating the soil, for example, in our own treatment centers. We are utilizing the materials elsewhere when it used to be occurring, actually, the contaminated soil, and we utilize it elsewhere as a construction material. And as said, at the end of the day, if there are materials which cannot be utilized, we have our own countrywide landfill network to support those materials which cannot be recycled.
So that way, we are already involved, and actually, now lately, during last two years, we can see growing demand and I would say, discussions with customer that while we have those big landfills, what we can do, how could we make sure that the biodiversity is considered? And we have done nowadays in our projects as well, how to say it, making sure that we will make the biodiversity as rich as possible for customers. How then the market develops, where it is at the moment? We'll see that, our role is of course there, we are at the moment, but this growing demand to make sure that once we have taken something in use, we should return it, is growing. And we think more than just the soil remediation or contaminated soil project.
We'll think that overall remediation project and also taking and considering the biodiversity. We are touching already demolition works nowadays. We are helping customers, for example, demolishing, for example, tanks and so on, but how we see in the future that we can have a bigger role than we have nowadays. So that's the way we'll see how market develops, but we have a very good base to support our customers, to respond challenges and solutions they are looking after. If we summarize Industrial Services strategy, we have a number of areas we have a potential to grow and also create value add to our customers. We have that strong foothold with our customers today, and that's the one we secure in the future as well, to develop our activities, to make sure of that.
Then there is an increasing potential on those materials which are already flowing through us or we are treating, and we have a role there in the future, which we put effort on. And then, remediation is this area which is now, how to say, more and more coming to the table and in discussion. It's already there, but we'll have just seen the beginning, and we have a role there in the future, and we want to develop that together with our customers. Thank you for interest. This was the Industrial Services strategy, and next we have actually questions section, and I think Inka will take the lead from here.
Thank you, Antti. Now it's time for today's first questions and answers session, so Eero and Petri, please join us on the stage. All right. All right, do we have any questions from the audience? Maybe Nikko first.
All right, Nikko Ruokangas, SEB. Thank you for the presentations. I have a couple of questions, and I think the first one is both to environmental and Industrial Services. So, you told that you aim to move forward in the material value chains and build competencies for emerging circular economy markets. So, could you open a bit what kind of investments or actions will this require from you?
Okay, if I start it. As I mentioned, we see growth potential, for example, plastics and wood waste, and metals. We are looking for different way to growth in those markets. It's too early to say what kind of investments those might need, but maybe some. If I sort of add a little bit, we are talking about millions, maybe tens of millions, depending on how far in the value chain we want to expand. Let's say up to tens of millions is the investments required there.
All right. How quickly do you see that you could take these steps forward?
Well, during our strategy period, which is within the next three years.
All right, I understand. Then continuing on Environmental Services, you showed quite many interesting opportunities in different recycled materials. Could you illustrate us a bit on how do you see this converting into numbers and during what time window? During the last years, we have seen only a little growth in environmental service EBIT, what makes you confident that this time, this will convert to the numbers more efficient?
Yeah, maybe, maybe I'll take this, this as well. Well, as we showed, there is, there is clearly potential if we move forward in the value chain, and the value of the materials is, is much higher. At the same time, it is dependent on, on two things: regulation, and, and then demand for secondary raw materials. Currently, secondary raw materials are competing against virgin raw materials, and, and the price level is more or less the same. But as the requirements get tougher, and there is increasing need for secondary raw materials, that will obviously create then a better market for us. It is very difficult to say when that is actually going to happen, but we're certain it will happen, but we can't tell you when exactly it will start showing in the numbers.
All right, I understand. Thanks. That's all from me.
Thank you.
Then we had Rauli there.
Hi, Rauli from Inderes. Continuing probably on the same themes, but maybe starting from your M&A thinking, that, the... Can you a bit share that how, how much of your potential M&A is directed to the current businesses, and how much would it be in these new material processing things you were alluding to?
Well, obviously, when it comes to M&A, it is difficult to say, will it happen or not? We have identified potential and interesting targets, and let's say most of it is focused on expanding our position somehow, either moving further in the value chain or sort of creating bigger geographical footprint. Because we believe that through making that kind of bolt-on acquisitions that sort of expand our strategic position in some way, we can then further build organically on top of that and create more growth and more value. So that is our primary focus. There may be still opportunities related, for example, to this municipalization and the sort of impact of the 2021 waste law, that there are good opportunities to also seek growth from our existing businesses, and we are not counting that out, but our primary focus is in these growth-related acquisitions.
Okay, good. And then thinking M&A versus organic investments in this new material processing businesses. Do you have a preference there, or is there some areas that you do think you would clearly need to acquire some competence, or are you able to do the things you like to focus also organically?
Both routes are possible. Organic route is slower. We would like to move faster, and therefore, acquisition in many cases is a way to speed up the development. But we will invest in both, organic and growth through acquisitions.
Great. And then one final question, a bit of a detail to the industrial side. You had there on the graphs quite a big jump in your net sales in the construction side from 2021 to 2022. Can you share a bit what has been driving that, and will it now come down as quickly when the construction industry is slowing down?
Yeah, I think those numbers which were illustrated, they were not the exact numbers, how to say it. So, it was basically showing that area, there has been active work. But, it relates also the projects what we have in industry, so it has a link to our customers, so it's not purely the construction sector itself.
Great, thank you.
Do we have... Yes. Oh, over there, gentleman. Yeah.
Good morning. Seppo Rinkineva, DNB Bank. As a follow-up to the previous question, or, or first one of them, regarding M&A opportunities and your geographical footprint, you are in the presentations talking only about Finland and Sweden. Is that sort of cast in stone that that is the case, that you wouldn't be looking forward into, into expanding elsewhere, for example, in the Nordic countries or, or Baltic, or whatever?
Our primary focus is in Finland and in Sweden, and the reason is the logic I explained earlier. So when we look for acquisition targets, we like to find a target that builds on what we already have, but sort of expands our position somehow from there. And as we only have currently businesses in Finland and in Sweden, the logical place to look for is Finland and Sweden. There may be cases that along with the business in Finland or Sweden, we get something else, but that is sort of... So it's not completely ruled out, but our primary focus is to build on what we already have, and that means it is Finland and Sweden.
Okay, thank you. Then another one: The ongoing debate on the European Union level regarding the recycling of packaging materials, is that something that has an impact on you, or is it more or less insignificant from your perspective, looking at the shares of different waste fractions that was shown, then that was very interesting, and one would draw the conclusion as a layman from that picture that that discussion might be a little bit of insignificant for you, but is that the correct assumption, or?
No, no, it's not correct assumption. Maybe Petri can talk about that because it is very important, sort of.
Yeah, it's important for us, and due to this regulation, we see a lot more demand of recycling material and reusing, and we need those both. If you talk about with different packaging materials, and there is a lot of potential, and still in Finland, there is too much material in incinerators, and that's why there is also potential for more recyclable materials to get to our business, our processes.
And sort of, we could also serve an operator in the reuse of, let's say, that sort of all paper cups were banned, and there have to be plastic mugs to use. So we could see our role there in that type of market as well. But in our view, currently the recycling of different fibers, whether it's paper, cardboard or brown paper, the recycling actually works quite well, and therefore, we think it's perhaps not quite the right solution that was initially discussed. Now it looks like it's changing towards more a sensible approach in European Union as well.
Good. Thank you very much.
Any other questions from the audience? Yes, lady over there.
Hello. Gabriele Duseberg from Macquarie. First of all, thank you very much for, for the good presentation. Eero, I think you mentioned at the beginning on the waste-to-energy market, there is significant overcapacity, and that that presents an opportunity for, for upside in the future. I was just curious: could you talk a bit more about that?
Yes, in Finland, already now, certain waste-to-energy companies are importing waste from other countries in Europe. And as the sorting at the source and sorting in general is increasing, and as the recycling is increasing, what happens is that there is less mixed waste that will be incinerated, and the sort of energy value in that mixed waste is lower. And therefore, it is estimated that there could be as much as 30%-40% even over capacity in incineration in Finland in the coming years. And what is a sort of natural consequence of such development is that the gate fees will go down because there is gonna be a shortage of the fuel for incinerators.
And in some cases, there could be alternative fuels for those incinerators. But in general, we think that there is going to be a serious overcapacity of incinerators in Finland, which is a little bit shame, because now a lot of public funding has been directed to something which is, in a way, wasted in that way.
Thank you. Maybe one follow-on to that. So are the waste-to-energy disposal costs, is that effectively a pass-through cost for you?
Yes, more or less. For us, it is always a question whether the gate fee—if the gate fee is very high, then obviously there is a higher incentive to find an alternative solution. But when it comes to the sort of regular gate fees, that is the market sort of decides what is the price for handling the waste, and then the gate fees are sort of in that market price, if you will. But in general, we don't think that incineration is a sustainable solution.
There is always going to be a need for a certain level of incineration also in the future, because there are certain fractions that are just too expensive or difficult to be recycled, at least with current known technology. But we think that there is certainly a lot of room for improvement in terms of recycling materials that are currently incinerated. Like Petri mentioned, plastics is a very good example. The technology is developing fast, and also in mechanical recycling, we can see that the recycling rates with the newest technology, the recycling rates could be much, much higher, and not even mentioning the chemical recycling.
Yeah, that's a great answer, which brings me to one more question, if I may, final. So given what you all presented, that you do see more opportunity in recycling and extracting higher value out of the waste, is that something that your competitors see as well? And how do you see L&T positioned against the competition to harvest that opportunity? Thank you.
Yes, we... First of all, the competition landscape is changing. There has been mergers and acquisitions in Nordics and especially in Sweden in the past years, but certainly in Finland as well. As we're getting more industrial players to the markets, we see the markets to become more professional, if you will. Yes, many of our competitors see the world in similar way. Their solutions may be different, and their approach may be different, but I think they share our view, especially the larger players of the world.
All right, thank you, all. In order to stay on time, we now need to end the first Q&A session. There will be a second Q&A at the end of the event, and Eero, Petri, and Antti will also join that one. Now we will have a 15-minute break, and after that, the webcast will continue again. Thank you.
Thank you.
Welcome back from the break. In the second part of the Capital Markets Day, we will focus on our Facility Services businesses in Finland and Sweden. Our next presenter is Antti Niitynpää, Head of Facility Services, Finland. Welcome, Antti.
My name is Antti Niitynpää, and I've been with L&T now for 10 years, and in this role, two y ears. And before that, I have been in the same industry about 20, 20 years. Facility Services Finland want to be the most sustainable partner for the whole lifetime of customers' facility. In Facility Services Finland, we have three business lines: cleaning and support services, property maintenance, and technical services. There are around 4,800 employees working for Facility Services Finland. In recent years, Facility Services Finland has managed to grow its businesses. However, the growth has not been profitable. And this is why last year we started an extensive cost-efficiency program, and this year we have successfully made a turnaround of profitability. Facility markets are large, and there are many drivers that create opportunities.
Cities continue to grow, and our expectations for the built environment are growing. We expect energy efficiency, clean air, and hygienic spaces, and so on. At the same time, the built environment maintenance backlog is about EUR 30 billion-EUR 50 billion. Facility Services Finland operates on the large markets, and we have a very strong position, and there is a lot of room to grow for us profitability. And if you see the figures there, in the cleaning, we are second or third biggest in Finland, in property maintenance, about third to fourth, and in the technical services, around seventh to ninth. And as I mentioned, there are many drivers supporting our growth. Buildings become more technical, customer focus increasingly on sustainability, and public outsourcing is growing. However, there are some headwinds in labor availability and intense price competition.
As you can see, we serve many segments, but in 2022, we refocused our strategy and selected the top segments to focus on. This way, we can set clear priorities and focus our competencies, services, and sales development. In the office segment, especially data-driven cleaning and our energy-saving concepts are really attractive. In the retail and logistics segment, all of our services have potential, and we have expanded our service to retail support services also, such as shopping trolley maintenance, bottle return machine maintenance, and other support services, such as shelving and multistory security card, are now part of the range of our services. In the industry, technical services is kind of an entry-level service for the market. After you have a good technical services, you can have multi-service concept also.
One of the good, best examples of our service to, services to industry is Stora Enso Imatra. And food hygiene is also an excellent example of our services to critical environments. I will tell you a little bit more about that later. And of these segments, public sector and housing segment have less focus for us, and in these segments, there is a fierce price competition, and we must carefully evaluate our targets and choose our focus areas. Then about our presence in facility service value chain. We serve customers throughout the value chain, and in the future, it's really important to do that so because sustainability requirements are increasing, and our customers need to centralize services because that fact. And our customers want ease and risk-free, and, of course, the concentration is coming more extensively in the future. Then the turnaround.
The turnaround of the business has been successful in 2023. Our operational efficiency program was launched in 2022. In the program, we have both improved efficient ways of working and built the platform for future growth. The work continues, but we can already see concrete results. Q1 to Q3, EBIT was EUR 4.7 million higher than last year, and the production efficiency improvements have brought about 80% of our savings. The most important areas in terms of cost effectiveness and quality have been we have reduced the number of organizational layers, exactly two layers from our organizations. We have renewed our roles and responsibility areas in all services because motivated people whose role and objectives are clear is everything in our business. This is people's business.
Then we have built the new forward-looking management system with decent kind of KPIs and high-quality production throughout Finland. Efficient operational models are very important in our business because one example: if all our cleaners would use six additional minutes per customer location, we would have EUR 2 million higher operational cost yearly. Then the right number of resources at right time and right place is, of course, key issue also. And the third one is the procurement. We have centralized our procurement and reduced number of our suppliers and also optimized our premises, and reduced number of our machines and fleet, and make sure that we have optimized number of machines and cars. We have also reviewed our customer portfolio and negotiated or terminated unprofitable contracts.
In the future, disciplined portfolio management will be an ongoing practice. Now we are moving towards a phase of organic growth. We have made clear selections in which segments we are in, where our strengths are, and what kind of customer we want to win in, in each segments. To support the growth execution, we have also renewed our sales management model and incentives, and the new model is structured, data-based, and more outward-focused. We are going to move from inbound sales to outbound sales. We are also improving our channels for additional sales to maximize contract values. We are developing added value concepts, which I will get back later on this, in this presentation. Alongside with our service concepts, we will create also new pricing models for our customers. Then to our opportunities for future growth.
We will differentiate by leveraging our strong customer base and world-class sustainability expertise. And our strong customer base enables this development. And in terms of sustainability, excellent examples of our service solutions are responsible cleaning and property maintenance service solutions, for which we report responsibility index for entire service, but also for each customer. And the index includes four areas: social responsibility, carbon handprint, carbon footprint, and quality. Then, our smart energy efficient services to existing building markets is truly our spearhead in technical services. For our three biggest customers, we have achieved over 1 million savings yearly in energy consumption. And we have achieved also savings in carbon footprint for our customers. And also, we are not forgetting good indoor air conditions in our saving, besides our savings.
In the selected segments, we have built and we are building capabilities and knowledges. Example include investment for food hygiene service and retail segment support services. In food hygiene services, we are a market leader now. And quality and liability play a key role in our demanding relationships. One example is, in demanding customer relationships, is our food hygiene services, which I said we have become to be a market leader over the past three years. Examples of our customers is Snellman in Pietarsaari, HKScan , and for example, Fazer. We also want to be a frontrunner in implementing of digital solutions in our customer relationships and production. Excellent example of this is data-driven cleaning. With these solutions, we have achieved cost savings and better user experience for our customers and also better personal experience.
In terms of cleaning, we have also strongly robotized our production and facility service. Facility Services have large fleet of cleaning robots now in Finland, and I will present you later references of our spearheads, data-driven cleaning and smart solutions. We also have solutions for better end user experience. One example is our service button, that allows the user to order services directly to the right space using a QR code. Our wide range of services also enables multi-services for our customers. First example of new services is our data-driven cleaning and customer references Telia. How does this data-driven cleaning work? We monitor the use of spaces in real time. We also monitor waste bins, paper dispensers and so on, and spaces that are in use and need for cleaning are maintained in good condition.
One good thing also from data-driven cleaning is that it's also an excellent tool for monitoring office occupancy and thus as a basis for office solutions. Second example comes from Smart Solutions and there is a video for that.
Meillä täällä Meyer Turun telakalla on, niin kuin, ympäristönäkökulmasta vastuullisuustavoitteena se, että 2025 mennessä meillä on hiilineutraalin laivan konsepti valmiina, ja 2030 mennessä, että me oltaisiin hiilineutraaleja meidän omien toimintojen osalta. Käytännössä hiilineutraali telakka tarkoittaa sitä, että meistä ei jää hiilijalanjälkeä.
Tän katetun tilan lämmittäminen on tosi iso energiankulutus meillä. Sen lisäksi meidän tuotanto rakentuu pitkälti ulkona, varsinkin tuotantoprosessin loppuvaiheessa, ja siellä tarvitaan olosuhteiden pakosta myöskin lämmitystä. Osittain myöskin meidän toiminta ja tuotantoprosessit on hyvin energiaintensiivisiä. Me ollaan tehty paljon energiatehokkuustyötä jo aikaisemmin ja nyt me halutaan ottaa se seuraava steppi, että miten me päästään tästä eteenpäin yhdessä Älveten kanssa. Näitä toimii on muun muassa se, että selvitetään, mitä me tehdään täällä, missä energiahukka-alueita löytyy ja, ja sitten erityisesti lämmön talteenotto on meille iso yksi aihe. Meyerin kaltaiset yritykset, joilla on kunnianhimoisia päästövähennystavoitteita, hyötyy erityisen paljon energiatehokkuustoimenpiteisiin panostamisesta. Energiatehokkuudella voidaan saavuttaa tietysti matalampi energiankulutus, ja kun me voidaan leikata energiankäyttöä, me leikataan samalla sen energian tuotannon aiheuttamia luontohaittoja, kuten kasvihuonekaasupäästöjä ilmakehään. Ja sitten tämän kanssa kyljessä tulee tietysti mukana nämä kustannussäästöt, eli maksetaan vähemmän siitä energiankäytöstä kuin aiemmin.
Alueen tarkkasilmäiset asiantuntijat auttaa meitä tunnistamaan vielä enemmän niitä toimenpiteitä, joilla me saavutetaan meidän aika isokin energiansäästötavoite, 7.5% vuoden 2025 loppuun mennessä. Me halutaan näyttää, että tämmöinen raskas teollisuus, mitä meriteollisuuskin on, että se voidaan tehdä ympäristönäkökohdat huomioiden hyvin.
Right. This a great example of energy efficiency services. Then the solid foundation for growth. That was about it. We have progressed, and we are progressing step by step towards our objectives, which are: gain market leader position in chosen customer segments, grow faster than the market, achieve higher ROI than main competitors, customer satisfaction and retention, top of the market and best in industry employees experience and retention. And as I mentioned before, we have initially successfully focused on improving our cost effectiveness and quality, efficient operations, flexible organization and so on. And now we are at the stage where we can enter a phase of profitable growth in coming years. Transparency of services and customer reporting, value adding service concepts, need based digital service offering and so on. Yes, and to summarize my presentation. First, we built solid foundation for our businesses.
We have and we will have a cost-efficient system, efficient operation models. We will have improved customer satisfaction with standardized operation models, operating models, and measures to maximize customer value. We will have higher employee satisfaction by developing leadership and ways of working. We will have a solid and cost-effective base. Business is complemented by our spare heads and value-creating opportunities. Digitalization and sustainability, where we have top-of-the-market capabilities and concepts that we will develop further. Thank you!
Thank you, Antti. Next, we will hear a presentation about Facility Services Sweden. Please, Mikko Taipale, welcome to the stage.
Thank you, Inka. My name is Mikko Taipale, and I'm leading the Facility Services Sweden. Now we went directly into the numbers, but to present myself, I have joined the company about one year ago and been leading the Facility Services since January. I have a background from consulting and telecom and automotive industries. This is what we do. We ensure well-functioning facilities in highly demanding environments. We have two business lines: technical services and property maintenance, and cleaning and support services. Pretty much the same business lines as we have in Finland. We are 1,300 employees, and we are actually a nationwide provider, so we can provide our services in all places in Sweden.
If we look at our operating profit and margin during the past years, we see that we have big challenges at the moment. We are in a declining trend, and that is due to the market conditions, inflation, but also due to our own inefficiencies and inability to react fast enough. So we started a turnaround program in the beginning of this year, and I will come back later to that, what it means. If we look at our net sales by quarter in euro, we are pretty much stable, rather declining, but we need to remember the weak currency of Swedish krona. So in local currencies, we are actually around the market aligned when it comes to the growth.
Looking at the market in general, we are in facility management, in number 4 or 5, compared to the competitors, and among the top 10 players in cleaning services. The relevant market size is around EUR 5 billion, and the market growth is 3%-5%. We have number of generic tailwinds. The facility maintenance backlog is growing, and that is due to the difficult market conditions in the real estate market in Sweden. The facilities and buildings are becoming more technically demanding and digital, and the climate change mitigation increases the importance of energy efficiency.
Headwinds: We are still struggling, particularly in FM, to find good talents, and also in the public sector, we see the complexity increasing when it comes to the contractual terms. When we look at our positioning, we are very strong in public sector and healthcare, and healthcare basically means hospitals. We do not forecast any huge growth in that area. When we look at the office, retail, and logistics, we see a big potential there, and we want to extend our portfolio more towards the commercials. That includes also industrials. In housing, we believe that we are stable or slightly declining when it comes to the future. This also, when we look at the total relevant market segment shares, confirms that we are addressing the potential and the big portion of the market which is available.
This is also showing that we are diverse, and we have a good opportunities to create shareholder value, even one of the sectors would be declining. We look at the competitive position in the Facility Services value chain. It is exactly as Antti mentioned, more or less the it is the similar. The market is divided in the number of between number of players. Well, if you look at the value chain, we have companies who are clustered a little bit in a different ways. We have so-called IFM companies, integrated facility management companies, who are providing a wide range of all services, and also towards the end-user services within the support and workplace services, like catering and security services.
Then we have companies who have the background from ownership support services, and, and these companies are slowly coming into the technical facility market. And finally, we have companies who have a history of coming from the product or the technical solution market, and also extending during the past years to technical maintenance. And then we have a number of regional, but also very specific players, like in food hygiene. L&T in Sweden is a little bit different. We have a strong history and coming from technical maintenance. This is what we have done more than 20 years, and this is what we will do in the future. We are not extending into the end user services. We don't see a big potential there, but we will do the thing what we have done 20 years.
We extend within that area, but we go deeper and provide more expert services. If I look at the turnaround program, Eero mentioned that we are around 6-12 months behind of Finland, and that's absolutely correct. We saw already in the numbers, the Q3 numbers, as a trend shift. So the things what we did during the first six months of this year are providing some benefits already. And I will explain a little bit more what does it mean. First of all, we are fixing the basics. We are working with a totally new platform, how the company is driven. And starting from the operations, it means that we look at the customer portfolio. So we have been evaluating all our customers and their customer-specific profitability and going in depth. In some cases, we see that it is about our inefficiency.
In some cases, we actually do tough decisions and say that this cannot be fixed, and we move on. When it comes to the operating model, historically, we have been very decentralized. We are coming and creating a company with more centralization, so we have a better control and transparency and take the scale of benefits into use. The first area where we have been working a lot is the procurement, and it means in the procurement that we have gone through all our assets, all our supply chain agreements, and looking at what kind of leasing agreement, fleet, and all these items what we have. The big portion of this is the related also the way of working and the digitalization efforts, what we do.
We have also a huge effort to minimize our dependency when it comes to the subcontractors. In the core competence areas, where we see that we should do the job by ourselves, we actually recruit people. We rely huge amount of contractors the subcontractors, but we, in the future, we will only do that when it's economically feasible. We have been working with the organization, and we have been shifting people to new positions in order to create efficiency, but we have also reduced the amount of middle management and administration. At the same time, we built a platform in order to enable the growth. It means that we focus on add-on sales and high-margin service growth. That is mainly about the advisory services and technically demanding projects.
When our business is transforming, we also need to work with the pricing models and offering development. Looking at our opportunities for continued organic growth, we differentiate about through segment-specific capabilities and technical expertise. We have a strong customer base and references. We invest in quality and reliability in demanding customer environments, and we have a strong offering of environmental responsibility solution for facilities, for example, in energy efficiency. Our future potential, potential is within the property maintenance and technical services, based on demanding service installations, and also top up our base services with number of add-on services, which basically takes place through add-on sales. It is about different projects, and I have an example later on, one of those projects, but also takes the use of the experiences what we have in Finland in energy efficiency.
In cleaning and support services, we work decisively in the areas of food hygiene, offices, and retail, and we believe we have many years of good growth in those segments. At the same time, we have a profile of being a sustainable cleaning provider, and we will further develop that and use the good experiences we have in the company. Looking at our targets and growth ambition, we have extremely good position in chosen customer segments. We want to grow faster than the market and achieve higher ROCE than main competitors, and we want to have a excellent customer satisfaction. We have been focusing a lot about bringing the new operating platform in place, and that means cost effectiveness and quality focus. It has taken place through investing on creating efficient operations, new ways of working, and streamlining the organization.
We are moving on, building on new sales function. We have been investing to transform the way how we attract new customers. I mentioned the offering development, but also becoming more proactive in sales. And we are moving later on to work with the data centricity and customer reporting, creating the true value to our customers.... I have a couple of examples on our recent success stories. And I, I'm proud to say we are a trusted partner in those selected customer segments. And the first example is the our strategic partnership with ByggVesta, who is a nationwide customer with 4,000 rental agreements. They asked us to provide expertise for fulfilling fire prevention regulations and performing controls, and we did a delivery where we provided professional drawings and control plans.
We provided and executed 75% of those controls and created a huge cost saving in our base service. The customer feedback was overwhelming, extremely happy. They saw immediate improvements in safety for their tenants, and also, of course, impacting their overall customer satisfaction. Then we have another example, which is Guldfågeln. Guldfågeln is part of the Blentagruppen, which is the main chicken meat producer in Sweden. We have a long relationship, and since we have been working with them, we have good routines and everything, and we were able to expand our portfolio, and we opened in September a new site in Öland, where we handle the cleaning operations for them.
It's a good success story, which shows that we have also potential among the current customers, if we just focus on our own way of working and doing the things what we can do the best. To summarize, as I mentioned, we have a turnaround program. We focus on profitable base business and creating a new platform. We do that through cost effectiveness. We rely on our track record and segment competencies. We invest in customer satisfaction and sales opportunities, and take care of our people, that they feel satisfied and committed. The best-in-class technical expertise and segment specialization will lead to that. We work with the customer reporting and data analytics, and then we also keep up with the good work with the sustainably focused service concepts.
This will ultimately lead that we create value to our customers and bring new openings to our business. Thank you. Inka?
Thank you, Mikko. Next, we will invite to the stage Jorma Mikkonen and Hilppa Rautpalo, who will take us through L&T's recent sustainability performance. Jorma and Hilppa, welcome.
Yes, hello, everyone. So Jorma Mikkonen was my name, and, been serving this company over 30 years, so quite some time. And, my current position, in the company, I'm heading the corporate functions, such like, public affairs, sustainability, strategy, and sourcing. And together with me here is Hilppa Rautpalo.
Thank you so much, Jorma. So my name is Hilppa Rautpalo. I have been here within L&T about four years, and I'm responsible for our human resources, so our very valuable asset, our people.
Yes. So, sustainability is a word we have heard many times today in each presentations. So it kind of shows us how integrated the sustainability is into our strategy and business operations. We are offering services for our customers and helping them to achieve their sustainability goals. So, we're kind of as we're taking a role to be a sustainability partner to our customers, it then of course we have to act by example in our own operations. And in this presentation, we are giving you insight of our sustainability work. Yeah, and here is the one page here of our goals and priorities in our sustainability work.
I'm gonna begin with the environmental sustainability issues, and then Hilppa continues with the social goals. When we are going to the environmental sustainability sector, it's very natural that the circular economy work is very in an important role there. So through our business services, we are mitigating the climate change impact and biodiversity loss by promoting the sustainable way to use natural resources. In going deeper to environmental sustainability, we have reported very strong performance in all our indicators. We can say that we are well in track with our goals.
The recycling rate is mentioned before also, and this indicator measures the, the, how we have succeeded to promote the, the recycling and reuse of materials to our customers. So it's not question of our own waste, but our customers' materials. And this 50%, almost 60% is very solid number because it covers all the materials, not only the municipal waste, but also industrial waste, construction waste, and the hazardous waste too. And if it were only up to us, the rate would be clearly over 70%, but it's always the question is that, is the customer willing to pay about the recycling solutions? Unfortunately, too often, the disposal is more cheaper than recycling.
But there is one good exception of that, and this is the hazardous waste, where actually the disposal is very much. It costs a lot more than recycling, and therefore, we have a solid number. We have achieved a 70% recycling rate in hazardous waste, which is kind of, say, European record level. The carbon footprint measures our own climate emission reduction activities we have made. And when we are talking about L&T scope, this means basically the actions we have made to in traffic emissions, because over 90% of our emissions comes from the traffic.
Electrification has progressed very well in the lighter wheels, such as cars and vans. We have about 350 electric cars already. But in the heavy-duty machines and the trucks, the situation is different. The technology is not ready yet, and there we have invested in gas trucks and growing use of HVO, the renewable diesel. And then finally, the carbon handprint measures the positive impact we have through our business operations. As Eero mentioned before, in connection with the strategy, we have also updated our long-term climate targets.
And we have made a roadmap to net zero by 2045, which is aligned with the Paris Agreement climate agreement 1.5-degree path. It's also important to notice that it covers not only our own operations, but also the supply chain, so Scope 3 emissions. This picture illustrates the positive impact of L&T's operations as a whole. And it also tells how crucial role circular economy has in the climate mitigation. And when we are digging deeper to our own emissions, they're around 300,000 tons level. It's good to notice that the supply chain plays a huge role there.
Over 88% of the emissions comes from the supply chain, and therefore, it is important that we expand our climate work also to the supply chain. And when we do so, we have made a roadmap and analyzed the supply chain emissions. And it is very interesting to notice that actually 50% of the supply chain emissions comes from waste-to-energy. So in our case, the most efficient way to cut the supply chain emissions is to promote material use and recycling, which is very much aligned with our strategy. And the other key areas is, of course, the emissions, our own emissions reductions, but also the reductions of the subcontractor's fleet.
The third key area is the green sourcing guidance, which directs us to take into account the climate impacts of our products and services. But this is, in a nutshell, our environmental sustainability work we do, and then I give the floor to Hilppa.
Thank you so much, Jorma, for the environmental part. So now we are moving towards our own employees. So as stated earlier by Jorma and also our other business directors, one of our focus area in our sustainability program is our people, our employees. So we actually cannot achieve any of our targets presented today in our strategy without committed and skilled workforce. And today, and also in the future, all employees, they want to do meaningful work in a very sustainable environment, and that is why we at L&T are Employed by Tomorrow . But let's have a look on our own workforce and people-related sustainability topics in more detail. So at L&T, we are actually working in a very labor-intensive industry, especially our Facility Services in Finland and Sweden.
Our whole work community of 8,500 employees is a quite diverse group of people from very different backgrounds, age groups, and in total, over 87 nationalities. Actually, when it comes to Finland, we are one of the biggest employers when it comes to the number of employees. Managing such a number of people, that requires very good know-how related to the availability of labor, meaning recruitment, and development of professional skills during the whole employment life cycle. For example, we have over 1,000 drivers whose competence certificates we take care of annually, all the time. So we are one of the biggest employers for the drivers in Finland.
We have invested quite a lot in the employee well-being, and as an achievement of that investment, for example, our sickness-related absence percentage is currently only 4.9%, which is actually quite a lot better than our main competitor companies. So what we want in L&T, we want our own employees to be well, stay with us as long as possible, and get home safely without any injuries. So here are some of our key personnel metrics in more detail, and divided by circular economy businesses and facility service businesses. We regularly follow our staff satisfaction, eNPS index, Supervisor Index , and also the development of work safety. And as you can see from the metrics, and, like mentioned before today, our two business areas, circular economy and Facility Services, they are in a little bit different stage at the moment.
For example, the availability of labor, that affects more our Facility Services businesses and also their turnaround programs. Our Total Recordable Incident Frequency Rate, TRIF, that has developed very well over the past years, and our figures actually include also very minor incidents. We have invested in occupational safety with proactive safety work, safety walks, and trainings. For example, we have had very big Safety Under Helmet trainings this year and last year, and we have trained many thousand our supervisors, and this year we will train our employees as well. Then about Supervisor Index . That is, it's actually quite high in both circular economy business and Facility Services business, and we have made investments in the supervisor work and continually develop leadership skills within our own L&T Academy, which is a platform for our internal education.
Actually, when we look at the statistics and surveys, employees do not leave organizations, they leave managers. So that is why the Supervisor Index is one of the key metrics developing our personnel. And with our eNPS index, Net Promoter Score, we are measuring employee satisfaction and loyalty rate, and the circular economy businesses have actually developed extremely well over the past years. But the difficult financial situation and the effects of operational efficiency and turnaround, that can be seen in facility service businesses in Finland and in Sweden. Then a few words about health and well-being. Our investments in our employee well-being has had a strong impact to our cost of lost labor input.
Our current sick leave % is low, and in the long term, we have managed to reduce our sickness-related absences by 2.7 percentage points, which actually means, approximately savings of EUR 6 million. Also, we have managed to increase our retirement age by 4.4 years, and the average retirement age of our employees is currently 63.8 years. By reducing sick leaves and taking care of our employee well-being, we have also managed to reduce the number of disability pensions, which has quite a big positive impact in our pension costs in Finland. These figures only include Finnish operations that we are looking. So we at L&T, we are professionals in recruiting labor through many different channels.
We responsibly employ, for example, immigrants, for example, from Philippines for the past year in Finland, in Facility Services, and we utilize various social employment channels. We do cooperation with municipal and governmental officials and educational institutions. So even though our business directors have mentioned today the availability of labor as a challenge, we are very good at managing it. And we are able to extend our careers. We keep people in work life as long as possible, for example, by offering part-time work and adapting work tasks. And with the help of various measures, we take care of our employees through whole employment life cycle, and we educate our personnel, and they are able to acquire certificates and diplomas while they are working with us.
So our people is actually our business, and by taking care of our personnel, that enables us to execute our strategy and fulfill our mission. We make together the circular economy a reality. Thank you very much. That will end up our sustainability part. Thank you.
Thank you, Jorma and Hilppa. Now it's time for today's last presentation. Our CFO, Valtteri Palin, will talk more about L&T's financial targets. Welcome, Valtteri.
All right. Thank you, Inka, and good morning. My name is Valtteri Palin, and I'm the CFO of the company. In my presentation, I will talk about financial performance, financing, balance sheet, and M&A capacity, also, ICT roadmap, and financial targets, and dividend. Oh, sorry. But first, I want to say that the key point of this presentation is, or the key message is that we are financially well positioned for future growth and investment. First, I will go briefly through the financial performance. Despite of the challenging economic situation, our all divisions had a solid performance in the first nine months. We adapt costs, improve the efficiency, and we were able to improve the EBIT.
It was EUR 31.8 million compared to last year's EUR 31.3 million. Also, we have made actions to lower the level of capital employed, net working capital, and the cash flow was EUR 0.74 per share, compared to EUR 0.03. Of course, in the comparison period, we made acquisitions. Net sales in 2022 was EUR 844 million. Now it has decreased, but the reason is that we don't consolidate this Biowatti renewable energy sources company anymore into the figures. So actually, the comparable net sales increased, and its organic net sales only, it was 0.4% higher than in the comparison period.
These circular economy businesses represents a bit over 50% of the company's net sales, and these businesses the performance has been solid and profitable for a very long time. But on the other hand, Facility Services businesses, Finland and Sweden. The total EBIT last year was zero. Now the results are improving, and in Facility Services Finland, as Antti mentioned, the results are already visible, and we consider that the Sweden is like 6-12 months behind Finland. Then financing position, balance sheet. The interest-bearing debts total was EUR 200 million at the end of Q3, including IFRS 16 leasing liabilities as well.
So we have been able to repay our loans back this year, almost EUR 30 million. We have refinanced the bank loan in Q2, EUR 40 million, and then we emitted the bond EUR 75 million last year. So we don't have any refinancing in the next few years. The next one is the bank loan in 2026, and then the bond will mature in 2028. 65% of the loans have fixed rate, so actually our interest costs were this year at the same level than they were in the comparison period, despite of the higher interest rates. Sustainability-linked financing.
One of the key element since 2019 in the strategy is sustainability, and two years ago, none of the company's financing was linked to sustainability, and now majority is. The bond, bank loan, revolving credit facility, they all are linked to sustainability financing. The metrics we use are injury frequency. We have over 8,000 employees, so that is a really suitable metric for us. Carbon footprint, emissions from subcontractors, and the fourth one is carbon handprint. On the table on the right-hand side, you can see, for example, the development of Scope 1 and 2. We set the target 2019, the goal is 2030, and we are on the right path with that metrics.
Cash flow and efficient capital management. So we have been able to decrease the amount of capital employed. Our net working capital has improved. As you can see, at the end of Q3, it was EUR 28.5 million, negative. It improved by EUR 6 million, and when it's negative, it means it finances our operations. Also, we have been operating with a little lower amount of cash to impact the capital employed. The cash flow has been really strong in our business. It's really stable. It pretty much goes according to net result. If there are no acquisitions or some extraordinary items, it's predictable. It was EUR 28 million the first nine months compared to last year's one.
Of course, we were made two acquisitions in 2022. Then moving on to ICT roadmap, we have invested a lot to renew basically the whole ICT architecture we have. We completed Facility Services Finland ERP system in 2019, then we have renewed the most systems in these administrative systems, like in HR and finance. Also, Facility Services Sweden ERP system was upgraded in 2021, 2022, and now we have two major ERP systems ongoing in Environmental Services and Industrial Services. And these ERP systems enables us to grow also in our current operations.
We have a good platform to sort of add modules and also to expand the value chain and by adding new modules on that platform. We have invested a lot of money into these systems. In 2021, EUR 4 million per year, 2022, EUR 7.5 million, this year, first six months, EUR 5.1 million, and the investments will go on. These ERP systems should be ready, up and running in 2025, and then the investment costs will go down. Also, we have booked a lot of consulting costs in P&L directly, which have affected negatively on the result. So financial targets, we have three financial targets. The first one, growth, it should be 5% or more.
In 2020, it was negative. There were COVID among other things, 2021, 20% to 7%, it was supported by acquisitions. And now this year, the comparable growth is positive despite of the challenging environment, and there are no acquisitions supporting this growth this year. Return on capital employed, the target is 15%. 2020, it was only 7.5%. The reason is that we booked these discontinuation costs of Russia in 2020. 2022, 2021, between 10% and 11%. And in Environmental Services, Industrial Services, it has been around 15%, so we are on the target level in those businesses.
Now this year, the rolling 12 months, almost 12%, and this year, Facility Services Finland achieved this 15% target as well. So in Sweden, we are behind the target, and we are working on that we can achieve the group-level target, 15%. Gearing, it should be below 125%. It has been around 80%. Now it's under 80%, and this leads us to balance sheet and M&A capacity. At the end of Q3, we had a capacity for investments for current operations or inorganic more than EUR 100 million, and we would still be under the targeted level.
We have identified more than EUR 500 million of M&A targets in Finland and in Sweden. In Finland, we are well positioned for building on the service business and expanding capabilities in the value chain. In Sweden, we bought the company SVB 2022 in Industrial Services, and now we have there a good platform for the growth as well. Then dividends. The company has been a good dividend payer throughout the years. In from 2012 to 2020, the company has paid approximately 100%, basically the whole result out. And now in 2021, 2022, the company has paid, like, 50%. We have strengthened the balance sheet, the investment potential, and despite of that, the dividend yield was still fairly good, 4.4%.
The dividend paid out this year was almost EUR 18 million. Summarizing my presentation, we have a strong financing position and balance sheet, which enables organic and inorganic growth. The growth will be profitable, and then the financing will be linked in sustainability targets. So thank you, and now I think we are ready for the questions.
Yes. Thank you, Valtteri. Now it's time for a short wrap-up by Eero, and then we will move to the second questions- and-a nswers session.
Good. One, two. Yep, now it works. So short summary... Yeah? Can I talk already?
Just wait one moment. Can we get the other, people also on, on the stage?
I messed up Inka's choreography. Sorry, sorry about that.
We will have a great discussion about that later.
Yes, I'm sure we will. Good. To summarize, why do we think Lassila & Tikanoja is an excellent company in general, but as an investment as well? So, we are a clear market leader in Finland with nationwide network, diverse customer base, and unparalleled access to materials. We have a solid service business and strong customer relationships... excellent growth prospects, grounded on circular economy, demand, and maximizing value creation. Sustainability is integrated into our strategy and operations, and as Valtteri just presented, we have a strong balance sheet and very good financing position.
Thank you, Eero. Now we are ready for the second Q&A. Are there any questions from the audience? Nikko, go ahead. The microphone will soon be there.
All right, Nikko Ruokangas from SEB. Again, thank you for the presentations. So, first of all, you have shown notable improvement in Facility Services Finland this year, where you show different actions in one slide affecting in 2023 and 2024. So, so talking about these efficiency actions, how much improvements do those still bring to you in addition to the ones already achieved?
Maybe I, I take this question, because it's budgeting time. So, the best companies in Facility Services have a operating profit around 5% of the sales, and I see no reason why we couldn't reach those same levels also in our Facility Services.
Both in Finland and Sweden?
Yes. Obviously, when exactly are we going to reach that? That I cannot tell you, because I don't know, but we are working hard on that, and, as presented here by Antti and Mikko, we are making good progress towards that, that goal.
Understand. Understand. Maybe a bit continuing on the topic and linking to your financial targets: so, could you discuss when do you believe that it will be realistic to achieve your financial targets? Is it during this three-year period, or some targets maybe earlier? Okay, okay, the turning target has already been achieved. And then, does the return on capital employed target require you to do actions related to Facility Services you have raised as an option, or is it doable like this going on?
Yes. The target is to reach the strategic targets during the strategic period, and it includes Facility Services in these numbers, because we only have started the strategic evaluation, and therefore, Facility Services are very much part of Lassila & Tikanoja also in these, these targets.
All right. Great, thanks. That's all from me.
Do we have other questions from the audience? Well, if there are no more questions, then we would like to thank you for joining our Capital Markets Day, and we wish you a great rest of the day.
Thank you very much, people here and, and people there behind the screens. Thanks a lot. Bye-bye.