IR newsletter - Quarter highlights Q2/2021

Key discussion points of the quarter 

The most discussed topics with investors during the second quarter were upcoming strategy update, project management improvements, market demand and future of work after the COVID-19 pandemic.  

• The performance of the Infrastructure segment has been unsatisfactory, and changes are needed to improve profitability. The Infra business is still at the core of YIT’s strategy, sustainable urban development.  
• Project management improvements have been ongoing in both Business premises and Infrastructure segments. In Business premises, the actions are bearing fruit and the business has been stabilising. In Infrastructure, the evaluation of the magnitude and timing of the issues is ongoing. However, the possible project deviations are expected to be below the magnitude of earlier issues in the Business premises.  
• Market demand has been solid in housing business and moderate in real estate market. Public sector projects support the business premises and infra demand.  
• Future of work and office spaces. Office demand is changing due to remote work, and requirements for adaptability and flexibility of the spaces are increasing. YIT has launched a Workery+concept.  
  
  

Selected recent news 
Group news  

Segment news 

Silent call  

YIT’s Q2 silent call for analysts was held on Tue 22 June. CFO Ilkka Salonen went through the highlights of the quarter followed by Q&A session. The key topics in the Q&A were: 

Q: Could you comment on the price level of new apartments in Housing Finland and CEE?
A: Market is quite hot leading to natural price increases. However, at the same time we have seen some inflation in raw materials, for example steel and lumber.

Q: How much you expect apartment start-ups to grow in Finland?
A: We are targeting a clear increase in start-ups this year compared to 2020.

Q: Your EBIT margin has stayed above 10% in Housing Russia in the past couple of quarters. Are there reasons why margins should be below this level in near term?
A: The performance in Russia has been good, business in solid. However, it's good to remember that there have been some positive one-offs, for example a plot sale in Q4 last year, which supported profitability back then.

Q: Prices of lumber, steel, concrete etc. have continued to increase in Q2. Have you seen any issues in pricing, are they going to hit the books later?
A: We have started to see impacts since the end of last year. We have started mitigations. In some areas, it is relatively easy to mitigate the impacts as the price our end-product is based on indices. In some other areas, it is more challenging. The impact will be more visible going forward.

Q: Are you buing steel directly or using distributors?
A: It's mixed, we have multiple sources. This is also dependent on the project type.

Q: How much of your contracts is fixed priced and how much index-based?
A: Competion-based projects are often based on fixed pricing contracts. We have less exposure in alliance type of projects or other projects where we use index-based contracts.

Q: Steel prices started to increase a year ago. How long does it take for those prices to flow in your projects? Perhaps second half of this year?
A: That is a good assumption.

Q: There has been scarcity in logistics etc. As construction market is turning around and activity is about to increase, we will likely see also scarcity of workforce. Are you taking actions now or is this something you will need to handle in the future?
A: This is business as usual for us. Once we start a project, we have always organization in place. Regarding subcontracting, there might be some scarcity. We don't still tightness at the moment. 

Q: What kind of development you have seen in rents and market yields of the Mall of Tripla?
A: Visitor number have increased from the low levels seen last year during the COVID-19 pandemic, however, still below then before the pandemic. We haven't seen major changes in rent levels and there are new tenants coming. Regarding the yields, they increased last year but have been stable since and looking stable at the moment. The big question is that when and how fast the society returns to normal mode.

In case you missed the silent call, you can find the podcast recording on our website

Earnings release 

YIT’s Q2 half-year report will be published on Friday, 30 July around 9 a.m. (Finnish time). 
The news conference will be held on the same day at 10 a.m. (Finnish time). 
Materials will be available on our website. 
 
If you have any questions before the silent period begins, please don’t hesitate to contact us. 

YIT Investor Relations team 
investorrelations@yit.fi



You can find all our Investor newsletters on our website.