Review by the President and CEO
Kari Kauniskangas in connection with Interim report 1-3/2019
The result for the first quarter improved year-on-year, despite showing a loss. This was however expected due to seasonality and the low number of residential project completions. Overall better performance of the company came from several sources. Order backlog strengthened from the year-end, synergies were realised in the result faster than we had estimated and the cash flow was good, considering seasonality. Our outlook is positive and our guidance for the whole year remains unchanged, and for the second quarter, we see a slight profit improvement.
I am particularly pleased to note that the Paving and Housing Russia segments improved their combined adjusted operating profit by nearly EUR 20 million year-on-year. The improvement in the Paving segment came mainly from Sweden and Norway, where the measures implemented to reduce winter planning costs, for example, had a direct impact on the result. In Russia, we were able to complete two projects earlier than estimated and the contracting business performed better year-on-year.
The Housing Finland and CEE segment’s adjusted operating profit declined due to no hand-overs in the CEE countries and a lower year-on-year number of completed apartments in the Helsinki metropolitan area. In March, YIT and a group of investors established a joint venture that focuses on rental apartments. We also sold a portfolio of fully or nearly completed apartments to the joint venture. This transaction had a weakening impact on the segment’s profitability for the first quarter. However, it strengthened the investments of the Partnership properties segment in rental housing generating stable cash flow. The transaction also enables us to speed up capital turnover, while keeping value upside on the portfolio.
In the Business premises segment, we signed several significant lease agreements, in Tripla among them. Our large projects progressed as planned and the revenue and profit from the renovation services grew in Finland. In the Infrastructure projects segment the quality and profitability of the order backlog improved. However, the result was still burdened by low margin levels of old projects.
In general, construction volume is at a good level in Finland, supported by urbanisation. The residential activity improved in the latter part of the quarter. In our other operating countries, the market outlook is stable. In Finland, the volume of residential construction is returning to a normal level after a few peak years. Residential sales to consumers in good locations has continued at the level seen last autumn, even though the proportion of private investors of all home buyers has declined from last year.