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Review by the President and CEO

Kari Kauniskangas in connection with the Financial statements bulletin 2019

Our positive development continued in 2019 and the Group adjusted operating profit increased to EUR 166 million. Adjusted operating profit for the fourth quarter was at an all time high and we expect the strong order backlog and solid demand to support our profitability also in 2020.

The greatest milestone of the year was the opening of the Mall of Tripla in October. The first months of the mall have been extremely successful and the number of customers exceeded 7 million at the end of the year. Even though the finalisation costs of the Mall of Tripla significantly impacted the Business premises segment’s result negatively during the second half of the year, the project overall has been very profitable for us. In the fourth quarter, we booked a fair valuation for the Mall of Tripla investment in the Partnership properties segment boosting the segment’s adjusted operating profit to EUR 83 million for the full year.

Consumer sales for apartments strengthened clearly in Finland and the CEE countries towards the end of the year. The Housing Finland and CEE segment’s full-year adjusted operating profit decreased slightly due to lower number of completed apartments and changes in the sales mix. In Russia, our business returned to profitable, and residential sales picked up at the end of the year. The decision we made in the summer to focus on four cities and maintenance business in Russia, as well as to close down five units, has progressed well. During the year, capital invested in Russia decreased by over EUR 50 million at comparable exchange rates.

The result for Infrastructure projects grew significantly from the previous year driven by strengthened order backlog margins and improved project management. The segment achieved a positive adjusted operating profit after a loss in the previous year, and the order backlog increased to over EUR 1.1 billion. Furthermore, the discontinued Nordic paving and mineral aggregates operations achieved a good result with a substantial turnaround especially in Norway and Sweden.

According to the strategy update in fall 2019, urban development, the Partnership properties segment and services are the main sources for growth and profitability. We have rigorously been developing business and competitive advantages in these areas. Strategy execution is supported by the decision to the sell Nordic paving and mineral aggregates businesses to Peab, which will significantly strengthen our balance sheet and clarify our business structure. The transaction requires approval from competition authorities, and we expect the closing to take place during the first or the second quarter of 2020.

In sum, we strengthened our market position in all businesses in 2019. Solid position together with actions to improve productivity and profitability create a firm foundation for us to continue our favourable development also in 2020.