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Antti Inkilä, Interim President and CEO
Our third quarter told two stories. On one hand, apartment sales were strong in all of our operating countries and demonstrated our ability to adjust to a changing market environment and utilise our strong market position. However, as we announced earlier, our third-quarter profitability was burdened by an EUR 18 million margin reduction in revenue and cost estimates of the Tripla project. In addition, we made an inventory write-down of EUR 7 million related to the sale of a business premise in line with our strategic measures to increase capital efficiency. Consequently, the Business premises segment’s result turned to a loss, and the Group’s adjusted operating profit was unsatisfactory at EUR 16 million.
The Business premises segment’s year has been difficult due to the financial settlements in three challenging projects, but the outlook for the segment is positive. Those challenging projects have been completed, the segment’s order book is at a good level and upcoming projects are healthy.
In the third quarter, results particularly in the housing segments were nonetheless excellent. In the Baltic and Central European countries, the development was favourable after the difficulties caused by the coronavirus pandemic earlier this year, and apartment sales were higher compared to the corresponding period last year. In Russia, the number of apartments sold was the second highest ever.
We have also continued our actions to improve profitability, increase capital efficiency and strengthen the balance sheet. In addition to speeding up the sales process of the above-mentioned business premise, we started preparations to close down our loss-making infrastructure business in Norway, and we signed conditional contracts to sell significant plots in Russia in the units to be closed down. These actions led to write-downs in the third quarter, but they will strengthen our cash flow by over EUR 50 million and improve our capital efficiency by the end of 2021.
Our outlook for the rest of this year has clarified supported by strong apartment sales, good reservation levels, as well as construction sites progressing according to plans. Therefore, we reinstated our result guidance for 2020 earlier this month: we expect full-year Group adjusted operating profit to be in the range of EUR 90-110 million.
Going forward, strengthening financial performance remains our primary target. To reduce the amount of negative surprises, we will improve project management. To achieve this, we will continue to promote an open culture which entails disciplined and common ways of working, as well as sharing best practices between the segments. We are committed to our strategy and we continue to focus even more strongly on the most profitable businesses, sustainable urban development and property investments.
We are confident with our outlook for 2021. The Group’s order book is at a good level and we have been more selective in bidding processes. Our project pipeline is promising, and measures to improve capital efficiency have supported our balance sheet. Our strong balance sheet, unique plot reserve and diverse business portfolio ensure our success in even the most challenging market conditions. As a Group, we have also proven our capability to adapt quickly to a changing environment during the coronavirus pandemic.