Review by the President and CEO
Kari Kauniskangas in connection with the Financial Statements Bulletin 2018
The fourth quarter’s financial performance was one of highest in YIT’s history: the adjusted operating profit was a record-breaking EUR 99.6 million, while operating cash flow amounted to EUR 204.5 million. We carried out two significant property transactions in December: we sold the Tripla Workery offices in Helsinki’s Pasila district as a whole. In addition, YIT and our joint venture Regenero, sold the Tietotie 6 property in Espoo’s Otaniemi district. The sale of the Tripla Workery offices is the single largest office property transaction in YIT’s history. In addition to the property sales, the result for the quarter was supported by the completion of several consumer housing projects in Finland and the CEE countries.
The closing of the paving season went well, and the effect of the business restructuring measures made earlier in the year in Norway and Sweden was seen in the year-end result. The result for the fourth quarter was burdened by project write-downs and risk provisions made to old projects particularly in the Infrastructure projects and Housing Russia segments, totalling approximately EUR 10 million. In both segments, changes to tendering practices were implemented in the first quarter, hence the profitability and contract terms of new projects in the order backlog are at healthy levels.
The year 2018 was successful for YIT in many ways. YIT and Lemminkäinen merged at the beginning of February. In addition to actual business operations, significant resources were focused to the integration of the companies and creating the foundation for a new YIT by establishing a common company culture. The synergies achieved from the merger began to show in the Group’s result in 2018 in line with the set targets. We specify the previously given overall synergy estimate from EUR 40-50 million to EUR 45-50 million by the end of 2020. In September, we announced our new strategy for 2019–2021. The strategy’s target is to improve profitability and to strengthen financial stability. The core of the strategy is urban development and it is built on YIT’s key strength: development and implementation of self-developed projects.
In 2018, self-developed projects and their successful sales in Housing Finland and CEE, Business premises and Partnership properties segments brought in the lion’s share both of the segments’ revenue and profit, as well as the entire Group’s profit. The construction and leasing of the Mall of Tripla have proceeded very well and ahead of our targets.
During the year, the result of the Infrastructure projects and Housing Russia segments was weak, and Paving segment’s result was modest. There were, however, several successes within these segments. As we enter this year, we have confidence also in these segments due to the large number of measures implemented last year to improve the financial performance. In addition to the measures we have taken, our strong and healthier order backlog and good financial position give us a solid foundation for this year.
I thank our customers for their trust and cooperation in 2018, as well as our personnel and partners for working with such commitment and enthusiasm to achieve our goals.