Interim Report January 1 – March 31, 2014: Moderate development in Housing, challenges in Business Premises and Infrastructure

Moderate development in Housing, challenges in Business Premises and Infrastructure

Unless otherwise noted, the figures in brackets refer to the corresponding period in the previous year.

January–March 2014 (Segment reporting, POC)

  • Revenue decreased by 11% to EUR 403.1 (452.0) million. At comparable exchange rates, revenue decreased by 6%.
  • Operating profit amounted to EUR 26.9 (35.9) million and operating profit margin was 6.7% (7.9).
  • The order backlog remained at the level of the end of 2013, amounting to EUR 2,696.7 million.
  • Operating cash flow after investments amounted to
    EUR -12.3 (-5.3) million

Guidance for 2014 remains unchanged

The Group revenue based on segment reporting is estimated to grow by 0–10% at comparable exchange rates.  The operating profit margin based on segment reporting is estimated to be in the range of 7.5–8.5% excluding non-recurring items.

Continuing uncertainty over the general macroeconomic development impacts YIT’s business operations and customers. Prolongation and potential escalation of the Ukrainian crisis would probably have a negative effect on YIT’s business operations.

Kari Kauniskangas, President and CEO:

The market situation remained challenging in the first quarter, and the Ukrainian crisis increased the uncertainty in our operating environment. In Russia, our housing sales were boosted in February–March by consumers looking to shift their assets to fixed property. Prolongation and potential escalation of the crisis would probably have a negative effect on our business operations.

With respect to the Housing segment, we can be satisfied with our strong growth in the number of apartments sold in the first quarter in Russia, the Baltic countries and Central Eastern Europe. The result we achieved in Finland was fair considering the prevailing market environment. The weak development of our business premises operations, combined with lower volume in infra services due to seasonality and the timing of projects, meant that the Business Premises and Infrastructure segment achieved only a modest result.

In 2014, our priorities are customer focus, cost-efficiency and improving cash flow as well as capital efficiency. We are engaging in measures to further improve the customer experience, perceived quality and digital services, as well as introduce new concepts in response to customer needs. The prevailing demand is currently focused on cost-efficient premises. In product development, we emphasise design management, affordability of the products and achieving volume advantages in purchasing. To improve cash flow, we systematically implement the measures we have promised to normalise the number of completed unsold apartments and business premises, release slow-moving assets and build off-balance sheet partnerships to support our plot acquisitions. Cash flow and return on investment will remain key criteria for management remuneration in 2014. 

Key figures

Segment reporting, POC

EUR million 1-3/14 1-3/13 Change 1-12/13
Revenue 403.1 452.0 -11% 1,858.8
  Housing 281.3 286.2 -2% 1,152.2
  Finland, the Baltic countries and Central Eastern Europe 172.9 188.6 -8% 656.2
   Russia 108.5 97.6 11% 496.0
  Business Premises and Infrastructure 121.1 158.8 -24% 688.9
  Other items 0.7 7.0 17.8
Operating profit 26.9 35.9 -25% 152.8
Operating profit margin, % 6.7% 7.9% 8.2%
Operating profit excluding non-recurring items 26.9 35.9 -25% 154.0
  Housing 28.9 35.0 -17% 136.3
  Finland, the Baltic countries and Central Eastern Europe 16.8 22.4 -25% 66.2
  Russia 12.2 12.6 -3% 70.2
  Business Premises and Infrastructure 0.2 3.1 -94% 31.0
  Other items -2.3 -2.2 -13.4
Operating profit margin, %
excluding non-recurring items
6.7% 7.9% 8.3%
  Housing 10.3% 12.2% 11.8%
  Finland, the Baltic countries and Central Eastern Europe 9.7% 11.9% 10.1%
  Russia 11.2% 12.9% 14.1%
  Business Premises and Infrastructure 0.2% 1.9% 4.5%
Profit before taxes 18.2 30.6 -41% 122.8
Profit for the review period1 14.3 23.4 -39% 93.9
Earnings per share, EUR 0.11 0.19 -42% 0.75
Operating cash flow after investments -12.3 -5.3 -87.9
Return on investment (last 12 months), % 10.2% 15.0% 10.3%
Equity ratio at end of period, % 35.0% 40.7% 37.8%
Order backlog at end of period 2,696.7 2,710.2 0% 2,713.7

Attributable to equity holders of the parent company

Group reporting, IFRS 

EUR million 1-3/14 1-3/13 Change 1-12/13
Revenue 403.2 445.6 -10% 1,743.0
Operating profit 23.2 31.0 -25% 104.0
Operating profit margin, % 5.8% 7.0% 6.0%
Profit before taxes 18.8 30.3 -38% 95.0
Profit for the review period1) 14.6 22.9 -36% 70.3
Earnings per share, EUR 0.12 0.18 -33% 0.56
Operating cash flow after investments -12.3 -5.3 -87.9
Order backlog 3,146.4 3,045.9 3% 3,184.6
Invested capital 1,555.8 1,445.5 8% 1,556.2
Return on investment (last 12 months), %
(figures for 3/13 non-IFRS)
7.0% 14.3% 7.0%
Effective tax rate, % 22.4% 23.7% 26.1%
3/14 3/13 Change 12/13
Net interest-bearing debt, EUR million1 840.3 677.7 24% 781.7
Gearing ratio, % 1 132.1% 94.0% 112.0%

1(3/13 non-IFRS)

Events after the review period

YIT’s residential sales in Finland, the Baltic countries and Central Eastern Europe have been at a normal level in April. In Russia, activity in the housing market has slowed down slightly compared to the first quarter.

After the review period, YIT signed an agreement on selling the Bisnespaja Avia business premises in Aviapolis, Vantaa, Finland, to the non-UCITS Fund OP-Vuokratuotto.

Market outlook for 2014


In the long term, residential demand in Finland will be supported by migration to growth centres. Furthermore, the population and the number of households will increase with continued migration and the increasing number of one-person households. YIT estimates that the demand for small apartments, in particular, will remain good.

According to RT’s (Confederation of Finnish Construction Industries) April 2014 estimate, the construction of 26,500 apartments will start in Finland during 2014. According to a report published by VTT Technical Research Centre of Finland in January 2012, the annual need for the production of new apartments amounts to 24,000–29,000 apartments. YIT’s goal is to strengthen its position as the leading housing developer in Finland.

YIT estimates that housing prices in Finland will remain stable in 2014. The increase in construction costs is expected to be moderate in 2014. The interest rates of mortgages are forecasted to remain low, and slight improvement in consumers’ access to financing is expected.  However, the macroeconomic uncertainty and the consumer confidence under the long-term average will continue to affect the Finnish housing market.

Residential demand in the Baltic countries is expected to be supported by economic growth. Furthermore, the poor condition of residential buildings creates a need for new high-quality apartments. The volume of residential construction is estimated to grow in the Baltic countries (VTT Technical Research Centre of Finland, December 2013). Euroconstruct estimated in November 2013 that residential start-ups will decline slightly in the Czech Republic and Slovakia in 2014. In the Baltic countries and Central Eastern Europe, residential prices are expected to increase slightly.

The volume of housing construction is estimated to continue growing in Russia in 2014, but the growth is expected to slow down somewhat from the level in the previous years (VTT Technical Research Centre of Finland, December 2013). YIT expects residential prices in Russia to remain stable in 2014. Residential demand has been supported by low unemployment rates and favourable development in the mortgage market. Moreover, the increase in the interest rates on mortgages has levelled off in recent times. Forecasts of economic growth in Russia have been lowered recently and the Russian ruble has weakened significantly against the euro.  Prolongation and potential escalation of the Ukrainian crisis would probably have a negative effect on YIT’s business operations.

The long-term outlook for Russian residential construction is good. Living space per person is still clearly lower than in Western Europe and housing is in poor condition, which creates the need for new, high-quality housing. Furthermore, the middle class is expected to grow in proportion to the population and the number of household-dwelling units is expected to increase. The development of the mortgage market in Russia has also contributed to the expansion of the potential buyer base. YIT has promoted the availability of mortgages to consumers through extensive cooperation with partner banks.

Business Premises and Infrastructure

The business premises market is expected to continue to be weak in Finland in 2014. Real estate investors are still cautious due to the general economic situation and, in order to control risks, the Helsinki metropolitan area and good tenants are appreciated. The low level of long-term interest rates increases investors’ interest in high-yield properties. Vacancy rates for offices are still high, with vacant building stock also including relatively old office premises in poor condition. YIT believes that the demand will focus on modern and energy-efficient offices. Commercial construction is maintained by investments in retail trade and the expansion of foreign retail chains in the Finnish market. Vacancy rates for commercial premises are rather low.

In the Baltic countries, business premises construction is estimated to increase by 5% in 2014 (VTT Technical Research Centre of Finland, December 2013). In Slovakia, business premises construction is expected to decrease by 8% in 2014 (Euroconstruct, November 2013).

Infrastructure construction is estimated to decrease slightly in comparison with 2013 (Euroconstruct, November 2013). The competition is tight, especially for smaller contracts.

News conference for investors and media

YIT will arrange a news conference on April 25, 2014 at 10:00 a.m. Finnish time (EEST) at YIT's head office, Panuntie 11, 00620 Helsinki, Finland. The event is in English and targeted for analysts, portfolio managers and the media.


The news conference and presentation by the President and CEO of YIT Corporation Kari Kauniskangas can also be followed through a live webcast at The live webcast starts at 10:00 a.m. (EEST) and a recording of the webcast will be available at approximately 12:00 p.m. (EEST) at the same address.

Conference call

The news conference can be participated also through a conference call. Conference call participants are requested to dial in at least five minutes prior to the start of the conference, at 9:55 a.m. (EEST), to number +44 2033645372.

During the webcast and conference call, all questions should be presented in English. At the end of the event the media has the possibility to ask questions also in Finnish.

Schedule in different time zones

Interim Report published The investor and analyst
event, conference call
and live webcast
Recorded webcast
EEST (Helsinki) 08:00 10:00 12:00
CEST (Paris, Stockholm) 07:00 09:00 11:00
BST (London) 06:00 08:00 10:00
US EDT (New York) 01:00 03:00 05:00


Kari Kauniskangas
President and CEO

For additional information, please contact:

Timo Lehtinen, Chief Financial Officer, YIT Corporation, tel. +358 45 670 0626, 

Sanna Kaje, Vice President, Investor Relations, YIT Corporation, tel. +358 50 390 6750,