YIT warns its Business premises segment to be loss-making in the third quarter and reinstates full-year result guidance for 2020
YIT issued a third-quarter guidance for each of its segments in its 2020 Half-year report. In contrast to the guidance, YIT expects the Business premises segment’s adjusted operating profit to be negative in the third quarter of 2020. The segment’s profitability is weakened by a EUR 18 million margin reduction in revenue and cost estimates of the Tripla project. In addition, the segment’s adjusted operating profit is negatively impacted by an inventory write-down of EUR 7 million related to a business premise in Finland of which the majority is due to additional costs to achieve a desirable rental level for sales. The write-down is related to the company’s target to increase capital efficiency. Earlier, YIT expected in its 2020 Half-year report the Business premises segment to be profitable in the third quarter.
In rest of the segments, third-quarter performance was strong. While consumer apartment completions remained at a low level in the Housing Finland & CEE segment as expected, particularly completed apartment sales was clearly stronger than expected both in Finland and CEE. In Housing Russia, the number of apartments sold was also very strong. Infrastructure projects and Partnership properties segments performed according to plans.
As a whole, following the bookings of EUR 25 million in the Business premises segment, YIT expects its Group third quarter adjusted operating profit to be approximately EUR 16 million, cash flow to be as expected and the balance sheet to remain strong.
Actions to increase capital efficiency and strengthen the balance sheet have continued
In line with YIT’s strategy, the company has continued actions to improve profitability, increase capital efficiency and to strengthen the balance sheet. The preparations to sell the above-mentioned Finland-based business premise included the inventory proceeded. In addition, YIT announced on 13 October 2020 to start preparations to close down its loss-making infrastructure business in Norway, which will result in a write-down of EUR 12 million to the third quarter results. Furthermore, after the reporting period, YIT has signed a conditional contract to sell significant plots in units to be closed down in Russia. The plots represent approximately 35 percent of the value of YIT’s total plot reserves in Russia. The sale is expected to be finalised in 2021 and to result in a cash flow of over 30 million. Related to the plots, YIT will book a write-down of EUR 13 million to the third-quarter results. The close down of the business in Norway and the sale of the plots in Russia will be treated as adjusting items and therefore, they will not have an impact on adjusted operating profit.
These actions are expected to have a positive impact of over EUR 50 million on the company’s cash flow by the end of 2021.
YIT reinstates full-year result guidance for 2020
YIT withdrew its full-year result guidance for 2020 on 1 April 2020 due to increased uncertainty and weakened visibility resulting from the coronavirus pandemic. The outlook has clarified supported by strong apartment sales, good reservation levels, as well as the construction sites progressing according to plans.
YIT expects its full-year Group adjusted operating profit to be in the range of EUR 90-110 million (2019: EUR 165.5 million). During the rest of the year, YIT expects its projects to be completed on schedule despite the second wave of the coronavirus pandemic. However, possible decisions by authorities, such as closing down construction sites widely or slow acceptance processes in completion, may lead to temporary shutdowns and cause postponements of revenue and profit into 2021.
YIT will publish its third quarter 2020 interim report on 30 October 2020.
For further information, please contact:
Tommi Järvenpää, Vice President, Investor Relations, YIT Corporation, tel. +358 (0)40 576 0288, email@example.com
Vice President, Investor Relations
Distribution: NASDAQ Helsinki, major media, www.yitgroup.com
YIT is the largest Finnish and significant North European construction company. We develop and build apartments and living services, business premises and entire areas. We are also specialised in demanding infrastructure construction. Together with our customers, our nearly 8,000 professionals are creating more functional, attractive and sustainable cities and environments. We operate in 10 countries: Finland, Russia, Sweden, Norway, the Baltic countries, the Czech Republic, Slovakia and Poland. Our revenue in 2019 was approximately EUR 3.4 billion. YIT Corporation’s share is listed on Nasdaq Helsinki Oy. www.yitgroup.com