YIT’s Half-year report January−June 2022
Strategy execution continues: profitability improved despite prevailing market instability, the sale of the businesses in Russia completed successfully.
Second quarter 2022 highlights:
- Adjusted operating profit was EUR 25 million (24).
- Adjusted operating profit margin improved to 4.5% (3.4) supported by enhanced productivity.
- Good performance in Housing continued in market instability. Earnings were weaker than previous year mainly due to a lower number of apartment completions in Finland resulting from low start-ups during the COVID-19 pandemic.
- Transformation in other segments progressed driven by improvements in project management in Business Premises and Infrastructure and portfolio development in Property Development.
- YIT withdrew from all operations in Russia successfully.
- Result for the period was EUR -277 million (11), negatively impacted by the result of EUR -293 million from the discontinued operations following the sale of YIT’s operations in Russia. Discontinued operations’ result was impacted by the booking of the accumulated RUB/EUR translation difference of EUR -253 million. The booking did not have an impact on Group’s equity or cash flow.
- Net interest-bearing debt was at EUR 435 million (353) and gearing at 51% (35).
- Order book strengthened to EUR 4,067 million (31 March 2022: 3,756).
- Land bank amounted to 2,145,000 sqm (31 March 2022: 2,173,000), which enables the construction of approx. 32,000 new homes.
- Combined lost time injury frequency amounted to 12.0 (12.1).
- Teemu Helppolainen, Executive Vice President, Housing Russia, left the company with the completion of the sale of YIT´s businesses in Russia.
|Operating profit margin, %
|Adjusted operating profit
|Adjusted operating profit margin, %
|Result before taxes
|Result for the period, continuing operations
|Result for the period, including discontinued operations
|Earnings per share, continuing operations, EUR
|Operating cash flow after investments
|Net interest-bearing debt
|Gearing ratio, %
|Equity ratio, %
|Return on capital employed, % (ROCE, rolling 12 months)
|Combined lost time injury frequency (LTIF, rolling 12 months)
|Customer satisfaction rate (NPS)
From the first quarter of 2022 onwards, YIT has four reportable segments: Housing, Business Premises, Infrastructure and Property Development. Sold Russian businesses are reported as discontinued operations. On 25 April 2022, YIT restated financial information for comparative periods reflecting an operating model change, where certain operations and functions were transferred between reportable segments, and the reporting of the sold Russian businesses as discontinued operations. Balance sheet and cash flow statement for comparative periods were not restated. Unless otherwise noted, all figures in this report concern continuing operations.
Unless otherwise noted, the figures in brackets refer to the corresponding period in the previous year.
Markku Moilanen, President and CEO
“The second quarter was eventful. Market turbulence was noticeable: while supply chains were finding new balances, consumer confidence was deteriorating due to rising interest rates and inflation. However, for us at YIT, the quarter was successful despite the prevailing market instability. The highlight of the quarter was the closure of the sale of our Russian businesses. I am satisfied that we were able to negotiate a strong deal, close it according to the agreed terms, and withdraw from all operations in Russia in these challenging conditions. This achievement makes me proud as, above all, it is a testimony to the enormous expertise and commitment of our people who worked relentlessly to accomplish this important milestone in YIT’s history.
The second quarter was successful also for our businesses. We reached a solid adjusted operating profit of EUR 25 million, a slight increase from last year (24). More importantly, our relative profitability improved with our adjusted operating profit margin amounting to 4.5% compared to 3.4% a year before. This is a remarkable achievement considering that the market was not easy at all. It proves that our businesses are in good shape and our strategy execution has been successful.
The core of our strategy is a strong Housing business. The growth is sought in key cities in Finland, Poland, the Czech Republic and Slovakia, where YIT sees opportunities in the medium and long term. This growth is enabled by improving performance in the rest of our businesses.
The construction sector is cyclical and typically it is housing that swings harder than the rest of the construction. Now, it seems evident that we are heading towards a downturn. Accordingly, it is of the utmost importance to have a business model which withstands shocks from the market. That is what we have built-in at YIT. Our diversified business model provides us protection against market turbulence, which can be seen in our second quarter earnings. While the Housing segment’s earnings decreased from last year’s very strong levels to more normalised figures, the successful transformation and improving performance in Business Premises and Infrastructure drove our earnings growth.
I am happy to see that our strategy execution is on the right track. We have already achieved substantial productivity gains from our new agile operating model and focus on project management. Our renewed focus on core businesses is developing well with selectiveness in project tendering and selected divestments. ESG, in turn, unlocks future potential as green investments increase.
In short term, however, there are challenges as market instability continues. Rising interest rates and high inflation are impacting our sector, especially in the Housing business. Demand has come down from last year’s exceptionally strong levels and there are uncertainties in the near term. Regarding construction materials, on the other hand, we see some signs of stabilising prices at the moment. Our material availability has remained at a good level because of strong relationships with our suppliers and hard work of our procurement and project organizations.
While we at YIT are obviously not immune from the market instability, our diversified business model and strategy which focuses on core competencies are supporting us. Our balance sheet is strong and withstands cyclical changes in sales levels. Our investments are geared towards future growth and opportunities. We have clear competitive advantages and expect to navigate through current market challenges by rigorous strategy execution and to continue our solid performance.”
YIT’s order book increased to EUR 4,067 million at the end of the second quarter (31 Mar 2022: 3,756). The increase was driven by the strengthened order book of the Housing segment. In Business Premises, Infrastructure, and Property Development, the order book remained stable. At the end of the quarter, 92% of the order book was sold (31 Mar 2022: 82).
YIT’s revenue decreased by 20% to EUR 545 million (685). The decrease was primarily due to a lower number of apartment completions and lower sales in Housing, partly offset by a higher revenue in Business Premises driven by the sale of two self-developed projects.
YIT´s adjusted operating profit was EUR 25 million (24) and the adjusted operating profit margin increased to 4.5% (3.4). Improved profitability was driven by the successful continued transformation in Business Premises and Infrastructure, as well as sales of two self-developed projects in Business Premises.
YIT’s operating profit was EUR 22 million (21). Adjusting items were EUR 2 million in the second quarter (2). The result for the period, including discontinued operations, was EUR -277 million (11) and was impacted by the booking of the accumulated RUB/EUR translation difference of EUR -253 million following the sale of the Russian businesses.
YIT´s revenue was EUR 1,063 million (1,247). Revenue increased in the Business Premises and Property Development segments but decreased in the Housing and Infrastructure segments.
YIT´s adjusted operating profit increased to EUR 47 million (39) and the adjusted operating profit margin to 4.4% (3.1). Improved profitability reflects solid performance across the segments, particularly successful continued transformation in Business Premises and Infrastructure.
YIT’s operating profit was EUR 44 million (31). The adjusting items amounted to EUR 2 million (8).
Guidance for 2022
In Housing, completions of consumer apartments are expected to decrease compared to 2021. In Business Premises, operational performance will continue to improve. Infrastructure will gradually improve, while still impacted by certain legacy low-margin projects. In Property Development, there are several promising projects in the pipeline.
YIT expects its Group adjusted operating profit for continuing operations to be higher than in 2021 (2021: EUR 85 million).
Temporary shutdowns or slower progress on construction sites and delayed completions due to the COVID-19 pandemic or challenges in construction material and labour availability could lead to the postponement of revenue and profit from one quarter or year to another. YIT aims to mitigate the impact of increased construction material costs by actively managing its customer relations, contracts, and procurement. Rising interest rates and overall inflation could have an impact on consumer demand and result in lower-than-expected apartment sales. Due to an increased number of apartments under construction, YIT expects to tie up more capital as the year progresses.
News conference for investors and media
YIT will arrange a news conference on Thursday, 28 July 2022 at 10:00 a.m. EEST (8:00 a.m. BST). The results will be presented by Markku Moilanen, President and CEO of YIT Corporation, and CFO Tuomas Mäkipeska. The news conference will be held as a live webcast that can be followed on the company’s web site at www.yitgroup.com/webcast. A recording of the webcast will be available at the same address later that day.
The news conference can be participated also through a conference call. Questions can be asked via the conference call and should be asked in English.
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 (7:55 a.m. BST). Conference call numbers are:
- Participants from Finland +358 (0)9 8171 0310
- Participants from Sweden +46 (0)8 5664 2651
- Participants from UK and outside of Nordic countries +44 (0)33 3300 0804
- Participants from US +1 (0)63 1913 1422
The participants will be asked to provide the following confirmation code: 10424545#.
The event is targeted for analysts, portfolio managers and the media. Welcome!
For further information:
Tommi Järvenpää, Vice President, Investor Relations, YIT Corporation, tel. +358 40 576 0288, email@example.com
Vice President, Investor Relations
Distribution: Nasdaq Helsinki, major media, www.yitgroup.com
YIT is the largest Finnish and a significant North European development and construction company. For 110 years, we have been creating better living environments for our customers: functional homes for sustainable living, future-proof public and commercial buildings and infrastructure for smoother flow of people, businesses and society. We employ 5,500 professionals in nine countries: Finland, Sweden, Norway, Estonia, Latvia, Lithuania, the Czech Republic, Slovakia and Poland. Our revenue in 2021 was EUR 2.7 billion. YIT Corporation's share is listed on Nasdaq Helsinki Oy. www.yitgroup.com