YIT’s Interim Report January-September 2023
Operating cash flow for the quarter improved significantly from the comparison period; net debt remained stable from the previous quarter. Revenue was stable at EUR 553 million (560), while adjusted operating profit decreased to EUR 16 million (21).
Third quarter 2023 in brief
The order book was EUR 3,391 million (30 Jun 2023: 3,540), the decrease was due to the lower number of consumer apartment start-ups in Housing. The order book in Business Premises remained stable and increased somewhat in Infrastructure. At the end of the quarter, 75% of the order book was sold (30 Jun 2023: 72%).
Revenue remained stable at EUR 553 million (560), supported by the sale of the Maistraatinportti office property.
Adjusted operating profit decreased to EUR 16 million (21), and the adjusted operating profit margin amounted to 2.9% (3.7).
Operating cash flow after investments amounted to EUR -3 million (-149). The cash flow was supported by YIT’s improved net working capital efficiency and the sale of Maistraatinportti. Consumer apartments under construction affected the third quarter cash flow. Due to less apartments under construction in the coming quarters, the increase of the capital tied up to apartments will slow down compared to previous quarters.
Net interest-bearing debt was at EUR 820 million (590), and gearing was at 100% (69). Compared to the previous quarter, both net interest-bearing debt and gearing remained stable.
In Housing, adjusted operating profit decreased to EUR 10 million (17), negatively impacted by low consumer sales in Finland. New consumer apartment start-ups decreased to 108 (596). The number of unsold completed apartments increased to 948 (30 Jun 2023: 730).
In Business Premises, adjusted operating profit increased to EUR 4 million (3), however, still burdened by higher construction material prices, which weighed on margins in fixed price projects started before the surge in price inflation.
In Infrastructure, adjusted operating profit increased to EUR 2 million (1), but it was still burdened by certain low-margin legacy projects in Sweden.
Result for the period was EUR 1 million (7, continuing operations).
YIT’s transformation program, launched in February, has progressed faster than originally expected. YIT has identified and launched all measures to achieve the targeted annual inflation-adjusted run-rate cost savings of 40 million euros by the end of 2024. Actions taken by the end of the third quarter amounted to EUR 20 million. In addition, YIT is expecting to achieve a significant amount of project-related efficiency gains.
|Operating profit, %
|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 (cLTIF, rolling 12 months)
|Customer satisfaction rate (NPS)
Russian businesses, sold on 30 May 2022, are reported as discontinued operations.
Unless otherwise noted, the figures in brackets in this report refer to the corresponding period in the previous year.
Heikki Vuorenmaa, President and CEO
“The third quarter was a step forward for YIT. While macroeconomic factors are beyond our control, our determined actions to improve and transform our performance have progressed faster than originally expected. With the actions taken by the end of the third quarter, YIT will gain annualised inflation-adjusted run-rate cost savings of EUR 20 million by the end of 2024. In addition, we are expecting to achieve a significant amount of project-related efficiency gains. We are also off to a good start with the capital release actions, which we are determined to execute according to plan. I want to take the opportunity to thank our personnel for their tireless commitment to the transformation ongoing in the company. To ensure our competitiveness, we need to strengthen the consistency of our processes, best practices and culture. These are the assets that will enable us to operate effectively across segments in the future.
Supported by the actions taken to improve net working capital efficiency, our operating cash flow for the quarter improved significantly from the comparison period. We have managed to halt the growth of debt and due to less apartments under construction in the coming quarters, the increase of the capital tied up to apartments will slow down compared to previous quarters. After a challenging first quarter, we have improved the cash flow by close to 300 million euros year-on-year, despite the increased number of unsold completed apartments. This is a great achievement in the prevailing environment, and we are determined to continue with the actions to improve our financial position. Group adjusted operating profit amounted to EUR 16 million (21) for the quarter, affected by the low consumer sales in Housing in Finland. In Housing, completion of net 356 apartments in CEE countries were shifted from the third quarter to the fourth quarter, affecting the segment's result.
The market headwinds in the Finnish housing market continued during the quarter, and the profitability in the Housing segment was negatively impacted by low consumer sales. In contrast, demand in Central Eastern Europe improved, with consumer sales increasing significantly from the comparison period and the previous quarter, partly offsetting the challenging Finnish market. The business portfolio, where we have operations in different geographical areas, is proving its strength. We continued with a careful approach to new start-ups and plot investments, with most of the consumer apartment start-ups in Central Eastern Europe where market conditions were more favourable.
The Business Premises segment increased its revenue, supported by the sale of the self-developed renovation site Maistraatinportti office building located in Länsi-Pasila, Helsinki. I am happy that we succeeded in completing the transaction in these difficult market conditions. Maistraatinportti is a great example of YIT’s strong expertise in project development and renovation projects. Renovation projects can extend the life cycle of buildings while simultaneously making them more energy efficient to use, which reduces emissions and the carbon footprint. We are committed to the Science Based Targets initiative (SBTi), and one of the key measures is to reduce the emissions that stem from the usage of completed premises.
In the Infrastructure segment, our performance was supported by the performance of the Finnish operations. We were selected as a service provider for the development phase of the Pirkkala-Linnainmaa tramway alliance. Winning this alliance project is an excellent example of the strong skills and expertise that we share with our partners. We are delighted to be able to develop this regionally and socially significant project together with all parties involved. In Sweden, low-margin legacy projects continued to weigh on profitability.
Professionals in the field of engineering ranked YIT the most attractive employer in the construction industry in the Universum Professionals Survey for the fourth consecutive year. We are very proud of this recognition, and that YIT has remained the ideal employer for professionals in the field for such a long time. It is important for us to remain a pioneer in our field and to invest in our operating methods, personnel competence development and diverse career paths. In particular, in this challenging market situation in the construction sector, we bear our responsibility for the attractiveness of the industry, offering opportunities for personal development and an excellent employee experience.
Consumers’ disposable income continued to be under pressure during the third quarter, and the economic uncertainty leading to caution in the housing market continued. In addition, we have unfortunately witnessed new geopolitical tensions globally, and uncertainty remains high. However, we are seeing a growth of pent-up demand among the consumers in the apartment market. As the start-ups in Finland have been at an extremely low level during recent quarters, there will be a significantly lower supply of apartments in the markets in 2024 and early 2025. YIT’s unsold completed apartments are located in attractive housing areas and consist of an attractive mix of different sized apartments. When the economic recovery kicks off, we will be in an excellent position to respond to the demand and gain market share.
With over 100 years of experience in the construction industry, YIT has witnessed changing economic conditions and retained its position as a quality player in the construction business. With a clear focus and high energy, we continue to navigate our way through the current cycle."
YIT’s order book decreased to EUR 3,391 million (30 Jun 2023: 3,540), driven by the lower number of consumer apartment start-ups in Housing. At the end of the quarter, 75% of the order book was sold (30 Jun 2023: 72%).
YIT’s revenue was at the previous year's level at EUR 553 million (560). In Housing, revenue remained stable despite lower sales in Finland, supported by a higher number of consumer completions in Central Eastern Europe. In Business Premises, revenue increased, due to the sale of the Maistraatinportti office property during the quarter. In Infrastructure, revenue decreased. The comparative period was supported by certain large projects that have since been completed.
YIT’s adjusted operating profit decreased to EUR 16 million (21), and the adjusted operating profit margin was 2.9% (3.7). In Housing, profitability was negatively impacted by low consumer sales in Finland and a weaker sales mix. In Business Premises, higher construction material prices weighed on margins in projects started before the surge in price inflation. In Infrastructure, profitability increased, but was still burdened by certain low-margin legacy projects in Sweden.
YIT’s operating profit was EUR 13 million (16). Adjusting items were EUR 3 million in the third quarter (5), mainly associated with the costs of the transformation program. Net finance costs amounted to EUR 12 million (5) due to increased market interest rates and higher amount of net interest bearing debt. The result for the period was EUR 1 million (7).
YIT’s revenue decreased by 4% to EUR 1,566 million (1,623). In Housing, revenue remained stable, supported by the sales of apartments in Finland to YIT’s joint venture’s rental housing portfolio during the first half of the year. In Business Premises, revenue was at the previous year's level, supported by the sale of the Maistraatinportti office property during the third quarter. The comparative period in Business Premises included a sale of two self-developed projects. In Infrastructure, revenue decreased. The comparative period in Infrastructure was supported by certain large projects that have since been completed.
YIT’s adjusted operating profit decreased to EUR 26 million (67), and the adjusted operating profit margin was 1.6% (4.1). In Housing, profitability was negatively impacted by low consumer sales and a weaker sales mix. In Business Premises, higher construction material prices weighed on margins in projects started before the surge in price inflation. The comparative period in Business Premises was supported by the sale of two self-developed projects. In Infrastructure, profitability increased but was still burdened by certain low-margin legacy projects in Sweden.
YIT’s operating profit was EUR 16 million (60). Adjusting items amounted to EUR 10 million (7). Adjusting items were related mainly to the costs of the transformation program. Net finance costs amounted to EUR 34 million (22). The result for the period amounted to EUR -14 million (-403, including discontinued operations), and earnings per share amounted to EUR -0.08 (0.15, continuing operations). The comparative period was burdened by the sale of the Russian businesses.
Guidance and outlook for 2023
YIT expects its Group adjusted operating profit for continuing operations to be lower than in 2022, but at least EUR 50 million (2022: EUR 110 million).
The housing market recovery in Central Eastern Europe is expected to further continue. In Finland, the market is expected to continue to be weak in the fourth quarter. In Business Premises and Infrastructure, the underlying operational performance is expected to improve, but low-margin legacy projects will still affect Infrastructure’s performance.
YIT’s performance will be supported by the increased efficiencies from the transformation program launched on 10 February 2023.
Developments in housing markets may have an impact on the outlook. Rising interest rates may have a negative impact on the fair value of investments. Delayed apartment completions could lead to the postponement of revenue and profit from one quarter or a year to another.
Webcast for investors and the media
A webcast and an international telephone conference will be arranged on 1 November 2023 at 10:00 a.m. EET (8:00 a.m. GMT). The results will be presented by Heikki Vuorenmaa, President and CEO of YIT Corporation, and CFO Tuomas Mäkipeska.
The webcast can be followed at https://yit.videosync.fi/2023-q3 and at the company’s web site at www.yitgroup.com/investors. A recording of the webcast will be available at the same address later that day.
The teleconference can be accessed by registering at: https://palvelu.flik.fi/teleconference/?id=10010334. After the registration, participants will be provided with phone numbers and a conference ID to access the conference. To ask a question, please dial *5 on your telephone keypad to enter the queue.
The event is targeted for investors, analysts and the media. Welcome!
For further information:
Essi Nikitin, Vice President, Investor Relations, YIT Corporation, tel. +358 50 581 1455, firstname.lastname@example.org
Distribution: Nasdaq Helsinki, major media, www.yitgroup.com
YIT is the largest Finnish and a significant North European development and construction company. We develop and build sustainable living environments: functional homes, future-proof public and commercial buildings, infrastructure for smooth mobility, and renewable energy solutions to benefit the climate. We employ around 5,000 professionals in nine countries: Finland, Sweden, Norway, Estonia, Latvia, Lithuania, the Czech Republic, Slovakia and Poland. Our revenue in 2022 was EUR 2.4 billion. YIT Corporation's share is listed on Nasdaq Helsinki. Read more: www.yitgroup.com