YIT’s Interim Report January–March 2023
Adjusted operating profit decreased to EUR -4 million (22) in an unprecedentedly weak housing market
- Adjusted operating profit decreased to EUR -4 million (22), and the adjusted operating profit margin amounted to -0.9% (4.2). Profitability was burdened primarily by very low consumer sales in Housing.
- Operating cash flow after investments amounted to EUR -211 million (-41). Approximately half of the negative cash flow is attributable to Housing, where the cash flow was burdened by very low consumer sales, payments for plot investments made before the reporting period, and the apartments currently under construction. New consumer apartment start-ups decreased to 29 (624).
- Result for the period was EUR -14 million (12, continuing operations).
- The number of unsold completed apartments decreased to 747 (31 Dec 2022: 794).
- Net interest-bearing debt was at EUR 791 million (338), and gearing at 95% (41).
- After the reporting period, on 21 April 2023, YIT lowered its guidance for the full-year 2023 due to the weaker-than-expected housing market and provided preliminary financial information for its first quarter.
- YIT's transformation program, launched in February, progressed well. Actions taken by the end of the quarter will result in annualised cost savings of EUR 16 million by the end of 2024. The targeted inflation-adjusted run-rate cost savings are expected to be at least EUR 40 million by the end of 2024, with more than half of the planned run-rate cost savings expected to be achieved already during 2023.
- Order book decreased to EUR 3,542 million (31 Dec 2022: 3,702), driven by the lower number of consumer apartment start-ups in Housing and the strict selection of new projects in Infrastructure.
- Land bank in Housing amounted to 2,078,000 sqm (31 Dec 2022: 2,201,000), which enables the construction of approximately 33,000 new homes.
- The amount of projects in the permitting phase in YIT's wind power development portfolio increased to approximately 940 MW (31 Dec 2022: 550). During the quarter, a decision was made to focus on higher probability projects. As a result of the decision, and as certain projects were determined to be unfeasible for further development, the amount of project opportunities in the preliminary study phase decreased to approximately 1,130 MW (31 Dec 2022: 2,900).
- YIT's combined lost time injury frequency weakened to 13.5 (10.5), as more accidents were reported by YIT's partners. YIT has continued its systematic work to increase transparency and openness in safety communication and to strengthen day-to-day safety management within the company and with its partners.
- Aleksi Laine, SVP, Traffic Infrastructure at YIT, was appointed as the interim leader of the Infrastructure segment and a member of the YIT Group Management Team as of 29 March 2023. Pasi Tolppanen, the former EVP of the segment, left the company on 29 March 2023.
|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 first quarter of the year was challenging. As anticipated, the strong headwinds from the market persisted throughout the quarter. We faced major economic uncertainty, which was further aggravated by instability in the banking sector, and volatile interest rates. These factors contributed to the high levels of cautiousness across our industry, leading to a significant decline in our adjusted operating profit to EUR -4 million for the period (22).
The activity in housing markets was unprecedentedly low during the first quarter of 2023. In the Housing segment, demand was consequently weak and consumer sales were at a very low level. This had a negative impact on the segment's profitability and cash flow, and led us to lower our guidance for the full year. To navigate the current market downturn, we have taken several actions to release cash from our operations. We have also slowed down our new apartment start-ups and plot investments.
In the Business Premises segment, profitability decreased to a disappointing level. Increased construction material prices have burdened margins in projects started before the surge in price inflation, and the project management in some of these projects has been inadequate. Price inflation in key construction materials has stabilised, and we are evaluating ways to factor in the increased costs to certain earlier agreed projects. In the Infrastructure segment, profitability continued to be impacted by certain low-margin legacy projects and decreased slightly compared to last year.
Market activity levels in both Business Premises and Infrastructure remained relatively stable during the quarter, with several projects in the planning and bidding phase in both segments. Even with our strict project selection criteria, we succeeded in maintaining a strong and balanced order book.
A definite highlight of the otherwise disappointing quarter was the progress we made towards transforming YIT. In February, we launched a transformation program to improve our performance. As part of the program, we made a decision to simplify our organisational structure to increase our agility and customer focus. I have been impressed by our personnel's ability to quickly adapt to change and their commitment to YIT's long-term success.
We also entered into a strategic partnership with Tech Mahindra to strengthen our digital capabilities. The partnership enables us to drive efficiencies across our value chain by increasing transparency in our data management. All in all, we have had a strong start to our transformation, and we are well on our way to meeting the targets we have set. The actions we took by the end of the first quarter will result in annual cost savings of EUR 16 million, which will be realised in full by the end of 2024.
The year 2023 got off to a slow start. We expect the demand outlook in Housing to remain similarly weak for the first half of the year but gradually recover in the second half as the current market headwinds subside. We remain cautious in this challenging market. We focus firmly on executing our transformation and delivering value to our customers. We are also determined to seize the opportunities the market situation might offer us."
YIT’s order book decreased to EUR 3,542 million during the first quarter (31 Dec 2022: 3,702). The decrease was driven by the lower number of consumer apartment start-ups in Housing and the strict selection of new projects in Infrastructure. At the end of the quarter, 72% of the order book was sold (31 Dec 2022: 72%).
YIT’s revenue decreased by 12% to EUR 455 million (518). Revenue remained stable in Business Premises but decreased in other segments. In Housing, revenue decreased as a result of very low consumer sales. The comparative period in Infrastructure was supported by higher revenues in the road maintenance business, while the comparative period in Property Development was supported by the revenue recognition of self-developed projects.
YIT's adjusted operating profit decreased to EUR -4 million (22), and the adjusted operating profit margin amounted to -0.9% (4.2). In Housing, profitability was burdened primarily by very low consumer sales. In Business Premises, the increased construction material prices have burdened margins in projects started before the surge in price inflation, and the project management in some of these projects has been inadequate. In Infrastructure, profitability decreased slightly. In Property Development, there were no significant transactions during the quarter.
YIT’s operating profit was EUR -8 million (22). Adjusting items were EUR 4 million in the first quarter (0), related primarily to the costs of the transformation program. Net finance costs amounted to EUR 11 million (8). The result for the period was EUR -14 million (-133).
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).
In Housing, the demand outlook remains weak for the first half of the year but is expected to gradually recover in the second half of the year. In Business Premises and Infrastructure, the underlying operational performance is expected to improve, but certain 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.
News conference for investors and media
YIT will arrange a news conference on Wednesday, 3 May 2023 at 10:00 a.m. EEST (8:00 a.m. BST). The results will be presented by Heikki Vuorenmaa, 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. You can access the teleconference by registering on the link: https://palvelu.flik.fi/teleconference/?id=10010332. After the registration you will be provided phone numbers, a conference ID and user ID to access the conference call. To ask a question, please press *5 on your telephone keypad to enter the queue.
The event is targeted for analysts, portfolio managers and the media. Welcome!
For further information:
Samu Heikkilä, Investor Relations Manager, YIT Corporation, tel. +358 44 581 7979, email@example.com
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