YIT’s Financial Statements Bulletin January-December 2023

YIT’s Financial Statements Bulletin January-December 2023  

Operating cash flow after investments and financial position improved towards the end of the year. 

2023 in brief 

• Order book was EUR 3,157 million (30 Sep 2023: 3,391). Order book decreased in Housing and remained stable in Business Premises and Infrastructure. At the end of the quarter, 74% of the order book was sold (30 Sep 2023: 75%). 

• Revenue decreased to EUR 2,163 million (2,403), increasing in Business Premises and decreasing in Housing and Infrastructure. 

• Adjusted operating profit decreased to EUR 41 million (110), and the adjusted operating profit margin was 1.9% (4.6). The decrease was mainly related to low consumer apartment sales in Finland and fair value changes of equity investments and investment properties in the fourth quarter. 

• Operating cash flow after investments amounted to EUR -137 million (-285), mainly affected by the first quarter negative cash flow in the Housing segment. From the second quarter onwards, cash flow improved, supported by successful capital release actions of the transformation program and the sale of the Maistraatinportti office property. 

• Net interest-bearing debt amounted to EUR 795 million (615), and gearing was 94% (70). Compared to the previous quarter, both net interest-bearing debt and gearing decreased. 

• In Housing, adjusted operating profit decreased to EUR 32 million (98), impacted by low consumer sales in Finland. New consumer apartment start-ups decreased to 863 (2,400). The number of unsold completed apartments increased to 1,267 (30 Sep 2023: 948). 

• In Business Premises, adjusted operating profit decreased to EUR 0 million (16), affected by the decline in fair value of investments in the fourth quarter and 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 14 million (4). YIT announced on 5 December 2023 that it had agreed on the sale of YIT Energy Oy, the renewable energy business. An estimated total purchase price of EUR 48 million and an estimated gain on sale of EUR 47 million was recorded for Q4/2023. The gain on sale is reported in operating profit adjusting items. On 8 January 2024, YIT announced that it had decided to close down its infrastructure business in Sweden. The business to be closed down is recorded in operating profit adjusting items from the beginning of Q4/23. 

• Result for the period was EUR 3 million (63, continuing operations). 

• YIT’s Board of Directors proposes that no dividend be distributed. 

• During the fourth quarter, YIT signed a EUR 140 million term loan, which is secured. The loan replaced previous term loans totalling EUR 150 million which were to mature in late 2023 and the spring of 2024. 

• YIT’s transformation program has progressed faster than originally expected. With the actions taken by the end of 2023, YIT will gain annualised run-rate cost savings of EUR 25 million, which will be fully realised by the end of 2024. In addition to the cost savings, YIT is expecting to achieve a significant amount of project-related and capital efficiency gains. 

Key figures 

EUR million	10–12/23	10–12/22	1–12/23	1–12/22
Revenue	597	779	2,163	2,403
Operating profit	33	42	51	102
Operating profit, %	5.5	5.3	2.4	4.2
Adjusted operating profit	13	42	41	110
Adjusted operating profit margin, %	2.2	5.4	1.9	4.6
Result before taxes	13	35	-5	74
Result for the period, continuing operations	17	28	3	63
Result for the period, including discontinued operations	17	28	3	-375
Earnings per share, continuing operations, EUR	0.08	0.13	-0.01	0.28
Operating cash flow after investments	67	40	-137	-285
Net interest-bearing debt	795	615	795	615
Gearing ratio, %	94	70	94	70
Equity ratio, %	33	35	33	35
Return on capital employed, % (ROCE, rolling 12 months)	2.5	8.4	2.5	8.4
Order book	3,157	3,702	3,157	3,702
Combined lost time injury frequency (cLTIF, rolling 12 months)	12.1	13.3	12.1	13.3
Customer satisfaction rate (NPS)	52	49	52	49

YIT has supplemented agreements in the scope of IFRS 16 leases and adjusted the 2022 comparative balance sheet and the income statement and balance sheet of the three first quarters of 2023. More information is disclosed in the notes. 
YIT Kalusto Oy was classified as an asset held-for-sale at year-end 2023. Accordingly, related assets and liabilities are presented as separate line items in the balance sheet. The Russian businesses, sold in 2022, have been reported as discontinued operations. 
Unless otherwise noted, the figures in brackets in this report refer to the corresponding period in the previous year. 

Comments from the President and CEO, Heikki Vuorenmaa 

“Year 2023 was characterized by difficult market conditions. The euro area experienced a steep increase in interest rates, which impacted the housing market in most of our operating countries, especially in Finland. Additionally, increased inflation on materials and labor costs continued to impact our fixed price agreements in contracting segments. On the positive side, demand in Central Eastern European countries, especially in Poland, continued to improve throughout the year.  

We responded to the challenging operating environment with firm actions. We simplified our organisation and business model, streamlined our internal operating models and improved productivity, as well as renewed our procurement model. As a result, we reduced approximately 20% of our comparable fixed costs on a year-on-year basis, while comparable revenue declined by 10% during the same period.  Additionally, we continued to improve the underlying profitability of both of our contracting segments, Business Premises and Infrastructure, and released capital from our investment portfolio and other non-core businesses. As we move forward, a key focus area is capital allocation; ensuring we optimise the use of capital and smartly allocate it to get the best return on it.  

Our transformation program, launched in February 2023, is delivering on the targets set and progressing faster than initially anticipated. With the actions taken by the end of 2023, YIT will gain annualised inflation-adjusted run-rate cost savings of EUR 25 million by the end of 2024. While there is still work to do, I want to express my sincere gratitude to our entire organisation for their hard work and commitment during the challenging year.     

In Housing, our business portfolio with operations in different geographical regions has shown its strength, with our operations in Central Eastern Europe achieving a record-high operating profit in 2023. In Finland, the market conditions were unprecedentedly challenging in the beginning of the year, followed by a slow market recovery and overall weak market. Towards the end of the year, we saw a clear activation in the secondary housing market, and we believe this will eventually lead to an activation of demand in the primary market. An imbalance of demand and supply has led to a larger number of unsold apartments than typically in recent years. Our portfolio of unsold completed apartments consists of high-quality apartments, which are located in attractive housing markets, with more than 90% of the units in capital regions or university towns in Finland and Central Eastern Europe. 

In Business Premises, the year was marked by challenges brought on by increased inflation impacting our contracting business and rising yields that led to a decrease in real estate values. I am happy that we succeeded in completing the sale of the Maistraatinportti office property in these difficult market conditions. Maistraatinportti is a great example of YIT’s strong project development and renovation projects expertise. During the fourth quarter, we made a significant change in the segment's operating model, which enables us to conduct business in a more customer- and market-oriented way. 

In Infrastructure, we improved our way of operating towards the end of the year, which enabled us to start the new year well positioned. In the Finnish infrastructure business, we have the necessary expertise and the ability to win demanding projects. On the other hand, even though the Swedish infrastructure market is active, our positioning did not allow us to successfully compete for projects there. As a result of our strategic review, we made the decision to start closing down the operations in Sweden. 

During 2023, we strengthened our strategic focus on the customer and continued our determined work to improve productivity and sustainability. We became the first Finnish construction company to have our emissions reduction targets validated by the Science Based Targets initiative. Sustainability is an integral enabler of our long-term competitiveness. Our customers expect sustainable solutions, and we want to be in the frontline in providing them. With the science-based targets, we are taking the lead in the industry and are also encouraging our partners to invest in sustainable solutions. We have also continued the systematic work to optimise work safety, increase transparency and openness in safety communication, and strengthen day-to-day safety management within the company and with our partners.   

YIT is executing a significant capital reallocation and a capital release program. While capital has been increasingly tied to the Finnish housing stock, we succeeded in releasing capital and reducing our indebtedness in the last quarter of the year. We have built resilience to face the cyclical nature of our operating environment. The work is not yet finished, and we are determined to continue with the required measures.   

For more than 100 years, we have been a significant player in developing societies in the countries where we operate. Despite the turbulent environment around us, the fundamentals of our actions and business remain unchanged; our focus is – and always will be – to serve our customers to the best of our ability.” 

Results 

October-December 
YIT’s order book decreased to EUR 3,157 million (30 Sep 2023: 3,391). The order book decreased slightly in Housing and Business Premises and remained stable in Infrastructure. At the end of the quarter, 74% of the order book was sold (30 Sep 2023: 75%). 

YIT’s revenue decreased from the comparison period to EUR 597 million (779). In Housing, revenue decreased due to lower sales in Finland. Revenue increased in Business Premises and decreased in Infrastructure. The comparison period was supported by certain large projects that have since been completed. 

YIT’s adjusted operating profit decreased to EUR 13 million (42), and the adjusted operating profit margin was 2.2% (5.4). In Housing, profitability was negatively affected by low consumer sales in Finland and a weaker sales mix. In Business Premises, adjusted operating profit was affected by the decline in fair value of investments, while underlying operative performance improved for the quarter. In Infrastructure, profitability increased. On 8 January 2024, YIT announced that it had decided to close down its infrastructure business in Sweden. The businesses to be closed down are recorded in operating profit adjusting items from the beginning of Q4/23. 

YIT’s operating profit was EUR 33 million (42). Adjusting items were EUR -20 million in the fourth quarter (1), mainly related to the gain on sale of the renewable energy development portfolio, the negative booking related to the closing down of the infrastructure business in Sweden, and the costs of the transformation program. Net finance costs amounted to EUR 20 million (6) due to increased market interest rates, interest rate margins and the higher amount of net interest-bearing debt. The result for the period was EUR 17 million (28). 

January-December 
YIT’s revenue decreased by 10% to EUR 2,163 million (2,403). In Housing, revenue decreased due to low consumer apartment sales, especially in Finland. Revenue was 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 comparison period in Business Premises included a sale of two self-developed projects. In Infrastructure, revenue decreased. The comparison period in Infrastructure was supported by certain large projects that have since been completed.  

YIT’s adjusted operating profit decreased to EUR 41 million (110), and the adjusted operating profit margin was 1.9% (4.6). 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. Fair value changes also impacted the result in the fourth quarter. The comparison period in Business Premises was supported by the sale of two self-developed projects. In Infrastructure, profitability increased. 

YIT’s operating profit was EUR 51 million (102). Adjusting items amounted to EUR -10 million (8). Adjusting items were mainly related to the gain on sale of the renewable energy development portfolio, the negative booking related to the closing down of the infrastructure business in Sweden and the costs of the transformation program. Net finance costs amounted to EUR 56 million (28). The result for the period amounted to EUR 3 million (-375, including discontinued operations), and earnings per share amounted to EUR -0.01 (0.28, continuing operations). The comparison period was burdened by the sale of the Russian businesses.  

Guidance and outlook for 2024 

YIT expects its Group adjusted operating profit for continuing operations to be EUR 20–60 million in 2024. The operating cash flow after investments is expected to be positive.  

The housing market recovery in Central Eastern Europe is expected to continue. In Finland, the housing market is expected to continue to be weak in the first half of the year. In Business Premises and Infrastructure, the underlying operational performance is expected to improve.  

YIT’s performance will be supported by the increased efficiencies from the transformation program launched on 10 February 2023.  

Changes in the macroeconomic environment, especially in interest rates, may impact the housing market demand and the fair value of investments. Delayed apartment completions could lead to the postponement of revenue and profit from quarter or year to another. Actions to release capital may have an impact on the company’s profit. 

Board of Directors’ proposal for profit distribution 

The distributable funds of YIT Corporation on 31 December 2023 amounted to EUR 768 million, of which the profit for the period 2023 amounted to EUR 11 million.  

On 21 November 2023, YIT announced that the Board of Directors would not propose a profit distribution for the financial year 2023 to the General Meeting. Accordingly, YIT’s Board of Directors proposes that no dividend be distributed based on the balance sheet to be adopted for 2023. The proposal is based on an assessment of the Board of Directors of YIT on the industry’s business cycle, prevailing market conditions and the Company’s estimated cash flow. The assessment also considers the terms of financing agreements. 

Events after the reporting period 

On 8 January 2024, YIT announced that it had completed the strategic review of its Swedish infrastructure business, which was announced on 20 June 2023. As a result of the review, YIT announced that it had decided to close down its infrastructure business in Sweden. In connection with the decision, YIT announced it would recognize a negative booking of EUR 16 million in profit for Q4/2023, related to the decision to close down the operations and its implications for the margin forecasts for ongoing projects. The business to be closed down will be recorded in operating profit adjusting items from the beginning of Q4/2023. 

On 9 January 2024, YIT announced that it had agreed on the sale of the entire share capital of YIT Kalusto Oy, the company’s subsidiary providing in-house equipment services, to Renta Oy, a company operating in the equipment rental business. As part of the arrangement, YIT and Renta announced the signing of a long-term cooperation agreement on the delivery of equipment services to YIT in Finland. In addition to the share transaction, YIT announced that it would sell the property used by YIT Kalusto Oy, located in Urjala, Finland, to Renta. Prior to the share transaction, the specialised equipment YIT Corporation Financial Statements Bulletin 1–12/2023 14 (52) related to YIT’s Infrastructure business and the personnel working with the business will be transferred to YIT Infra Oy in an intra-group business transaction. 

Webcast for investors and the media 

A webcast and an international telephone conference will be arranged on 9 February 2024 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/q4-2023/  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=50048709. After 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, essi.nikitin@yit.fi

YIT Corporation 

Tuomas Mäkipeska 
CFO 

Distribution: Nasdaq Helsinki, major media, www.yitgroup.com  

YIT is a leading construction and development company. Building on over 110 years of experience, we develop and build sustainable living environments: functional homes, future-proof public and commercial buildings, and infrastructure to support the green transition. We employ approximately 4,300 professionals in eight countries. Our revenue in 2023 was EUR 2.2 billion. YIT Corporation's shares are listed on Nasdaq Helsinki.  

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