YIT’s Half-year Report January–June 2023

YIT’s Half-year Report January–June 2023

Q2: Order book remained stable during the quarter and operating cash flow was positive. Adjusted operating profit decreased to EUR 14 million (25), negatively impacted by low consumer sales.

Second quarter 2023 highlights

• Adjusted operating profit decreased to EUR 14 million (25), and the adjusted operating profit margin to 2.4% (4.5). Profitability was negatively impacted by low consumer sales in Housing, especially in Finland. The comparative period was supported by the sale of two self-developed projects in Business Premises.
• Operating cash flow after investments amounted to EUR 14 million (-132), supported by YIT’s actions to improve capital efficiency.
• The Housing segment’s consumer sales increased from the first quarter of 2023. Demand was still at a low level in Finland, while the demand in certain Central Eastern European countries improved.
• New consumer apartment start-ups decreased to 522 (1,062). All the new start-ups were in Central Eastern Europe, in countries where demand improved.
• The number of unsold completed apartments decreased slightly to 730 from the first quarter (31 Mar 2023: 747), but increased year-on-year.
• Result for the period was EUR -1 million (16, continuing operations).
• Net interest-bearing debt was at EUR 819 million (435), and gearing at 99% (51).
• YIT’s transformation program, launched in February, has progressed faster than originally expected. YIT has identified and launched all measures to achieve the targeted cost savings. Actions taken by the end of the quarter will result in annualised cost savings of EUR 18 million by the end of 2024.
• As part of the transformation program, YIT initiated a strategic review regarding certain assets and operations such as YIT’s wind power development portfolio, infrastructure operations in Sweden, and selected investments, including YIT’s ownership stake in Tripla Mall. With these measures, YIT has the potential to release approx. EUR 400 million of capital by the end of 2024.
• Order book remained stable during the quarter at EUR 3,540 million (31 Mar 2023: 3,542), supported by strengthened order books in Business Premises and Infrastructure.
• YIT simplified its organisational structure into three agile and customer-focused business segments: Housing, Business Premises, and Infrastructure.
• YIT became the first Finnish construction company to have its emissions reduction targets validated by the Science Based Targets initiative (SBTi).
• YIT’s combined lost time injury frequency weakened to 14.1 (12.0), largely as more accidents were reported by YIT’s partners. YIT continued its systematic work to increase transparency and openness in safety communication and to strengthen safety management within the company and with its partners.
• Jennie Stenbom was appointed as EVP, HR, and a member of the Group Management Team. She will start in her position in November 2023 at the latest. Tanja Kauhajärvi acts as Interim EVP, HR. Katja Ahlstedt, the former EVP, HR, left the company on 16 May 2023.

Key figures

EUR million	4-6/23	4-6/22	1-6/23	1-6/22	1-12/22
Revenue	558	545	1,013	1,063	2,403
Operating profit	10	22	2	44	102
Operating profit, %	1.8	4.1	0.2	4.2	4.2
Adjusted operating profit	14	25	10	47	110
Adjusted operating profit margin, %	2.4	4.5	0.9	4.4	4.6
Result before taxes	-1	14	-20	28	74
Result for the period, continuing operations	-1	16	-15	28	63
Result for the period, including discontinued operations	-1	-277	-15	-410	-375
Earnings per share, continuing operations, EUR	-0.01	0.07	-0.08	0.12	0.28
Operating cash flow after investments	14	-132	-197	-173	-281
Net interest-bearing debt	819	435	819	435	569
Gearing ratio, %	99	51	99	51	64
Equity ratio, %	33	37	33	37	36
Return on capital employed, % (ROCE, rolling 12 months)	4.9	7.6	4.9	7.6	8.4
Order book	3,540	4,067	3,540	4,067	3,702
Combined lost time injury frequency (cLTIF, rolling 12 months)	14.1	12.0	14.1	12.0	13.3
Customer satisfaction rate (NPS)	52	48	52	48	49

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 second quarter of 2023 included significant milestones for YIT. We launched a simplified new organisational structure and continued our good progress in transforming the company towards its full potential. We took determined actions to improve our performance and capital efficiency. Some of the impacts of our actions can already be seen in our performance this quarter, particularly in our improved cash flow. At the same time, the strong market headwinds in the Finnish housing market persisted. Our profitability was negatively impacted by low consumer sales, and our Group adjusted operating profit amounted to EUR 14 million (25) for the quarter.

The demand in the Housing segment continued to be negatively impacted by the rising interest rates and uncertain market outlook, especially in Finland. Although our consumer sales increased compared to the first quarter, the demand was still at a low level in Finland. In contrast, the demand in certain Central Eastern European countries improved. As we did not have any consumer completions in Central Eastern Europe during this quarter, the earnings of the Housing segment fell to a low level. We continued with a careful approach to new start-ups and plot investments, and we therefore decided to only launch new self-developed residential projects in Central Eastern European countries, where the market conditions were more favourable.

The Business Premises segment had an operationally solid quarter, even though the higher construction material prices continued to weigh on margins in projects that were started before the surge in price inflation. I’m pleased that we have succeeded in creating competitive solutions for our customers, which further strengthened the segment’s order book. We remain focused on serving our customers and being a trusted partner with market-leading capabilities.

In the Infrastructure segment, our performance was supported by a solid performance in Finland. In Sweden, profitability was burdened by certain low-margin legacy projects. During the quarter, we initiated a strategic review to secure the best possible value creation for the Infrastructure operations in Sweden. 

On the Group level, I’m proud of how the whole YIT team has adapted to the challenging market conditions. In the short-term, we have systematically improved our cash management, cost discipline and net working capital efficiency. In addition, our transformation program includes a set of initiatives to strengthen our long-term capabilities and operational efficiency.

During the quarter, we achieved an important step in our sustainability agenda. 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 want to take leadership in the industry and encourage our partners to invest in sustainable solutions.

Looking forward, developments in housing markets continue to be a major source of uncertainty for us. Although the demand in certain markets in Central Eastern Europe has improved, the market in Finland is yet to show definite signs of a recovery, and the level of uncertainty in the market remains very high. According to industry estimates, new housing start-ups in the overall Finnish market are expected to reach a multi-year low this year, well below the estimated long-term demand. Such a scenario could have serious repercussions throughout the industry.

We are focusing on implementing our plan and executing the ongoing initiatives to build a stronger and more competitive YIT. We follow market developments closely and remain ready to adapt our agenda accordingly. We will carefully evaluate both risks and opportunities in this exceptional period. I’m confident in YIT’s ability to deliver value to our shareholders in the long-term.”

Results

April-June
YIT’s order book remained stable at EUR 3,540 million compared to the first quarter of 2023 (31 Mar 2023: 3,542), supported by strengthened order books in Business Premises and Infrastructure. Year-on-year the order book has decreased, driven by the lower number of consumer apartment start-ups in Housing. At the end of the quarter, 72% of the order book was sold (31 Mar 2023: 72%).

YIT’s revenue was stable at EUR 558 million (545). In Housing, revenue increased, supported by the sale of apartments in Finland to YIT’s joint venture’s rental housing portfolio during the quarter, and sale and leaseback transactions for 11 plots. In Business Premises, revenue remained stable. The comparative period in Business Premises was supported by the sale of two self-developed projects. In Infrastructure, revenue decreased, mainly as a result of strict project selection in Sweden.

YIT’s adjusted operating profit decreased to EUR 14 million (25), and the adjusted operating profit margin amounted to 2.4% (4.5). In Housing, profitability was negatively impacted by low consumer sales, especially in Finland. In Business Premises, the underlying operational performance was solid, but 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 was supported by a solid performance in Finland, while profitability in Sweden was burdened by certain low-margin legacy projects.

YIT’s operating profit was EUR 10 million (22). Adjusting items were EUR 3 million in the second quarter (2), mainly associated with the costs of the transformation program. Net finance costs amounted to EUR 11 million (9). The result for the period was EUR -1 million (-277). The comparative period was burdened by the result of EUR -293 million from the discontinued operations following the sale of the Russian businesses.

January-June
YIT’s revenue decreased by 5% to EUR 1,013 million (1,063). In Housing, revenue remained stable, supported by the sales of apartments in Finland to YIT’s joint venture’s rental housing portfolio. In Business Premises, revenue decreased. The comparative period in Business Premises was supported by the sale of two self-developed projects. In Infrastructure, revenue decreased, mainly as a result of strict project selection in Sweden.

YIT’s adjusted operating profit decreased to EUR 10 million (47), and the adjusted operating profit margin amounted to 0.9% (4.4). In Housing, profitability was negatively impacted by low consumer sales. In Business Premises, profitability decreased as higher construction material prices weighed on margins in projects started before the surge in price inflation. In Infrastructure, profitability improved, driven by a solid performance in Finland, while profitability in Sweden was burdened by certain low-margin legacy projects.

YIT’s operating profit was EUR 2 million (44). Adjusting items amounted to EUR 7 million (2). Adjusting items were related mainly to the costs of the transformation program. Net finance costs amounted to EUR 22 million (16). The result for the period amounted to EUR -15 million (-410), and the earnings per share amounted to EUR -0.08 (0.12, 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).

In Housing, the demand outlook is expected to gradually recover in the second half of the year. The gradual housing market recovery in Central Eastern Europe is expected to continue into the second half of the year, while the recovery in Finland is expected to become more pronounced only towards the end 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 Tuesday, 1 August 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 audiocast that can be followed on the company’s web site at www.yitgroup.com/investors. A recording of the audiocast 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=10010333. 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, samu.heikkila@yit.fi
 

YIT Corporation

Tuomas Mäkipeska
CFO

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