YIT?s Interim Report, January 1 - June 3

 YIT’s Interim Report, January 1 - June 30, 2003: Net sales see stable growth. Order backlog is at an all-time high.

·    The YIT Group’s net sales in the January-June period were 11   per cent higher than in the first half of the previous year,   rising to EUR 932.1 million (Jan.-June/2002: EUR 840.5 million).
  International activities accounted for 19 per cent of the Group’s   net sales (22%). The share of net sales accounted for by the   maintenance and servicing business rose from 20 to 22 per cent.

·    Operating profit for the review period rose to EUR 57.9   million (EUR 39.2 million). The operating profit margin was 6.2   (4.7%). Operating profit includes about EUR 30 million in capital   gains from the sale of Makroflex. In line with its strategy, YIT   divested itself of the industrial production of sealants and   thermal insulation materials and in June sold its Makroflex   company operating in Finland and Estonia and the Makroflex brand   to the Henkel Group. Operating profit was reduced by the sum of   EUR 5.7 million recorded as a loss by YIT on the basis of a ruling   by the Helsinki District Court in February. The ruling concerned   the conversion and additional works involved in the refurbishing   of SOK’s former head office building, which was seen to completion   in 1999. YIT has appealed the decision.

·    Profit before extraordinary items and taxes was EUR 51.5   million (EUR 33.4 million). Profit after taxes was EUR 35.5   million (EUR 11.9 million). The residual taxes levied by the Tax   Office for Major Corporations in March 2002, EUR 10.9 million, cut   into the result for the comparison period. YIT appealed the tax   decision and the Tax Correction Board of the Tax Office for Major   Corporations approved the appeal in December. The matter is still   being reviewed in the Administrative Court, and thus the residual   taxes repaid to YIT in January 2003 by the Finnish Tax   Administration have not been accounted for in the 2002 financial   result or the result for the review period.

·    Earnings per share rose to EUR 1.22 (EUR 0.41). Exclusive of  the above-mentioned residual taxes, earnings per share amounted to  EUR 0.79 in the comparison period. Equity per share rose to EUR  12.85 (EUR 11.48).

·    Return on investment for the 12-month period ending at the  close of the report period was 20.4 per cent (18.1%). The equity  ratio was 34.8 per cent (35.5%) at period’s end.

·    Total assets in the consolidated balance sheet amounted to  EUR 1,176.3 million (EUR 1,024.5 million) at the end of the review  period. Among the factors contributing to the growth of the  balance sheet were the large purchases of plots carried out during  the period and the strong growth of developer contracting in  residential construction.

·    The Group’s uninvoiced backlog of orders was one-quarter  higher at the end of the period than a year earlier, having risen  to EUR 1,091.8 million (EUR 879.9 million). The Group’s backlog  for international orders rose by 30 per cent to EUR 256.9 million  (EUR 198.3 million). Due to their nature, part of the Group’s  maintenance and servicing operations are not included in the order  backlog.

·    After the review period, YIT purchased from ABB, by an  agreement signed on July 4, 2003, its Building Systems operations  offering technical building systems and property and industrial  services in Finland, Sweden, Norway, Denmark, the Baltic countries  and Russia. The acquisition is valued at EUR 203 million. The  transaction must be approved by the competition authorities before  it enters into force. The Finnish Competition Authority approved  the Finnish end of the deal on July 18, 2003, and the Swedish  Competition Authority approved it on July 23, 2003. The  acquisition is expected to be consummated by September 1, 2003.

·    The acquired Building Systems business had net sales in 2002  of about EUR 1,130 million. In May 2003, it had 9,080 employees.
 The consolidated net sales of the YIT Group, calculated using the  figures for 2002, will rise to about EUR 2,890 million after the  deal and the number of employees will increase to almost 21,700.
 The acquired Building Systems operations together with the present  YIT Building Systems and Calor AB will form the Group’s largest  business segment, YIT Building Systems. After the deal, YIT will  become a leading building system services company whose service  chain covers all of the Nordic countries. YIT will develop its  building system services as part of its core business.

·    The acquisition is in line with YIT’s strategy. Building  systems comprise a major strategic growth area in all of the  Nordic countries. The business functions of YIT and the acquired  Building Systems complement each other, as does the expertise of  their employees. Overlapping operations are minimal. After the  deal, the company will be able to offer customers improved and  more comprehensive services during the entire life cycle of  properties. The dependence of YIT’s net sales and earnings on the  ups and downs of the business cycle has been purposefully reduced  by expanding maintenance and servicing operations within the  company’s different business areas. Following the acquisition, the  share of maintenance operations within consolidated net sales is  estimated to rise to about 30 per cent.

Market situation remains stable

The trend in YIT’s net sales is supported by the continuing brisk demand for residences and premises for commercial services in Finland’s growth centres. The growth in residential production and renovation in Finland compensates for the decline in office and industrial construction in the construction and building system markets (heating, water, air-conditioning, electricity and automation contracting and maintenance). According to the business cycle report published by the Confederation of Finnish Construction Industries RT in March, Finland’s construction market will remain stable both during the present year and the next. In June, VTT predicted that growth in construction in Finland will amount to 0.9 per cent this year, 1.3 per cent next year and 4.1 per cent in 2005. In June, the Research Institute of the Finnish Economy ETLA estimated that investments in residential construction and civil engineering will grow both this year and the next. ETLA predicts that construction output will grow by 2.6 per cent on average each year from 2002 to 2007, that is, at a faster rate than in the previous five-year period. The growth in civil engineering outpaces that of building construction.

Investments in machinery and equipment in Finland will decline this year. Thus, total investments in Finland will decline by just under one per cent in 2003, but will swing into growth of two per cent in 2004 according to the forecast made by the Research Institute of the Finnish Economy ETLA in June. During the next five years, investments will increase by an average of 2.7 per cent annually.

The market for industrial, property and infrastructure maintenance will expand as the outsourcing trend progresses. The total market for telecom network construction and maintenance will not grow during the present or the next year, but growth is expected in the outsourcing of operators’ field functions in the future.

In May, the Swedish Construction Federation BI predicted that construction investments in Sweden will decline by four per cent this year and by three per cent next year. Euroconstruct on the other hand predicted in June that Swedish residential construction will decline by 0.2 per cent this year and grow by 3.2 and 2 per cent during the next two years. The growth in building repair works compensates for the effect of declining new construction on the building system market. In June, the Swedish National Institute of Economic Research KI in turn estimated that fixed investments in Sweden will decline by 1.5 per cent during the present year and grow by 3.4 and 6.6 per cent during the next two years. The outlook for the present YIT Installation Ltd’s Scandinavian business depends largely on trends in Swedish investments in building construction and maintenance as well as capital investments by industry.

In the Baltic countries and Russia, growth in investments and GDP significantly outpaces growth in the Nordic countries. Demand for market-financed residences in particular has strengthened in St Petersburg, Tallinn and Vilnius.

The outlook for YIT Building Systems’ business functions is based on assessments of the trends in the construction and property services market and the order backlog for industrial investments and shipyards not only in Finland and Sweden, but also in Norway and Denmark.

In 2002, the GDP of all the Nordic countries grew by a total of 1.7 per cent. This year, growth will slow down to 1.3 per cent on average. Euroconstruct expects that annual growth in 2004 and 2005 will be brisker, 2.5 per cent. This year, construction will remain at the same level as in 2002. Euroconstruct estimates that annual growth in construction in 2004 and 2005 will be about 1 - 1.5 per cent on average. During the next two years, the fastest growth will be seen in Sweden, while growth will be moderate in Finland and Denmark. Construction will decrease in Norway. Residential construction will increase, but other types of building construction will decline. There will be growth in repair works and civil engineering. The demand for building systems as part of construction works will increase in 2004 and 2005 in both residential construction and repairs, and decline in the case of other kinds of buildings.

The trend in the value of property management is stable. Growth is generated by new user services. The outsourcing trend is continuing in property services.

Demand for the investment services offered by YIT Building Systems and YIT Industry is overshadowed by the slight order backlog for industrial investments and the marine industry in all of the Nordic countries, which is the result of slow economic growth and low industrial capacity utilization ratios. The construction of Finland’s fifth nuclear power plant will call for a significant volume of construction, building system, industrial piping and electrical works during the next few years. The outlook for industrial maintenance is good.

Growth in the maintenance business imparts stability to the annual trend in YIT Building Systems’ net sales. On the basis of the figures for 2002, maintenance accounted for 39 per cent of YIT Building Systems’ net sales.

Good outlook for 2003

Thanks to the strong order backlog and the acquisition of Building Systems, YIT’s net sales will grow strongly. Profit before taxes  is expected to improve in 2003.

The growth in YIT’s market-financed residential construction and maintenance operations compensates for the cyclical weakening in other business segments. The integration of the business operations of the new YIT Building Systems into the Group will substantially increase net sales during the last four months of the year. The integration expenses will burden profitability this year. The new business is expected to have a positive effect on earnings per share from 2004 onwards. YIT’s equity ratio will decline due to the deal. The aim is to return the equity ratio to its strategic target level of 40 per cent by 2006 at the latest.

Publication on August 1 and subsequent Interim Report

A press conference will be held at 10:30 on Friday, August 1, followed by an event for investment analysts and portfolio managers at 13:00 at YIT’s head office. The address is Panuntie 11, 00620 Helsinki.

The Interim Report for the January-September period will be published on October 30, 2003. Interim Reports will not be printed; rather, they will be published as stock exchange releases and on the company’s site at www.yit.fi. Copies of Interim Reports can be ordered from YIT Corporation, Corporate Communications, P.O. Box 36, FIN-00621 Helsinki, Finland, or fax +358 20 433 3746.

YIT CORPORATION



Reino Hanhinen Group CEO    For additional information, contact: Group CEO Reino Hanhinen, tel. +358 20 433 2454, reino.hanhinen@yit.fi Executive Vice President Esko Mäkelä,  tel. +358 20 433 2258, esko.makela@yit.fi Veikko Myllyperkiö, Vice President, Corporate Communications,  tel. +358 20 433 2297, veikko.myllyperkio@yit.fi Petra Thorén, Manager, Investor Relations,  tel. +358 20 433 2635, petra.thoren@yit.fi

ANNEXES Interim Report, January 1 - June 30, 2003 Consolidated income statement, balance sheet, cash flow statement, key figures and contingent liabilities as well as net sales, operating profit, order backlog by division and the Group’s quarterly trends.

 Distribution: Helsinki Exchanges, principal media, www.yit.fi



YIT CORPORATION’S INTERIM REPORT, JANUARY 1 - JUNE 30, 2003

Net sales see stable growth

The YIT Group’s net sales for the January-June period rose to EUR 932.1 million (Jan.-June /2002: EUR 840.5 million), up 11 per cent on the previous year. Of the net sales, 66 per cent (64%) were generated by the business operations of the YIT Construction subgroup, which offers construction services, and 28 per cent (35%) by those of the YIT Installation subgroup, which provides capital investment and maintenance services for industry as well as building system services. YIT Primatel Ltd, which builds and maintains telecom networks, accounted for 6 per cent of net sales (1%). YIT Primatel has been part of the YIT Group since June 1, 2002

Net sales by subgroup (EUR million)

                                1-6/2003    1-6/2002      Change                                                                  YIT Construction subgroup          624.4       549.2         14% YIT Installation subgroup          260.3       295.6        -12% YIT Primatel subgroup               56.4        12.5        351% Other items                         -9.0       -16.8        -46% YIT Group, total                   932.1       840.5         11%

YIT’s service chain encompasses the entire life cycle of investments. The dependence of YIT’s net sales and earnings on the ups and downs of the business cycle has been purposefully reduced by expanding property, industrial, telecom network and traditional infrastructure maintenance and servicing operations. During the report period, the share of net sales accounted for by these business operations rose to EUR 205.9 million (EUR 165.2 million), or 22 per cent (20%) of total net sales.

The share of the Group’s net sales accounted for by international activities was EUR 181.6 million (EUR 185.7 million), or 19 per cent (22%). YIT’s strategy for international expansion in construction and telecom network services is to bolster its market position in the Baltic countries and Russia. In industrial and building system services, the Group seeks to strengthen its market position in the Nordic countries.

Non-recurring items improve earnings

Operating profit for the review period rose to EUR 57.9 million (EUR 39.2 million). The operating profit margin was 6.2 (4.7%).
Operating profit includes about EUR 30 million in capital gains from the sale of Makroflex. In line with its strategy, YIT divested itself of the industrial production of sealants and thermal insulation materials and in June sold its Makroflex company operating in Finland and Estonia and the Makroflex brand to the Henkel Group. Operating profit was reduced by the sum of EUR 5.7 million recorded as a loss by YIT on the basis of a ruling by the Helsinki District Court in February. The ruling concerned the conversion and additional works involved in the refurbishing of SOK’s former head office building, which was seen to completion in 1999. YIT has appealed the decision.

Operating profit by subgroup (EUR million)

                                1-6/2003    1-6/2002      Change                                                                  YIT Construction subgroup           57.3        32.4         77% YIT Installation subgroup            5.5         9.2        -40% YIT Primatel subgroup                0.7         2.0        -65% Other items                         -5.6        -4.4         27% YIT Group, total                    57.9        39.2         48%

Profit before extraordinary items and taxes was EUR 51.5 million (EUR 33.4 million). Profit after taxes was EUR 35.5 million (EUR 11.9 million). The residual taxes levied by the Tax Office for Major Corporations in March 2002, EUR 10.9 million, cut into the result for the comparison period. YIT appealed the decision and the Tax Correction Board of the Tax Office for Major Corporations approved the appeal in December. The matter is still being reviewed in the Administrative Court, and thus the residual taxes repaid to YIT in January 2003 by the Finnish Tax Administration have not been accounted for in the 2002 financial result or the result for the review period.

Earnings per share rose to EUR 1.22 (EUR 0.41). Exclusive of the above-mentioned residual taxes, earnings per share amounted to EUR 0.79 in the comparison period. Equity per share rose to EUR 12.85 (EUR 11.48). Return on investment for the 12-month period ending at the close of the report period was 20.4 per cent (18.1%). The equity ratio was 34.8 per cent (35.5%).

Order backlog at an all-time high

The Group has a strong market position. At the end of the period, the uninvoiced backlog of orders was one-quarter higher than a year earlier, having risen to EUR 1,091.8 million (EUR 879.9 million). The backlog for international orders rose by 30 per cent to EUR 256.9 million (EUR 198.3 million), representing 24 per cent (23%) of the entire backlog. The margin of the order backlog is good. Due to their nature, part of the Group’s maintenance and servicing operations are not included in the order backlog.

Order backlog by subgroup (EUR million)

                                  6/2003      6/2002      Change                                                                  YIT Construction subgroup          784.9       604.6         30% YIT Installation subgroup          216.9       221.7        - 2% YIT Primatel subgroup               90.0        53.6         68% YIT Group, total                 1 091.8       879.9         24%

The Group’s financial position is good

The Group’s financial position remained good during the review period. Interest-bearing liabilities amounted to EUR 170.1 million (EUR 175.6 million) at the end of the period and net debt to EUR 139.5 million (EUR 156.3 million). Net financial expenses were EUR 6.4 million (EUR 5.8 million), or 0.7 per cent (0.7%) of net sales. At the end of the review period, liquid assets amounted to EUR 30.6 million (EUR 19.3 million).

The construction-stage contract receivables sold to financing companies totalled EUR 145.3 million (EUR 116.4 million) at the end of the period. The interest paid on them to the financing companies, EUR 2.4 million (EUR 2.3 million), is included in net financial expenses.

The proportion of fixed-interest loans in the Group’s entire loan portfolio was 86 per cent (68%). Loans raised directly on the capital and money markets amounted to 64 per cent (59%).

Total assets in the consolidated balance sheet amounted to EUR 1,176.3 million (EUR 1,024.5 million) at the end of the review period. Among the factors contributing to the growth of the balance sheet were the large purchases of plots carried out during the period and the strong growth of developer contracting in residential construction.

Capital expenditures and acquisitions

Gross capital expenditures on non-current assets included in the balance sheet totalled EUR 14.2 million (EUR 52.3 million) in the January-June period, representing 1.5 per cent (6.2%) of net sales. Investments in construction equipment amounted to EUR 3.7 million (EUR 5.2 million) and investments in information technology to EUR 2.1 million (EUR 2.7 million). Other production investments came in at EUR 0.5 million (EUR 0.4 million). Other investments, including the goodwill on consolidation of acquired companies, amounted to EUR 7.9 million (EUR 44.0 million). The figure for the comparison period includes EUR 33.0 million in goodwill on consolidation arising from the acquisition of Primatel Oy.

In May, YIT Primatel Ltd acquired the network construction business of Draka NK Cables. In June, YIT Service Ltd acquired the Varkaus-based ETT-Teollisuusautomaatio Oy, which offers industrial automation and instrumentation installation.

In June, YIT sold all the shares outstanding in Makroflex Oy, which is in business in Finland, and all the shares outstanding in AS Makroflex, which operates in Estonia, and the Makroflex brand to the Henkel Group. The purchase price was EUR 36 million. In 2002, the Makroflex companies had total net sales of about EUR 34 million and the companies employed a total of around 100 people.

Number of personnel rising

During the review period, the Group employed 12,606 (10,989) people on average. The number of personnel was 13,087 (12,708) at the end of the period. Forty-seven per cent of the employees were on the payroll of YIT Installation, while 40 per cent were employed by YIT Construction, 11 per cent by YIT Primatel and two per cent by the parent company and incorporated service units. At the end of June, there were about 800 summer employees.

At the end of the period, the Group’s foreign units employed 3,004 (2,675) people, or 23 per cent of all personnel.

Shares and share capital

YIT Corporation’s share capital was EUR 59,492,670 at the beginning of the review period and the number of shares outstanding was 29,746,335. On the basis of shares subscribed for with share options from 1998, the share capital was increased by a total of EUR 5,200 on May 8, 2003, and by a total of EUR 115,502 on June 26, 2003. At the end of the period, the share capital was EUR 59,613,372 and the number of shares was 29,806,686.

The average share price during the review period was EUR 16.02 (EUR 16.39), with a high of EUR 17.80 (EUR 19.65) and a low of EUR 14.01 (EUR 13.20). At the end of the period, the closing share price was EUR 17.00 (EUR 18.50). Share turnover during the period amounted to EUR 85.0 million (EUR 100.1 million), with 5,308,507 shares being traded (6,107,847). Market capitalization at the end of the period was EUR 497.1 million (EUR 537.7 million).

At the beginning of 2003, YIT Corporation held a total of 567,500 of its own shares, representing 1.9 per cent of the company’s shares outstanding and the votes conferred by them. The shares had been bought on Helsinki Exchanges at an average price of EUR 12.64 on the basis of decisions taken by Annual General Meetings in previous years. The total nominal value of the shares was EUR 1,135,000. No shares were bought or disposed of during the review period. YIT’s subsidiaries did not own shares in the parent company.

During the review period, 82,200 Series A share options from 1998 were traded at an average price of EUR 4.34 and 145,200 Series B share options were traded at an average price of EUR 4.14 per share. A total of 11,100 shares were subscribed for on the basis of Series A share options and 49,251 shares on the basis of Series B share options.

At the end of the period, the Board of Directors did not have valid share issue authorizations or authorizations to issue convertible bonds or bonds with warrants.

Close to a quarter of the shares are in foreign ownership

The number of registered shareholders was 3,271 (2,969) at the beginning of the period and 3,540 (2,950) at the end.

According to the nominee registers, 22.1 per cent of the shares (15.0%) were owned by foreigners at the beginning of the period and 20.2 per cent (21.5%) at the end. Other foreign ownership at the end of the review period amounted to 3.3 per cent (2.4%); thus, a total of 23.5 per cent (23.9%) of the company’s shares outstanding were owned by foreigners.

Market situation remains stable in YIT’s main fields of business

Finland

In its business cycle report published in June 2003, the Research Institute of the Finnish Economy ETLA predicts that Finland’s GDP will grow by 1.6 per cent in 2003, while growth in 2002 was 2.2 per cent. ETLA predicts GDP growth of 2.8 per cent for 2004. The two-year incomes policy agreement concerning wages, salaries and collective agreements as well as the growth in disposable income have upheld the confidence of households in the stable development of their personal finances. Thanks to the growth in the disposable income of households, private consumption will increase by 2.7 and 3.3 per cent this year and the next. This year, investments by the national economy will decline by slightly under one per cent, while they will grow by 1.8 per cent next year. Growth in exports will remain at one per cent this year, accelerating to 3.2 per cent during 2004.

ETLA estimates that Finland’s GDP will grow by an average of 2.8 per cent annually until 2006, while industrial output will increase by 3.3 per cent per year. Production by the private service sectors will grow by 3.5 per cent, but the growth of the public sector will remain at about 1.2 per cent per year.
Construction will increase by 2.6 per cent on average per year until 2006.

The trend in YIT’s net sales is supported by the continuing brisk demand for residences and premises for commercial services in the growth centres. The growth in residential production and renovation compensates for the decline in office and industrial construction in the construction and building system markets (heating, water, air-conditioning, electricity and automation contracting and maintenance). According to the business cycle report published by the Confederation of Finnish Construction Industries RT in March, Finland’s construction market will remain stable both during the present year and the next. ETLA estimates that construction output will grow by 1.5 per cent this year and by 2.2 per cent the next. ETLA predicts that investments in machinery and equipment in Finland will decline by about three per cent in 2003, but will increase by three per cent in 2004.

The number of vacant industrial and commercial buildings is currently significantly below the normal levels in the growth centres of Finland. On the other hand, the vacancy rate of office buildings has exceeded five per cent in numerous growth centres.
Office building start-ups were slashed in the second half of 2001, and thus the supply will already return to normal at the end of this year. The increase in consumption and services is still causing a need for the construction of additional public and commercial service buildings.

The years-long population shift is maintaining demand for residences in Finland’s growth centres. 277,000 people moved from one municipality to another in 2002. They represent over five per cent of Finland’s population. According to the preliminary information released by Statistics Finland, 122,800 people moved from one municipality to another during the first half of the present year. The strongest population growth due to an influx of people was seen in the provinces of Pirkanmaa, Uusimaa and Kanta- Häme. Most of the people who move are young, and thus the populations of these areas will also rise due to greater birth rates. As the housing stock is already in full use, additional construction is required.

Sales of residences remained brisk during the first half of 2003.
The market is well poised to see further moderate growth in the demand for residences. Demand is supported by the relatively stable and low interest rate levels in the EMU area and the increase in the disposable income of households. Last year, the construction of a total of 27,600 residences was started up in Finland. According to RT’s predictions, the number of start-ups will rise to 28,500 residential units this year and to 29,000 next year.

According to VTT’s forecast published in June, civil engineering will increase by 2.7 per cent both this year and the next. There will be a surge in such investment projects during the years ahead. The infrastructure investments required by the Vuosaari Harbour, the Turku motorway, the Kehä III ring road, the Lahti branch line and the new nuclear power plant will increase construction output for many years to come. The construction of Finland’s fifth nuclear power plant will call for a significant volume of construction, building system, industrial piping and electrical works. In addition to the power plant, office and social premises, residences and storage facilities will be built in the area. The expertise and capacity of the Nordic YIT Building Systems are suitable for the construction and installation of the power plant’s process piping and tanks as well as its electrification. In the Nordic countries, YIT is the market leader in the design, production, installation and maintenance of high- pressure piping systems for power plants. In addition to the ordinary building systems required in the properties, ventilation, cooling, fire alarm and fire extinguisher systems for various equipment premises will be installed in the project.

From YIT’s standpoint, the market potential of the nuclear power plant is about EUR 700-800 million and it rests largely on piping deliveries and HEPACE and automation systems as well as construction works.

ETLA predicts that investments in machinery and equipment will contract by 5 per cent this year and swing to growth of 1.5 per cent next year. During the next five-year period, the amount of machinery and equipment investments will grow by 2 per cent annually. Nuclear power plant installation works towards the end of the period will increase investments substantially. According to an investment survey by the Finnish Confederation of Industry and Employers TT, capital investments by Finnish industry fell by 18.1 per cent last year and will contract by 7.0 per cent this year.

The stable outlook for the construction industry also supports the demand for building system contracting, particularly in the growth centres.

The market for industrial, property and infrastructure maintenance will expand as the outsourcing trend progresses. The total market for telecom network construction and maintenance will not yet see growth during the present or the next year, but growth is expected in the outsourcing of operators’ field functions.

The outlook for the new Building Systems business

The outlook for YIT Building Systems’ business functions is based on assessments of the trends in the construction and property services market and the order backlog for industrial investments and shipyards not only in Finland and Sweden, but also in Norway and Denmark.

According to Euroconstruct’s report published in June, the value of the Nordic construction market amounted to EUR 75 billion, or 7.5 per cent of the entire Western European construction market.
The figure also includes the market for building systems in new construction and repair works. In spite of differences in population and wealth, the construction markets of the Nordic countries were almost equally large in 2002. The market for repair works and maintenance was valued at EUR 29 billion. The value of new residential construction was EUR 12.2 billion, that of other building construction works was EUR 16.1 billion and that of civil engineering was EUR 17.5 billion.

In 2002, the GDP of all the Nordic countries grew by a total of 1.7 per cent. This year, growth will slow down to 1.3 per cent on average. Euroconstruct expects that annual growth in 2004 and 2005 will be brisker, 2.5 per cent. This year, construction will remain at the same level as in 2002. Euroconstruct estimates that annual growth in construction in 2004 and 2005 will be about 2.5 per cent on average. The fastest growth is seen in Sweden, while growth is moderate in Finland and Denmark. Construction will decline in Norway.

The demand for building systems will increase in 2004 and 2005 in residential construction and repair works, and decline in the case of other kinds of buildings.

The trend in the value of property management is stable. Growth is generated by new user services. The outsourcing trend is continuing in property services.

Demand for the investment services offered by YIT Building Systems and YIT Industry is overshadowed by the slight order backlog for industrial investments and the marine industry in all of the Nordic countries, which is the result of slow economic growth and low industrial capacity utilization ratios. On the other hand, the outlook for industrial maintenance is good.

Growth in the maintenance business imparts stability to the annual trend in YIT Building Systems’ net sales. On the basis of the figures for 2002, maintenance accounted for 39 per cent of YIT Building Systems’ net sales.

Sweden

According to the report published by the Swedish National Institute of Economic Research KI in mid-June, Sweden’s GDP growth will amount to 1.3 per cent this year and 2.5 per cent during the subsequent two years. Exports of goods will grow by 3.9 per cent this year and by about 7 per cent on average in 2004 and 2005. It is anticipated that household consumption will pick up in the autumn such that growth will be 1.8 per cent this year and 3.2 and 2.4 per cent in the next two years.

The market potential of YIT’s Swedish business functions is based largely on the trend in building construction, building maintenance and investments by industry. In May, the Swedish Construction Federation BI predicted that construction investments in Sweden will decline by four per this year and by three per cent next year. Euroconstruct on the other hand predicted in June that Swedish residential construction will decline by 0.2 per cent this year and grow by 3.2 and 2 per cent during the next two years. The growth in building repair works compensates for the effect of declining new construction on the building system market. In June, the Swedish National Institute of Economic Research KI estimated that fixed investments in Sweden will decline by 1.5 per cent during the present year and grow by 3.4 and 6.6 per cent during the next two years.

Norway

Norway’s high interest rates in relation to the other Nordic countries and its strong currency have kept the growth of its GDP moderate. Prognosesenteret estimates that growth will amount to 1 per cent this year, and to 2.3 and 1.8 per cent during the next two years. Development in mainland Norway is slightly faster.
Short interest rates have declined by 1.6 percentage points since last December and new interest rate reductions are expected. It has been assessed that the decline in interest rates will stimulate the development of the economy.

Investments will grow by 2.6 per cent this year and by 4.6 and 2 per cent during the subsequent two years. Investments in mainland Norway are predicted to decline by 4 per cent during the present year and swing to growth of 0.5 and 2 per cent during the next two years. A population shift and the growth of the population are streaming financial and construction activity into the Oslo region. Disposable income is reduced by a dramatic increase in electricity prices and uncertainty in the job market. Unemployment is on the rise, but the jobless count is at a reasonable level, 5 per cent. Private consumption and investments will support the development of the economy from 2003 to 2005.

Infrastructure investments will be increased by Norway’s largest- ever oil and gas investment, Snöhvit, which is located in Northern Norway. The contraction of residential construction is forecast to continue, falling from last year’s figure of 23,000 residences by about 1,000 residences per year in the period from 2003 to 2005.
According to Euroconstruct’s forecast released in June, the construction of other new buildings will decline by 3.4, 12.8 and 3.2 per cent in 2003, 2004 and 2005, respectively. Due to the growth in renovation, building construction will decline by 2.7 per cent in 2003 and 4 per cent in 2004. The falling trend will come to a halt in 2005.

Denmark

Denmark’s economy is growing moderately. The engines of growth are private consumption and domestic demand. It is estimated that its GDP will grow by 1.5 per cent this year and by an average of 2.5 per cent annually during the next two years. It is believed that the confidence of consumers will remain strong. A slight turn for the better in the international economy is anticipated towards the end of the present year and it is expected that this will support economic growth next year. Euroconstruct estimates that the construction of new residences will grow at a rate of 5 per cent during the present year and the next two years. Other building construction will continue to decline both this year and the next, but will swing into slow growth in 2005. As renovation is growing at an annual rate of only one per cent, the total value of building construction will remain at the previous year’s level, seeing growth of 1.4 and 2 per cent during the next two years.
Growth in public service buildings will level off or begin to decline this year due to budgetary constraints caused by a "tax freeze". The construction of office buildings will contract, but will remain at a high level compared with production during the previous decade. Industrial construction will decline, but will begin to grow again in 2004. Activity is centred around Copenhagen and other large cities.

Baltic countries and Russia

YIT Construction’s strategy for going international is based on the operations of local subsidiaries in the Baltic countries and Russia. In these countries, growth in GDP and construction outpaces the Nordic countries by several percentage points. The Baltic countries’ preparations for EU membership, scheduled for the beginning of May 2004, are already stimulating investments. In addition to infrastructure and business premise construction, demand for market-financed residences has become stronger in St Petersburg, Tallinn and Vilnius. YIT’s order backlog has grown rapidly in the region thanks to projects based on international funding and the start-up of residential production.

The total GDP of the Baltic countries amounted to about EUR 30 billion in 2002, up 6 per cent. In June, Euroconstruct estimated that average annual growth will remain at 5-7 per cent in 2004 and 2005. Construction output was valued at about EUR 3.5 billion.

Estonia’s GDP grew by 6.8 per cent last year and totalled EUR 6.5 billion. At the beginning of July, the Estonian statistics agency estimated that growth will reach 7 per cent this year. Growth is expected to continue at the same rate during the next two years.
VTT estimates that the construction market in 2002 was valued at about EUR 1.35 billion. According to the Estonian statistics agency, about 1,100 residences were completed last year, and other types of building construction grew by around 30 per cent.

Latvia’s GDP grew by 6.1 per cent last year and totalled EUR 8.9 billion. Growth during the next two years is predicted to amount to 6-7 per cent. The value of construction grew by over 10 per cent to about EUR 1 billion. Euroconstruct estimated that the same growth rate will continue during the next two years. According to the Latvian statistics agency, residential production grew by only 0.5 per cent last year. The number of completed residences thus remained under one thousand.

Lithuania’s GDP grew by 6.1 per cent last year and totalled EUR 14.2 billion. GDP growth during the next two years is predicted to amount to 6-7 per cent. VTT estimates that the value of construction in 2002 was about EUR 1.3 billion. According to the Lithuanian statistics agency, close to 4,200 residences were completed, or 700 more than in 2001.

The Russian Ministry of Economic Development and Trade raised, in July, its GDP forecast for the present year to 5.9 per cent and its forecast for 2004 to 5.2 per cent. Investment growth predictions were increased to 9.2 per cent for 2003 and 8 per cent for 2004. In the first half of this year, GDP grew by 7.2 per cent, industrial output by 6.8 per cent and investments by 11.9 per cent. YIT’s construction operations in Russia focus on the St Petersburg area.

YIT’s market strategy

YIT’s main strategy is profitable growth. YIT aims to achieve growth outpacing that of the market and a steadier flow of income by pragmatically extending its service chain over the entire life cycle of investment projects, from design and implementation to maintenance, upkeep and operating services.

The market for industrial, property and infrastructure maintenance will expand as the outsourcing trend progresses. The structure of the YIT Group’s business areas enables the company to offer capital investment and maintenance services - of various scales and content - to industrial, energy, property and telecom sector customers. The Group’s strategic expansion areas are the Nordic market for building systems, industrial investments and maintenance, and property services and the construction markets of the Baltic countries and Russia. YIT has implemented its strategy consistently. Major recent steps in this are the acquisition of Calor AB in 2001, the integration of YIT Primatel into the Group at the beginning of June 2002 and the acquisition of the Nordic Building Systems business this year.

Earnings trends of the subgroups

YIT Construction subgroup

During the first half of the year, YIT Construction’s net sales grew by 14 per cent on the previous year and amounted to EUR 624.4 million (EUR 549.2 million). International operations accounted for EUR 88.7 million of net sales (EUR 75.7 million). Operating profit grew by 77 per cent and was EUR 57.3 million (EUR 32.4 million). Operating profit includes about EUR 30 million in capital gains from the sale of Makroflex. A loss of EUR 5.7 million recorded due to the claim concerning SOK’s former head office property reduces operating profit.

The order backlog was 30 per cent larger than in the previous year, having risen to EUR 784.9 million (EUR 604.6 million).
International operations accounted for 22 per cent of the order backlog, or EUR 172.2 million (EUR 124.3 million).

The net sales of Building Construction were 24 per cent higher than in the previous year, hitting EUR 395.2 million (EUR 318.8 million). Building Construction is responsible for the Group’s residential construction in Finland. Outside the Greater Helsinki area, its field of business also includes other types of building construction. About 85 per cent of its net sales were generated by residential construction. Its operating profit of EUR 28.6 million (EUR 24.6 million) was up 16 per cent on the previous year’s figure. The order backlog was slightly over one-third higher at the end of the period than in the previous year, having risen to EUR 389.2 million (EUR 283.5 million).

Sales of residences remained brisk in the Greater Helsinki area and the other growth centres. Apart from the population shift, the factors contributing to the brisk demand for non-rental housing were the record-low interest rates, the greater income levels of households and consumers’ belief in the positive development of their finances.

Production was increasingly focused on market-financed non-rental housing. The construction of a total of 1,727 (Jan-June/2002: 1,507) residences was started up during the review period, of which 1,503 (849) were market-financed. YIT intends to increase the number of market-financed residential start-ups to about 2,800 residential units this year; last year, start-ups numbered about 2,200. 1,431 (1,690) residences were completed during the review period, of which 991 (491) were market-financed. At the end of the period, a total of 3,630 (3,045) residences were under construction, of which 2,706 (1,844) were market-financed. There were about 100 unsold completed residences.

The zoning plan of the Etu-Lyöty area in Oulu was confirmed in April and YIT has started up a residential and business facility project in the area which is valued at a total of about EUR 150 million. The construction works in the area will last about five years.

The zoning plan of the Vanhankaupunginkoski area in Helsinki came into force in June and YIT acquired an industrial property in Vanhankaupunginkoski from Fortum. It is intended that around 400 residences will be built in this area. The total value of the project is around EUR 110 million. The construction of the first sites will begin in August 2003.

In June, YIT and Paulig agreed that YIT will purchase a plot located in Vuosaari, Helsinki, from Paulig. It is intended that a 26-storey block of flats - the highest such in Finland - will be built on the plot. The building will have about 140 high-class residences.

Net sales of Property Services amounted to EUR 88.5 million (EUR 106.9 million), down 17 per cent on the previous year. Operating profit was EUR 0.6 million (EUR 7.4 million). EUR 5.7 million in losses have been booked in the result on the basis of a ruling made in February by the Helsinki District Court in the case concerning the refurbishing of SOK’s former head office property.
YIT has appealed the decision. At the end of the period, the order backlog was one-third larger than in the previous year, having risen to EUR 172.2 million (EUR 129.0 million).

Property Services offers its customers workplace solutions and investment properties as well as business facility, renovation and property management services in the Greater Helsinki area, Uusimaa and South Häme. It offers property management and maintenance services in all of Finland.

In June, a new unit was set up within the division to take on responsibility for property development, the construction of business premises and renovation in the areas of Uusimaa outlying the Greater Helsinki area. The aim is to bolster service provision in this rapidly-evolving region. In this unit’s area of operations, YIT won three competitive contracts during the first half of the year: the extension and refurbishing of the coeducational school of Kerava, the health centre of Kerava (project management contract) and the church and parish centre of Klaukkala.

In May, a contract agreement was signed with Kapiteeli Oy to refurbish the Salmisaarentalo building in Ruoholahti, Helsinki.
This is the largest refurbishing project in Finland. The value of the project management contract of the construction works carried out by YIT is about EUR 26 million.

An agreement was signed in June to realize business premises for the Finnish Meteorological Institute and the Finnish Institute of Marine Research in Kumpula, Helsinki. The project involves the design, implementation, funding and ownership arrangements of the business premises as well as taking on responsibility for their entire life cycle. The premises will be rented to Senate Properties under a 30-year rental agreement. The total pricetag of the investment is about EUR 37 million.

In June, YIT sold the first office building in Business Park Mankkaa, Espoo, to the Tapiola Group. The construction of the building commenced in February and it has been rented in its entirety to TietoEnator. The purchase price was about EUR 22 million.

In June, an agreement was signed to outsource the management of the properties and property companies owned by the Pohjola Group and the Suomi Group to YIT Rapido Property Management Services Ltd.

Infraservices’ net sales, EUR 52.4 million (EUR 48.7 million), were 8 per cent higher than in the previous year. Operating profit was EUR 0.9 million (EUR 1.5 million). The order backlog was EUR 51.3 million (EUR 67.8 million) at the end of the period, falling short of the previous year.

Infraservices provides infrastructure construction and maintenance services. YIT strengthened its market position in maintenance.
During the first half of the year, a total of 28 public road maintenance contracts were put out for competitive bids by the Finnish Road Administration. YIT landed four of these contracts.
As from next autumn, YIT will be responsible for nine public road maintenance areas in all, or close to one-tenth of all roadways in Finland. In addition, in the competitive bidding during the first half of the year, YIT landed the Lauttasaari-Munkkiniemi area in Helsinki as well as the Ahtiala-Kytölä and Renkomäki-Kujala areas in Lahti. The total value of the maintenance contracts won during the first half of the year is over EUR 30 million.

Significant construction projects during the first half of the year include a water tower for the town of Kankaanpää, the Ollinsalmi bridge in Joutsa for the Finnish Road Administration, the beachfront  paving of the Aurinkolahti residential area in Vuosaari, Helsinki, and the construction of Kallvikintie road, an element in the Vuosaari Harbour’s traffic arrangements.

The market for infrastructure construction and maintenance will grow in the next few years thanks to large infrastructure projects. The starting up of certain projects has been delayed slightly due to prolonged permit processes and several appeals that had been lodged.

The net sales of YIT Construction’s International Operations grew compared with the previous year, coming in at EUR 88.7 million (EUR 75.7 million). Operating profit amounted to EUR 30.0 million (EUR 2.7 million). Operating profit includes about EUR 30 million in capital gains from the sale of Makroflex. Earnings were weakened by the pushing back of large projects that are in the start-up stage in Russia; their construction has only got up to speed during the early summer.

At the end of the period, the order backlog was significantly higher than in the previous year, having risen to EUR 172.2 million (EUR 124.3 million). The starting up of several projects and market-financed residential construction in the Baltic countries and Russia contributed to growth.

International Operations provides construction and maintenance services in the Baltic countries and Russia. Water and environmental technology projects are carried out in Northern and Eastern Europe and in certain countries in the Middle and Far East.

YIT Installation subgroup

In the first half of the year, the net sales of YIT Installation fell 12 per cent short of the previous year, amounting to EUR 260.3 million (EUR 295.6 million). The contraction in net sales was primarily due to the decline in investments by industry. The share of net sales accounted for by its maintenance and servicing business rose from 54 to 60 per cent. International activities accounted for 37 per cent of net sales (39%).

Operating profit, EUR 5.5 million (EUR 9.2 million), was less than in the previous year. The order backlog at the end of the period was at the same level as in the previous year, coming in at EUR 216.9 million (EUR 221.7 million), of which EUR 83.3 million represented the order backlog of international activities (EUR 93.7 million).

YIT Installation took an active part in various cooperation and development projects concerning the construction of Finland’s fifth nuclear power plant, as well as in related competitive bidding. One of the projects initiated during the review period is aimed at assessing the technical welding requirements of the new nuclear power plant; the project is being funded by Tekes.

The net sales of Building Systems declined by 12 per cent compared with the previous year, amounting to EUR 67.2 million (EUR 76.5 million). The share of net sales accounted for by its servicing and maintenance business was slightly over one half. The result declined compared with the previous year. The order backlog at the end of the period was one-quarter higher than in the previous year, having risen to EUR 63.4 million (EUR 50.8 million).

Building Systems provides heating, water, ventilation, electrical and automation system contracting, upkeep services and end-to-end services for building systems in Finland. The division’s range of services also includes sprinklers and other fire extinguisher and alarm systems as well as electronic security services.

Demand for building system works in the construction of new residential buildings continued to rise in the Greater Helsinki area and the other growth centres. Demand was also brisk in the construction of commercial premises and remained at a good level in renovation and maintenance functions. However, demand in the construction of business premises was muted. It is estimated that demand in the construction of new residences and commercial premises will remain stable. In the case of renovation and maintenance, demand is expected to strengthen slightly. The construction of business premises will most likely remain at a low level until the latter part of the year.

Numerous significant projects carried out as joint efforts by the YIT Group and with the participation of Building Systems were started up during the review period. These include Digipolis in Kemi, YIT Centre and the Etu-Lyöty area in Oulu, Business Park Mankkaa in Espoo and the business premises of the Finnish Meteorological Institute and the Finnish Institute of Marine Research in Helsinki. Other significant projects that were started up include the Valimotie 27 industrial and office project in Helsinki, the Prisma department store in Oulu and a supermarket for Kesko in Mäntsälä.

The net sales of Capital Investment Services for Industry fell 19 per cent short of the previous year, amounting to EUR 69.5 million (EUR 85.9 million). The decline in net sales was primarily due to the scarcity of industrial investment projects in Finland, Sweden and central Europe. Demand has fallen substantially in the marine industry in particular. Close to 30 per cent of net sales were generated by its maintenance and repairs business. Demand has declined in the maintenance of industrial piping, but has remained at a reasonable level. Earnings decreased compared with the previous year. At the end of the period, the order backlog was significantly lower than in the previous year, stalling at EUR 33.8 million (EUR 59.7 million).

The division offers piping and tank deliveries for industrial investments. The projects it implements range from individual works to end-to-end deliveries. The largest project initiated during the review period comprised piping deliveries as part of the VEPA 2003 project of Stora Enso’s Veitsiluoto mills. A nationwide framework agreement for piping maintenance was continued with UPM-Kymmene, along with regional annual agreements made with Stora Enso. In addition, significant new annual maintenance agreements were made during the review period.

The most significant energy industry projects comprised piping deliveries for different clients in the Wisa 800 REC project in Pietarsaari. The largest engineering manufacturing project was the delivery of internal circulation tank piping for Foster Wheeler Oy’s power plant in Narva. One of the most significant marine industry projects was the delivery of piping for Mäntyluoto Works Oy in Pori.

The net sales of Industrial Maintenance were at the same level as in the previous year and amounted to EUR 49.8 million (EUR 51.5 million). The result was better than in the previous year. The order backlog at the end of the period was higher than in the previous year, having risen to EUR 59.5 million (EUR 54.9 million).

The division offers maintenance services ranging from individual works to comprehensive process operation for industrial production plants. During the review period, a great many shutdown works were performed for the forest and chemical industries and at nuclear power plants.

During the spring and early summer, a concerted effort was made to coach employees all over Finland. The service network was rounded out by acquiring the Varkaus-based ETT-Teollisuusautomaatio Oy, which offers industrial automation and instrumentation installation as well as assembly and servicing.

The net sales of Scandinavia were slightly lower than in the previous year, or EUR 90.3 million (EUR 98.4 million). Three- quarters of its net sales were generated by its maintenance and servicing business (63% during the comparison period). The division’s outlays on its maintenance and servicing business have lessened its dependence on fluctuations in the amount of new construction works. The result was at the previous year’s level.
At period’s end, the order backlog was larger than in the previous year, having risen to EUR 82.2 million (EUR 72.0 million).

In addition to the Swedish Calor Group, the Scandinavia division includes YIT Industrier AS in Norway. The division provides building system services and capital investment and maintenance services for industry in Sweden and Norway.

The residential markets of both Norway and Sweden have become muted and the markets are uncertain about how the situation will develop. Residential construction has been rising for many years running, but is expected to decline both this year and the next.
Demand has weakened in the construction of business and commercial premises. The public sector is also cutting back on construction.

Industry has been cautious in its investments, but several large projects will be started up in Sweden towards the end of the year.
Industrial output in Norway has remained at a good level and the outlook for the rest of the year is stable.

Major new projects during the review period included a pumping system delivery for the Bromma purification plant and a HEPAC and backup system delivery for the waste incineration plant of Uppsala. The maintenance investments of Sweden’s nuclear power plants are on the rise. Calor will replace a section of the seawater cooling system of the Oskarshamn 2 plant.

YIT Primatel subgroup

In the January-June period, YIT Primatel had net sales of EUR 56.4 million (June 2002: EUR 12.5 million). Slightly under 60 per cent of net sales are based on long-term customer agreements and slightly over 40 per cent on project production. Operating profit amounted to EUR 0.7 million (EUR 2.0 million). Goodwill amortization has been accounted for in earnings. YIT Primatel’s net sales and earnings are subject to great seasonal variation and the trend in its full-year earnings is expected to be better than in the first half of the year. At the end of the period, its order backlog was EUR 90.0 million (EUR 53.6 million).

In May, the cable company Draka NK Cables Oy and YIT Primatel Ltd made an agreement to cooperate in Finland and its neighbouring areas. The agreement also included the sale of Draka NK Cables’ network construction business to YIT Primatel. Sivifori Oy, which is specialized in the repair of telecom terminal devices, and YIT Primatel Ltd signed a cooperation agreement in June. At the same time, YIT Primatel’s terminal device repair business was sold to Sivifori.

Cooperation with operators expanded further. The market for local IT services has begun to evolve and joint operations networks are emerging. A joint broadband connection product was developed in association with operator partners. The objective is that the customer’s workstation is made operational at the time of connection delivery. A cooperation agreement was made with Cygate Networks Oy concerning the nationwide provision of corporate network construction and maintenance services. An agreement was signed with TeliaSonera to dismantle the NMT 450 network.

Uncertainty is continuing in the telecommunications business. More significant growth in the near future is foreseen in the demand for wireless local networks. The number of broadband networks continues to rise.

Events after the end of the review period

YIT purchased from ABB, by an agreement signed on July 4, 2003, its Building Systems operations offering technical building systems and property and industrial services in Finland, Sweden, Norway, Denmark, the Baltic countries and Russia. The acquisition is valued at EUR 203 million. The transaction must be approved by the competition authorities before it enters into force. The Finnish Competition Authority approved the Finnish end of the deal on July 18, 2003, and the Swedish Competition Authority approved it on July 23, 2003. The acquisition is expected to be consummated by September 1, 2003.

The acquired Building Systems business had net sales in 2002 of about EUR 1,130 million. In May 2003, it had 9,080 employees.
YIT’s net sales, calculated using the figures for 2002, will rise to about EUR 2,890 million after the deal and the number of employees will increase to close to 21,700. YIT will become a leading building system services company whose service chain covers all of the Nordic countries. YIT will develop its building system services as part of its core business.

YIT’s corporate structure will change after the acquisition. The acquired business operations together with the present YIT Building Systems and Calor AB will form the Group’s largest business segment, YIT Building Systems. The other three business segments are: Construction Services, Services for Industry and Telecom Services.

The acquisition is in line with YIT’s strategy. Building systems comprise a major strategic growth area in all of the Nordic countries. The business functions of YIT and the acquired Building Systems complement each other, as does the expertise of their employees. Overlapping operations are minimal. After the  deal, the company will be able to offer customers improved and more comprehensive services during the entire life cycle of properties.
The dependence of YIT’s net sales and earnings on the ups and downs of the business cycle has been purposefully reduced by expanding maintenance and servicing operations within the company’s different business areas. Following the acquisition, the share of maintenance operations within consolidated net sales is estimated to rise to about 30 per cent.

YIT will finance the acquisition with borrowed capital. As a consequence of the acquisition, the company’s equity ratio will fall. YIT’s objective is to restore the equity ratio to the strategic target level of 40 per cent by 2006 at the latest. It has been assessed that the acquisition will have a positive effect on earnings per share from 2004 onwards. The Building Systems business is characterized by a strong cash flow, low investment requirements and a good return on investment.

YIT estimates that the acquisition will yield annual synergy benefits of about EUR 10 million from 2004 onwards. The synergy benefits will come primarily in the areas of purchasing, administration and information technology as well as through technology transfer between existing and new units. The integration costs are estimated to come to about EUR 6 million in 2003 and 2004. The main items making up the integration costs are information technology, changing the external identity and training for the personnel. Measures to improve the profitability of business functions in Sweden are ongoing. The objective is to achieve a positive result in 2004.

On July 15, 2003, the Finnish Competition Authority announced that it had approved the sale of the Makroflex companies and brand. The Estonian competition authorities approved the deal on July 16, 2003, and it was consummated on July 18, 2003.

Good outlook for 2003

Thanks to the strong order backlog and the acquisition of Building Systems, YIT’s net sales will grow strongly. Profit before taxes  is expected to improve in 2003.

The growth in YIT’s market-financed residential construction and maintenance compensates for the cyclical weakening in other business segments. The integration of the business operations of the new YIT Building Systems into the Group will substantially increase net sales during the last four months of the year. The integration expenses will burden profitability this year. The new business is expected to have a positive effect on earnings per share from 2004 onwards. YIT’s equity ratio will decline due to the deal. The aim is to return the equity ratio to its strategic target level of 40 per cent by 2006 at the latest.

Helsinki, July 31, 2003

The Board of Directors

 CONSOLIDATED FINANCIAL STATEMENTS, JUNE 30, 2003 (Unaudited)

INCOME STATEMENT (EUR million) January 1 - June 30                                 Jan-       Jan-    Change,       Jan-                             Jun/2003   Jun/2002          %   Dec/2002

Net sales                      932.1      840.5         11    1,763.0 - of which international       181.6      185.7         -2      386.9 activities Operating income and          -860.3     -788.0          9   -1,643.5 expenses Depreciation and write-         -8.3       -8.0          4      -16.9 downs Amortization of goodwill        -5.6       -5.3          6      -12.8 Operating profit                57.9       39.2         48       89.8 % of net sales                  6.2%       4.7%         ..       5.1% Financial income and            -6.4       -5.8         10      -12.2 expenses, net Profit before                   51.5       33.4         54       77.6 extraordinary items % of net sales                  5.5%       4.0%         ..       4.4% Extraordinary income               0          0         ..          0 Extraordinary expenses             0          0         ..          0 Profit before taxes             51.5       33.4         54       77.6 % of net sales                  5.5%       4.0%         ..       4.4% Profit for the report           35.5       11.9        198       43.0 period % of net sales                  3.8%       1.4%         ..       2.4%

Projects have been booked in the income statement on the basis of the degree of completion or the degree of sale, whichever is lower.

Income taxes constitute a proportion, calculated from the report period on a pro rata basis, of the estimated full-year taxes.

The residual taxes levied by the Tax Office for Major Corporations in March 2002, EUR 10.9 million, cut into profits for the comparison period. YIT appealed the decision and the Tax Correction Board of the Tax Office for Major Corporations approved the appeal in December. The matter is still being reviewed in the Administrative Court, and thus the residual taxes repaid to YIT in January 2003 by the Finnish Tax Administration have not been accounted for in the 2002 financial result or the result for the review period.

INCOME STATEMENT (EUR million) April-June/2003 compared with the previous quarter

                                Apr-       Jan-    Change,                                        Jun/2003   Mar/2003          %

Net sales                      500.6      431.5         16            - of which international        97.1       84.5         15            activities Operating income and          -442.6     -417.7          6            expenses Depreciation and write-         -4.2       -4.1          2            downs Amortization of goodwill        -2.8       -2.8          0            Operating profit                51.0        6.9        639            % of net sales                 10.2%       1.6%         ..            Financial income and            -2.8       -3.6        -22            expenses, net Profit before                   48.2        3.3      1,360            extraordinary items % of net sales                  9.6%       0.8%         ..            Extraordinary income               0          0         ..            Extraordinary expenses             0          0         ..            Profit before taxes             48.2        3.3      1,360            % of net sales                  9.6%       0.8%         ..            Profit for the report           33.9        1.6      2,019            period % of net sales                  6.8%       0.4%         ..                                                                                   BALANCE SHEET (EUR million)                              Jun/2003   Jun/2002   Change,   Dec/2002 ASSETS                                                   %            Intangible assets                 9.2        7.7        19        9.7 Goodwill on consolidation        69.3       78.4       -12       71.8 Tangible assets                  57.1       74.4       -23       61.9 Investments                                                           - Own shares                      7.2        7.2         0        7.2 - Other investments               7.4        6.4        16        7.1 Inventories                     396.5      280.2        42      338.1 Receivables                     599.0      550.8         9      503.5 Marketable securities            10.7        1.9       463       10.7 Cash and cash equivalents        19.9       17.5        14       28.2 Total assets                  1,176.3    1,024.5        15    1,038.2                                                                       LIABILITIES Share capital                    59.6       59.3         1       59.5 Other shareholders’ equity      323.3      281.5        15      313.7 Minority interests                2.2        2.6       -15        2.9 Provisions for liabilities        8.8       11.4       -23       14.2 and charges Non-current liabilities         114.6      139.6       -18      138.2 Current liabilities             667.8      530.1        26      509.7 Total shareholders’ equity    1,176.3    1,024.5        15    1,038.2 and liabilities

CONSOLIDATED CASH FLOW STATEMENT (EUR million)

                             Jan-Jun/   Jan-Jun/   Change,   Jan-Dec/                                  2003       2002         %       2002 Cash flow from operating                                              activities Profit before extraordinary      51.5       33.4        54       77.6 items Adjustments, total              -12.2       17.5      -170       42.3 Cash flow before change in                                            net working capital              39.3       50.9       -23      119.9 Change in net working           -46.7        6.0      -878        7.0 capital Cash flow from operations                                             before financial items and       -7.4       56.9      -113      126.9 taxes Interest paid                    -9.0       -9.2        -2      -13.9 Dividends received                  0        0.1        ..        0.1 Interest received                 0.9        0.8        13        1.4 Taxes paid                      -12.7      -23.3       -45      -37.9 Net cash from operating         -28.2       25.3      -211       76.6 activities                                                                       Cash flow from investing                                              activities Capital expenditure on                                                tangible and intangible assets               -15.4      -52.2       -71      -60.3 Proceeds from sale of                                                 tangible and intangible assets                33.5        3.0     1,017       12.4 Investments in other assets         0          0        ..       -0.3 Proceeds/losses from sale                                             of investments                    0.1          0        ..       -0.4 Net cash used in investing       18.2      -49.2      -137      -48.6 activities                                                                       Cash flow from financing                                              activities Rights issue                      0.7        2.9       -76        4.3 Purchase of own shares              0       -0.7        ..       -0.7 Change in loan receivables        0.1        0.8       -88        0.8 Change in short-term debt        19.6       34.2       -43       -0.3 Borrowing of long-term debt      15.1        2.9       421       10.4 Repayment of long-term debt      -7.6       -9.4       -19      -16.1 Dividends paid                  -26.3      -24.5         7      -24.5 Net cash used in financing        1.6        6.2       -74      -26.1 activities                                                                       Change in liquid assets          -8.4      -17.7       -53        1.9                                                                       Liquid assets at beginning       38.9       37.0         5       37.0 of period Liquid assets at end of          30.5       19.3        58       38.9 period

KEY FIGURES                  Jun/2003   Jun/2002   Change,   Dec/2002                                                          %           

Earnings per share, EUR 1)       1.22       0.41       198       1.49 Earnings per share, EUR,         1.21                            1.47 diluted Earnings per share, EUR,                                              excluding residual tax                      0.79                 1.86 Equity per share, EUR           12.85      11.48        12      12.54 Average share price during                                            the period, EUR                 16.02      16.39        -2      16.40 Share price at end of           17.00      18.50        -8      16.79 period, EUR Market capitalization at                                              end of period, EUR million      497.1      537.7        -8      489.9 Weighted average share-                                               issue adjusted number of                                              shares outstanding,            29,181     28,857         1     28,970 thousands Weighted average share-                                               issue adjusted number of                                              shares outstanding,            29,445                          29,257 thousands, diluted Share-issue adjusted number                                           of shares outstanding at       29,239     29,066         1     29,179 end of period, thousands Net interest-bearing debt                                             at end of period, EUR           139.5      156.3       -11      104.1 million Return on investment 2)         20.4%      18.1%        ..      17.8% Equity ratio                    34.8%      35.5%        ..      38.2% Gearing ratio                   36.9%      46.5%        ..      28.2% Gross capital expenditures                                            on non-current assets, EUR       14.2       52.3       -73       60.6 million - % of net sales                 1.5%       6.2%        ..       3.4% Order backlog at end of                                               period, EUR million 3)        1,091.8      879.9        24      938.8 - of which orders from          256.9      198.3        30      255.0 abroad Average personnel              12,606     10,989        15     11,990

1) The residual tax weakens the comparability of this key    indicator in particular.
2) Calculated for the period July 1, 2002 - June 30, 2003 using    the balance sheet figures of June 30, 2002 and June 30, 2003.
3) Portion of binding orders not recognized as income.

 CONTINGENT LIABILITIES       Jun/2003   Jun/2002   Change,   Dec/2002 (EUR million)                                            %

Mortgages given as security                                           for loans - For own commitments            29.9       33.2       -10       32.8 Pledges given for loans                                               - For own commitments               0        7.3        ..          0 Other collateral given for                                            own commitments - Corporate mortgages               0        0.3        ..        0.7 - Securities pledged              0.2        0.2         0        0.3 Leasing obligations              18.5       18.2         2       18.3 Other commitments                                                     - Repurchase commitments 4)     107.4      103.7         4       91.3 - Other contingent                0.5        0.5         0        0.6 liabilities Guarantees                                                            - On behalf of associated         1.1        0.6        83        0.6 companies - On behalf of others             8.5        6.9        23        7.2 Mortgages given by                                                    companies held in                                                     inventories; for                  2.1          0        ..          0 commitments of Group companies and for own commitments Liability under derivative                                            contracts 5) - Foreign currency forward                                            contracts -- Value of underlying           14.2       15.6        -9       16.6 assets -- Fair value                    14.3       16.2       -12       17.2

4) Repurchase commitments for contract receivables sold to    financing companies.
5) Derivative contracts have been taken out mainly to hedge    foreign currency loans and foreign currency cash flows from    projects.

 NET SALES BY DIVISION (EUR million)

                     Jan-Jun/  Jan-Jun/    Change, Jul/2002- Jan-Dec/                          2003      2002          %  Jun/2003     2002                                                                       Building Construction   395.2     318.8         24     695.8    619.4 Property Services        88.5     106.9        -17     188.4    206.8 Infraservices            52.4      48.7          8     122.5    118.8 International            88.7      75.7         17     181.4    168.4 Operations Other items (YIT         -0.4      -0.9        -56      -1.1     -1.6 Construction) YIT Construction        624.4     549.2         14   1,187.0  1,111.8 subgroup, total YIT Installation        260.3     295.6        -12     546.4    581.7 subgroup YIT Primatel subgroup    56.4      12.5        351     139.7     95.8 6) Other items (YIT         -9.0     -16.8        -46     -18.5    -26.3 Group) YIT Group, total        932.1     840.5         11   1,854.6  1,763.0

6) On June 1, 2002, into the YIT Group.

 OPERATING PROFIT BY DIVISION (EUR million)

                     Jan-Jun/  Jan-Jun/    Change, Jul/2002- Jan-Dec/                          2003      2002          %  Jun/2003     2002                                                                       Building Construction    28.6      24.6         16      53.3     49.3 Property Services         0.6       7.4        -92       6.3     13.1 Infraservices             0.9       1.5        -40       3.5      4.1 International            30.0       2.7      1 011      33.5      6.2 Operations Other items (YIT         -2.8      -3.8        -26      -1.4     -2.4 Construction) YIT Construction         57.3      32.4         77      95.2     70.3 subgroup, total YIT Installation          5.5       9.2        -40      17.4     21.1 subgroup YIT Primatel subgroup     0.7       2.0        -65       4.7      6.0 6) Other items (YIT         -5.6      -4.4         27      -8.8     -7.6 Group) YIT Group, total         57.9      39.2         48     108.5     89.8

6) On June 1, 2002, into the YIT Group.



ORDER BACKLOG BY DIVISION AT END OF PERIOD (EUR million)                              Jun/2003   Jun/2002   Change,   Dec/2002                                                          % Building Construction           389.2      283.5        37      292.6 Property Services               172.2      129.0        33      117.6 Infraservices                    51.3       67.8       -24       50.5 International Operations        172.2      124.3        39      158.6 YIT Construction subgroup,      784.9      604.6        30      619.3 total YIT Installation subgroup       216.9      221.7        -2      225.5 YIT Primatel subgroup 6)         90.0       53.6        68       94.0 YIT Group, total              1,091.8      879.9        24      938.8

6) On June 1, 2002, into the YIT Group.

 QUARTERLY FIGURES, Q1/2002 - Q2/2003 (EUR million)

NET SALES            Q1/    Q2/    Q3/    Q4/    Q1/    Q2/                     2002   2002   2002   2002   2003   2003                                                             Building           154.4  164.4  132.2  168.4  187.2  208.0 Construction Property            41.5   65.4   40.1   59.8   37.5   51.0 Services Infraservices       17.6   31.1   35.7   34.4   21.7   30.7 International       36.3   39.4   38.7   54.0   34.4   54.3 Operations Other items (YIT                                            Construction)       -0.4   -0.4   -0.3   -0.4   -0.2   -0.2 YIT                249.4  299.9  246.4  316.2  280.6  343.8 Construction, total YIT Installation   144.9  150.7  139.2  146.9  129.2  131.1 YIT Primatel 6)            12.5   36.8   46.5   25.5   30.9 Other items (YIT    -7.9   -9.0   -4.8   -4.7   -3.8   -5.2 Group) YIT Group, total   386.4  454.1  417.6  504.9  431.5  500.6

                                                 OPERATING PROFIT     Q1/    Q2/    Q3/    Q4/    Q1/    Q2/                     2002   2002   2002   2002   2003   2003                                                             Building            12.1   12.5   12.2   12.5   13.7   14.9 Construction Property             1.5    5.9    2.3    3.4   -2.1    2.7 Services Infraservices        0.1    1.4    1.7    0.9    0.0    0.9 International        1.0    1.7    0.5    3.0   -0.5   30.5 Operations Other items (YIT                                            Construction)       -2.1   -1.7    0.4    1.0   -1.6   -1.2 YIT                 12.6   19.8   17.1   20.8    9.5   47.8 Construction, total YIT Installation     4.2    5.0    6.7    5.2    1.8    3.7 YIT Primatel 6)             2.0    3.6    0.4   -1.7    2.4 Other items (YIT    -2.0   -2.4   -1.6   -1.6   -2.7   -2.9 Group) YIT Group, total    14.8   24.4   25.8   24.8    6.9   51.0

                                            ORDER BACKLOG        Q1/    Q2/    Q3/    Q4/     Q1/     Q2/                     2002   2002   2002   2002    2003    2003                                                             Building           256.2  283.5  273.8  292.6   329.1   389.2 Construction Property           141.0  129.0  138.7  117.6   138.4   172.2 Services Infraservices       71.2   67.8   58.0   50.5    56.8    51.3 International       78.7  124.3  143.1  158.6   175.0   172.2 Operations YIT                547.1  604.6  613.6  619.3   699.3   784.9 Construction, total YIT Installation   216.4  221.7  202.7  225.5   214.5   216.9 YIT Primatel 6)            53.6   37.3   94.0    94.5    90.0 YIT Group, total   763.5  879.9  853.6  938.8 1,008.3 1,091.8                                                    6) On June 1, 2002, into the YIT Group.