YIT’s Interim report January-March 2022

YIT’s Interim report January-March 2022

Solid quarter driven by strong performance in Housing.

• Adjusted operating profit increased to EUR 22 million (15).
• Adjusted operating profit margin improved to 4.2% (2.7).
• Housing continued its strong performance.
• In Business Premises and Infrastructure, transformation progressed according to plan.
• Result for the period, including discontinued operations, was EUR -133 million (4), negatively impacted by an impairment of EUR 152 million following the held for sale classification of the Russian businesses.
• Balance sheet remained strong. Net interest-bearing debt was at EUR 338 million (439) and gearing at 41% (44).
• Strong order book of EUR 3,756 million (31 Dec 2021: 3,847).
• Land bank amounted to 2,173,000 sqm, which enables the construction of approx. 32,000 new homes.
• YIT announced after the reporting period on 1 April that it is selling its businesses in Russia. The closing process is progressing but been slower than anticipated. The sale is expected to be closed during the second quarter of 2022.
• Combined lost time injury frequency decreased to 10.5 (12.2)
• Katja Ahlstedt was appointed as Executive Vice President, Human Resources. Katja joined the company on 1 April.
• Teemu Helppolainen, Executive Vice President, Housing Russia, leaves the company once the sale of YIT’s businesses in Russia has been completed.
   

Key figures

From the first quarter of 2022 onwards, YIT has four reportable segments: Housing, Business Premises, Infrastructure and Property Development. Russian businesses are reported as discontinued operations. On 25 April 2022, YIT restated financial information for comparative periods reflecting an operating model change, where certain operations and functions were transferred between reportable segments, and the reporting of Russian businesses as discontinued operations. Balance sheet and cash flow statement for comparative periods were not restated. Unless otherwise noted, all figures in this interim report concern continuing operations.

Unless otherwise noted, the figures in brackets refer to the corresponding period in the previous year.
 

Markku Moilanen, President and CEO

“YIT’s first quarter was solid. The beginning of the year tends to be a low point in our industry, but with our focused strategy, we were able to utilise our capabilities successfully. As a result, our adjusted operating profit increased markedly from the previous year to EUR 22 million (15).

Our Housing business continued its very strong performance. Apartment completions decreased from last year’s first quarter reflecting cautious start-up levels at the beginning of the COVID-19 pandemic. This had a negative impact on the revenue of the business during the first quarter.  Nevertheless, the Housing segment’s adjusted operating profit increased during the period. This reflects not only the improved sales mix but also the rigorous work the segment has done to improve efficiency and focus on its core capabilities.

In Business Premises and Infrastructure, the transformation is progressing according to plan. Both segments posted positive adjusted operating profits in the first quarter demonstrating that our decisive actions in these businesses are well under way.

Overall, the first quarter was highlighted by the escalation of the geopolitical situation. This quarter will be remembered for the human distress and suffering we have all witnessed in Ukraine. We have been deeply shocked by the situation and our hearts and thoughts are with the Ukrainian people.

At YIT, our highest priority has been to ensure the health and safety of our employees. At the same time, we accelerated the strategic review of our businesses in Russia, originally announced last November. As a result of our relentless efforts to find the best possible solution in these challenging circumstances, we were happy to announce the conclusion of the strategic review at the beginning of April. Our Russian businesses were sold, which ensures a rapid, controlled, and complete exit from Russia. Once the sale is closed, we can fully focus on our strategy and core businesses. In addition, our balance sheet withstood the hit from the impairment and remains strong. This leaves us room to manoeuvre and creates security in these uncertain times.

The crisis in Ukraine has caused mayhem throughout the entire construction industry. We have seen issues in availability of certain construction materials, and some material prices have continued to increase. Furthermore, general consumer confidence is weakening, and we expect that will be reflected in housing demand. At YIT, we have been able to overcome these challenges so far and the impacts on our business have been limited. We have sought alternative material sources and kept our construction sites open. Going forward, we expect the challenges in material cost inflation and availability, as well as consumer demand to continue at least during the next couple of quarters. On the other hand, we believe that the market will find a new balance as new supply chains will be formed, and consumer demand will respond.

While the near-term outlook is subdued, the mid- and long-term prospects for our industry remain positive. Urbanisation continues and the need for more sustainable living is increasing. These megatrends will support the market over the cycle, and our strategy is spot-on when it comes to meeting higher demand and the changing needs of society.

Our strategy is the right one. Actions to improve efficiency and reduce costs will help us to stay competitive even if the market weakens. For us, the main priority is to continue focusing on our profitable core and execute our strategy to deliver predictable, market-leading results.”
 

Results

January–March

YIT’s order book amounted to EUR 3,756 million at the end of the first quarter (31 Dec 2021: 3,847). The order book was flat in Housing and decreased slightly in Business Premises and Infrastructure as a result of rigorous project selection. At the end of the quarter, 82% of the order book was sold (31 Dec 2021: 83).

The Group’s revenue decreased by 8% to EUR 518 million (562). The decrease was primarily due to a lower number of apartment completions in Housing, partly offset by a higher revenue in Business Premises.

The Group’s adjusted operating profit increased to EUR 22 million (15) and the adjusted operating profit margin to 4.2% (2.7). Improved profitability was driven by strong performance of the Housing segment, as well as the successful continued transformation in Business Premises and Infrastructure.

YIT’s operating profit was EUR 22 million (10). Adjusting items were EUR 0 million in the first quarter (5). The result for the period, including discontinued operations, was EUR -133 million (4) and was negatively impacted by an impairment of EUR 152 million following the held for sale classification of the Russian businesses.
 

Guidance for 2022

In Housing, completions of consumer apartments are expected to decrease compared to 2021. In Business Premises, operational performance will continue to improve. Infrastructure will gradually improve, while still impacted by certain legacy low-margin projects. In Property Development, there are several promising projects in the pipeline.

YIT expects its Group adjusted operating profit for continuing operations to be higher than in 2021 (2021: EUR 85 million).

Temporary shutdowns or slower progress on construction sites and delayed completions due to the COVID-19 pandemic or construction material and labour availability could lead to the postponement of revenue and profit from one quarter or year to another. YIT aims to mitigate the impact of increased construction material costs by actively managing its customer relations, contracts, and procurement. Due to increased number of apartments under construction, YIT expects to tie up more capital as the year progresses.
 

News conference for investors and media

YIT will arrange a news conference on Friday, 29 April 2022 at 10.00 a.m. Finnish time (EET, at 8.00 a.m. GMT). The results will be presented by Markku Moilanen, President and CEO of YIT Corporation, and CFO Tuomas Mäkipeska. The news conference will be held as a live webcast that can be followed on the company’s web site at www.yitgroup.com/webcast. A recording of the webcast will be available at the same address later on 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.

Conference call participants are requested to dial in at least five minutes prior to the start of the conference, at 9.55 a.m. (EET). Conference call numbers are:

• Participants from Finland +358 (0)9 8171 0310
• Participants from Sweden +46 (0)8 5664 2651
• Participants from UK and outside of Nordic countries +44 (0)33 3300 0804
• Participants from US +1 (0)63 1913 1422

The participants will be asked to provide the following confirmation code: 26752930#.

The event is targeted for analysts, portfolio managers and the media. Welcome!

For further information:
Tommi Järvenpää, Vice President, Investor Relations, YIT Corporation, tel. +358 40 576 0288, tommi.jarvenpaa@yit.fi

YIT Corporation

Tommi Järvenpää
Vice President, Investor Relations

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

YIT is the largest Finnish and a significant North European development and construction company. For 110 years, we have been creating better living environments for our customers: functional homes for sustainable living, future-proof public and commercial buildings and infrastructure for smoother flow of people, businesses and society. We employ 5,500 professionals in nine countries: Finland, Sweden, Norway, Estonia, Latvia, Lithuania, the Czech Republic, Slovakia and Poland. Our revenue in 2021 was EUR 2.7 billion. YIT Corporation's share is listed on Nasdaq Helsinki Oy. www.yitgroup.com