YIT Oyj: YIT's Interim Report January-September 2024
YIT Corporation Stock Exchange Release 31 October 2024 at 8:30 a.m.
YIT's Interim Report January-September 2024
Profitability improved in all segments in Q3, cash flow positive
Third quarter 2024 in brief
Result for the period was EUR -6 million (1).
January-September 2024 in briefTransformation program costs are estimated to be EUR 50-70 million in total, of which EUR 57 million was realized by the end of September 2024. Program costs are recorded in operating profit adjusting items.
Key figures
+-----------------------------+-------+-------+-------+-------+--------+
|EUR million |7-9/24 |7-9/23 |1-9/24 |1-9/23 |1-12/23 |
+-----------------------------+-------+-------+-------+-------+--------+
|Revenue | 453 | 553 | 1,299 | 1,566 | 2,163 |
+-----------------------------+-------+-------+-------+-------+--------+
|Operating profit | 13 | 14 | -37 | 18 | 51 |
+-----------------------------+-------+-------+-------+-------+--------+
|Operating profit, % | 2.9 | 2.6 | -2.9 | 1.2 | 2.4 |
+-----------------------------+-------+-------+-------+-------+--------+
|Adjusted operating profit | 26 | 17 | 18 | 28 | 41 |
+-----------------------------+-------+-------+-------+-------+--------+
|Adjusted operating profit | 5.6 | 3.0 | 1.4 | 1.8 | 1.9 |
|margin, % | | | | | |
+-----------------------------+-------+-------+-------+-------+--------+
|Result before taxes | -6 | 1 | -86 | -18 | -5 |
+-----------------------------+-------+-------+-------+-------+--------+
|Result for the period | -6 | 1 | -73 | -14 | 3 |
+-----------------------------+-------+-------+-------+-------+--------+
|Earnings per share, EUR | -0.03 | 0.00 | -0.34 | -0.08 | -0.01 |
+-----------------------------+-------+-------+-------+-------+--------+
|Operating cash flow after | 2 | -2 | -4 | -204 | -137 |
|investments | | | | | |
+-----------------------------+-------+-------+-------+-------+--------+
|Net interest-bearing debt | 789 | 869 | 789 | 869 | 795 |
+-----------------------------+-------+-------+-------+-------+--------+
|Gearing ratio, % | 98 | 105 | 98 | 105 | 94 |
+-----------------------------+-------+-------+-------+-------+--------+
|Equity ratio, % | 34 | 32 | 34 | 32 | 33 |
+-----------------------------+-------+-------+-------+-------+--------+
|Return on capital employed, %| 2.0 | 4.4 | 2.0 | 4.4 | 2.5 |
|(ROCE, rolling 12 months) | | | | | |
+-----------------------------+-------+-------+-------+-------+--------+
|Order book | 2,736 | 3,391 | 2,736 | 3,391 | 3,157 |
+-----------------------------+-------+-------+-------+-------+--------+
|Combined lost time injury | 9.7 | 13.2 | 9.7 | 13.2 | 12.1 |
|frequency (cLTIF, rolling 12 | | | | | |
|months) | | | | | |
+-----------------------------+-------+-------+-------+-------+--------+
|Customer satisfaction rate | 58 | 51 | 58 | 51 | 52 |
|(NPS) | | | | | |
+-----------------------------+-------+-------+-------+-------+--------+
Unless otherwise noted, the figures in brackets in this report refer to the corresponding period in the previous year.
Comments from the President and CEO, Heikki Vuorenmaa
"Profitability improved in all our segments in the third quarter, reflecting the results of our transformation program. The actions we have taken to focus on our core businesses, to upskill our people in supply chain and project management capabilities, and to enhance commercial excellence are paying off. Both contracting segments improved their performance in the third quarter. In Housing, actions taken to activate consumers and boost sales are visible, despite our sales continuing flat in Finland. While operational efficiencies and the order book are more in our own hands, reducing balance sheet and debt level is connected with the successful timing of divestments, which requires increasing activity in the retail transaction market.
Markets are active in both Infrastructure and Business Premises, and multiple large projects are in the tendering phase, for example, in the industrial sector. We are particularly focused on complex projects that require high-level engineering skills.
Housing sales have continued at a good level in Central Eastern Europe, with the Baltics continuing to pick up, and business overall is progressing as planned. Our capital employed remains under control, and we see significant potential to further increase our production volumes and simultaneously release capital over time through increased sales.
We have seen the macroeconomy moving in a direction that is likely to support a pick-up in the Finnish housing market, and the secondary market has already shown signs of increased activity levels. Inflation has fallen, and during the third quarter, we have seen significant interest rate decreases. Although declining interest rates will help brighten the picture for the Finnish construction industry, there are no visible signs of a steep recovery in the housing market. We haven't started any consumer apartment projects in Finland during the first nine months of 2024, thus the level of consumer apartment completions in Finland will be low in 2025. Market recovery is expected to begin in 2025, with the emphasis on the latter half of the year. Along with the recovery, the number of consumer apartment starts will accelerate.
Lowering indebtedness has not progressed as we would have expected. Net debt at the end of September was at the same level as at the end of the previous quarter, albeit lower than in the comparison period. Our financial status allows us time to address the level of indebtedness, and dedicated actions are ongoing to optimize the balance sheet and lower our debt.
In September, YIT was ranked as the most attractive employer in the construction industry for the fifth consecutive year. We are extremely proud of this achievement. The key to YIT's success is our skilled and versatile employees. By focusing on understanding our customers' needs and offering opportunities for professional growth, our goal-oriented, development-focused culture creates a foundation for shared successes and inspiring career paths.
We are well on track to achieve the expected results in 2024. We are determined to push forward our strategic priorities and to further improve customer experience and operational performance. During the third quarter, we have put much time and effort into building our new long-term plan, and the whole team is excited to communicate the updated strategy and financial targets to the market in mid-November. Our ambition remains high - to be the expert partner in developing sustainable homes, spaces and cities - for a good life."
Results
July-September
YIT's order book decreased from the previous quarter to EUR 2,736 million (30 Jun 2024: 2,980). At the end of the quarter, 77% of the order book was sold (30 Jun 2024: 76%).
YIT's revenue decreased from the comparison period to EUR 453 million (553). In Housing, revenue in total decreased, increasing in the Baltic and CEE countries and decreasing in Finland. In Business Premises, revenue decreased. Comparison period was supported by the sale of the Maistraatinportti office property. In Infrastructure, revenue increased, supported by industrial construction.
Adjusted operating profit increased to EUR 26 million (17). Adjusted operating profit margin was 5.6% (3.0). Adjusted operating profit increased in all segments in the third quarter, impacted by sound performance in the contracting segments and Housing Baltic and CEE. In Housing Finland, adjusted operating profit was supported by a EUR 6 million net decrease in 10-year liability provision mainly related to a declined number of apartments on a liability period.
YIT's operating profit was EUR 13 million (14). Adjusting items were EUR 12 million in the third quarter (3), mainly related to the costs of transformation program and operating profit from operations to be closed down in Sweden. Net finance costs increased to EUR 20 million (13) year-on-year due to increased cost of funding driven by the higher interest rate environment and higher margins in refinancing. The result for the period was EUR -6 million (1).
January-September
YIT's revenue decreased to EUR 1,299 million (1,566). Revenue decreased in all segments. In Housing, revenue in the comparison period was supported by the sale of 190 apartments in Finland to YIT's joint venture's rental housing portfolio and by sale and leaseback transactions for 11 plots in the second quarter of 2023. In Business Premises the comparison period was supported by the sale of the Maistraatinportti office property. In Infrastructure, revenue decreased mainly due to the revenue decrease in businesses to be closed down.
YIT's adjusted operating profit decreased to EUR 18 million (28), and the adjusted operating profit margin was 1.4% (1.8). In Housing, adjusted operating profit decreased mainly attributable to the decrease in adjusted operating profit in Housing Finland. In Business Premises, adjusted operating profit decreased, burdened by a decrease in the fair value of Tripla Mall caused by a yield increase in the first quarter, impacting the adjusted operating profit by EUR -12 million. In Infrastructure, adjusted operating profit increased supported by the steady performance of the projects in Finland.
YIT's operating profit was EUR -37 million (18). Adjusting items amounted to EUR 56 million (10), mainly related to the costs of transformation program and operating profit from operations to be closed down, offset by the gain on sale of the equipment services business YIT Kalusto Oy. Net finance costs amounted to EUR 48 million (37). The result for the period amounted to EUR -73 million (-14), and earnings per share amounted to EUR -0.34 (-0.08).
Guidance and outlook for 2024
YIT expects its Group adjusted operating profit for continuing operations to be EUR 20-60 million in 2024. The operating cash flow after investments is expected to be positive.
The housing market recovery in the Baltic countries and Central Eastern Europe is expected to continue. In Finland, the housing market is not expected to materially improve during 2024. In Business Premises and Infrastructure, the underlying operational performance is expected to improve.
YIT's performance will be supported by the increased efficiencies from the transformation program launched on 10 February 2023.
Changes in the macroeconomic environment, especially in interest rates, may impact the housing market demand and the fair value of investments. Delayed apartment completions could lead to the postponement of revenue and profit from one quarter or year to another. Actions to release capital may have an impact on the company's profit.
Webcast for investors and the media
A webcast in English and an international telephone conference will be arranged on 31 October 2024 at 10:00 a.m. EET. The results will be presented by Heikki Vuorenmaa, President and CEO of YIT Corporation, and CFO Tuomas Mäkipeska.
The webcast can be followed at https://yit.videosync.fi/q3-2024. A recording of the webcast will be available at the company's website after the event.
The teleconference can be accessed by registering at: https://palvelu.flik.fi/teleconference/?id=50048712. After the registration, participants will be provided with phone numbers and a conference ID to access the conference. To ask a question, please dial *5 on your telephone keypad to enter the queue.
For further information:
Essi Nikitin, Vice President, Investor Relations, YIT Corporation, tel. +358 50 581 1455, essi.nikitin@yit.fi
YIT Corporation
Tuomas Mäkipeska
CFO
Distribution: Nasdaq Helsinki, major media, www.yitgroup.com
YIT is a leading construction and development company. Building on over 110 years of experience, we develop and build sustainable living environments: functional homes, future-proof public and commercial buildings, and infrastructure to support the green transition. We employ approximately 4,300 professionals in eight countries. Our revenue in 2023 was EUR 2.2 billion. YIT Corporation's shares are listed on Nasdaq Helsinki.
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