Helsinki, Finland, 2013-10-30 07:00 CET (GLOBE NEWSWIRE) -- YIT CORPORATION INTERIM REPORT OCTOBER 30, 2013 AT 8:00 A.M.
YIT'S INTERIM REPORT JANUARY 1 – SEPTEMBER 30, 2013: Strategy execution proceeding in demanding market environment
Unless otherwise stated, the text section of the interim report concerns the construction business, i.e. the continuing operations after the partial demerger. The demerger of Caverion Corporation from YIT was finalized on June 30, 2013. The results of building services for January–June 2013 are reported under discontinued operations, along with the demerger costs (tables section).
July–September 2013 (segment reporting, POC)
January–September 2013 (segment reporting, POC)
Kari Kauniskangas, President and CEO: Significant milestones in strategy implementation
In terms of the financial results, the third quarter was modest. Nevertheless, I am satisfied with the progress in International Construction Services, where we achieved significant milestones in important new projects. Among other things, YIT obtained acceptance for the city plan for two residential construction projects in St. Petersburg with a combined value of approximately EUR 1.5 billion. The segment’s operating profit margin excluding non-recurring items also improved slightly from the previous year, and revenue continued to grow. The profitability of Construction Services Finland was impaired by the weakened sales mix in residential sales and the low revenue of Business Premises. However, with active sales to investors we were able to expedite the sales of completed apartments and halt the increase in the number of completed unsold apartments. Winning the design and implementation tender for the Central Pasila project with our one-billion-euro Tripla-proposal was a significant milestone in the implementation of our strategy in Finland.
With continued macroeconomic uncertainty in the third quarter, our focus is currently particularly on sales as well as improving cash flow, cost- and capital efficiency. In the short term, we aim to reduce the level of completed unsold apartments and complete the sales of business premises projects currently under construction. Further goals include maintaining positive cash flow and finding new partners to finance plot investments and large area development projects as well as releasing approximately EUR 150 million from slow-moving assets over the next three years, mainly in International Construction Services. At the same time, we are building a foundation for future growth by moving forward with strategically important projects.
Segment reporting, POC
|Revenue, EUR million||7-9/13||7-9/12||Change||1-9/13||1-9/12||Change||1-12/12|
|Construction Services Finland||287.5||308.9||-7%||892.7||986.4||-9%||1,329.0|
|International Construction Services||164.3||153.3||7%||429.0||394.6||9%||599.6|
|Operating profit, EUR million||7-9/13||7-9/12||Change||1-9/13||1-9/12||Change||1-12/12|
|Construction Services Finland||22.2||28.9||-23%||71.6||93.8||-24%||134.1|
|International Construction Services||20.5||25.7||-20%||49.8||49.5||1%||80.4|
|Operating profit margin, %||7-9/13||7-9/12||1-9/13||1-9/12||1-12/12|
|Construction Services Finland||7.7||9.3||8.0||9.5||10.1|
|International Construction Services||12.5||16.7||11.6||12.5||13.4|
|Operating profit excluding non-recurring items, EUR million||7-9/13||7-9/12||Change||1-9/13||1-9/12||Change||1-12/12|
|Construction Services Finland||22.2||28.9||-23%||71.6||93.8||-24%||134.1|
|International Construction Services||20.5||18.7||10%||49.8||42.5||17%||73.4|
|Operating profit margin excluding non-recurring items, %||7-9/13||7-9/12||1-9/13||1-9/12||1-12/12|
|Construction Services Finland||7.7||9.3||8.0||9.5||10.1|
|International Construction Services||12.5||12.2||11.6||10.8||12.2|
|Order backlog, EUR million||9/13||6/13||Change||9/13||9/12||Change||12/12|
|Construction Services Finland||1,555.1||1,584.0||-2%||1,555.1||1,541.0||1%||1,499.0|
|International Construction Services||1,258.3||1,226.8||3%||1,258.3||1,207.4||4%||1,266.1|
|Profit before taxes, EUR million||29.9||44.6||-33%||90.3||110.5||-18%||169.6|
|Profit for the review period, EUR million 1)||23.1||35.1||-34%||69.5||86.1||-19%||130.4|
|Operating cash flow after investments, EUR million||-82.0||-5.0||-164.2||41.9||49.9|
|Personnel at the end of the period||6,384||6,756||-6%||6,384||6,756||-6%||6,691|
|Return on investment (last 12 months), %||12.3||n/a||12.3||n/a||15.0|
|Equity ratio, %||37.0||37.9||37.0||37.9||43.1|
1) Attributable to equity holders of the parent company
Group reporting, IFRS
|Net interest-bearing debt, EUR million (2012 non-IFRS)||774.4||688.1||12%||774.4||617.2||4%||543.9|
|Gearing ratio, % (2012 non-IFRS)||123.7||109.8||123.7||106.1||80.9|
OUTLOOK FOR 2013
GUIDANCE (unchanged): The Group’s revenue and operating profit based on segment reporting for 2013 will decrease from the level of 2012, excluding non-recurring items.
Continuing uncertainty over the general macroeconomic development impacts YIT’s business operations and customers.
In Finland, a plan to reduce the corporate tax rate from 24.5% to 20% as of January 1, 2014 has been presented. The decrease would cause a one-time negative effect of less than EUR 4 million (POC) due to decrease in net deferred tax assets, that would be booked in the fourth quarter of 2013.
Construction Services Finland
With regard to Construction Services Finland, long-term residential demand continues to be supported by migration to growth centres. Furthermore, the population and the number of households will increase with continued migration and the increasing number of one-person households. However, the short-term risks of the housing market have increased due to macroeconomic uncertainty.
According to an estimate by the Confederation of Finnish Construction Industries RT published in October 2013, construction will begin on 27,000 residential units in Finland in 2013. According to a report published by VTT Technical Research Centre of Finland in January 2012, the annual need for the production of new residential units amounts to 24,000-29,000 residential units over the long term. YIT's goal is to strengthen its position as the leading residential developer in Finland.
YIT estimates that housing prices will remain stable in 2013. Construction costs are estimated to increase, mainly due to new energy regulations, but the increase is expected to be moderate in 2013.
With regard to the construction of business premises, real estate investors are still cautious due to the general economic situation, and in order to control risks the Helsinki metropolitan area and good tenants are appreciated. The low level of long-term interest rates increases investors’ interest in high-yield properties. According to RT’s October 2013 estimate, construction of office buildings will decrease by approximately 30% in Finland during 2013. Vacancy rates for offices are still high, with vacant building stock also including relatively old office premises in poor condition. YIT estimates that the demand will focus on modern and energy-efficient offices. YIT estimates that the renovation of business premises will grow in 2013.
According to RT’s October 2013 estimate, commercial construction will decrease by approximately 12% in Finland during 2013. The shift of the retail trade towards ever larger business properties and the expansion of foreign retail chains in Finland will support construction activity. Vacancy rates for commercial premises are quite low.
The infrastructure construction market is expected to remain stable and at the same level as in 2012 (VTT Technical Research Centre of Finland, September 2013). Rail and metro construction will continue to increase in 2013, and several major route projects will be underway in 2013–2014. The market situation for rock construction is expected to remain favourable, with the focus shifting from excavation to interiors and engineering. The road maintenance market is estimated to remain stable.
International Construction Services
The volume of residential construction is estimated to increase in Russia in 2013. However, growth is expected to slow down slightly compared to the previous year.
Moscow, the Moscow Oblast and St. Petersburg make up the largest residential markets in Russia: these areas account for approximately one-fifth of all residential construction. Residential demand has been supported by the reasonably good economic development in Russia, good consumer confidence, low unemployment rates and favourable development in the mortgage market. Moreover, the increase in the interest rates on mortgages has leveled off in recent times. Forecasts of economic growth in Russia have been lowered recently. In addition, the price of oil, which is a key factor for the development of the Russian economy, and the exchange rate between the euro and ruble have recently fluctuated more strongly than before.
The future outlook for Russian residential construction is good. Living space per person is still clearly lower than in Western Europe and housing is in poor condition, which creates the need for new, high-quality housing. Furthermore, the middle class is expected to grow in proportion to the population and the number of household-dwelling units is expected to increase. The development of the mortgage market in Russia has also contributed to the expansion of the potential buyer base. YIT has promoted the availability of loans to consumers through extensive cooperation with banks. YIT expects housing prices in Russia to remain stable in 2013.
The volume of business premises construction is expected to grow moderately in 2013 according to statistics published by VTT Technical Research Centre of Finland. YIT’s largest individual market is St. Petersburg, where YIT will continue the marketing and sales of the Gorelovo industrial park.
In the Baltic countries, residential demand has still been supported by improved consumer confidence and the employment situation as well as accelerated economic growth. Furthermore, the poor condition of residential buildings creates a need for new high-quality residential units. Latvia joining the euro is expected to strengthen the country’s economic development. Housing prices have also increased slightly. Residential construction is expected to remain at the level of the previous year in the Czech Republic and Slovakia in 2013. Economic growth in the Czech Republic has stagnated and the country has increased the value added tax on housing sales as of the beginning of 2013. In addition, political uncertainty in the country has had a negative effect on consumer confidence and housing demand. In Slovakia, the housing market is supported by the stable price level of housing, moderate economic growth and interest rates remaining low. Growing unemployment is a risk.
NEWS CONFERENCE, WEBCAST AND CONFERENCE CALL
YIT will arrange a news conference on October 30, 2013 at 10:00 a.m. Finnish time (EEST) at YIT's head office, Panuntie 11, 00620 Helsinki, Finland. The event is in English and targeted for analysts, portfolio managers and the media.
The news conference and presentation by the President and CEO of YIT Corporation Kari Kauniskangas can also be followed through a live webcast at www.yitgroup.com/webcast. The live webcast starts at 10:00 a.m. (EEST) and a recording of the webcast will be available at approximately 12:00 p.m. (EEST) at the same address.
The news conference can be participated also through a conference call. Conference call participants are requested to dial in at least five minutes prior to the start of the conference, at 9:55 a.m. (EEST):
During the webcast and conference call, all questions should be presented in English. At the end of the event the media has the possibility to ask questions also in Finnish.
Schedule in different time zones:
|Interim Report published||News conference, conference call and live webcast||Recorded webcast available|
|CEST (Paris, Stockholm)||7:00||9:00||11:00|
|US EDT (New York)||1:00||3:00||5:00|
Financial reports and other investor information are available at YIT's website, www.yitgroup.com/investors. The materials may be ordered via the website, by sending e-mail to InvestorRelations@yit.fi or by telephone on +358 20 437 0711
President and CEO
For further information, please contact:
Timo Lehtinen, Chief Financial Officer, YIT Corporation, tel. +358 45 670 0626, email@example.com
Sanna Kaje, Vice President, Investor Relations, YIT Corporation, tel. +358 50 390 6750, firstname.lastname@example.org
Distribution: NASDAQ OMX Helsinki, principal media, www.yitgroup.com
YIT is a construction industry leader. We create better living environments in Finland, Russia, the Baltic countries, the Czech Republic and Slovakia. Over 100 years of experience have secured for us a strong market position: We are the largest housing developer and one of the largest business premises and infrastructure developers in Finland, and the most significant foreign housing and area developer in Russia. Our vision is to stay one step ahead – while caring for our customers, partners and personnel. We have more than 6,000 employees in seven countries. In 2012, our revenue amounted to approximately EUR 2 billion. Our shares are listed on Nasdaq OMX Helsinki. www.yitgroup.com