2013-10-30 07:00:01 CET
2013-10-30 07:00:08 CET
REGULATED INFORMATION
YIT - Interim report (Q1 and Q3)
YIT'S INTERIM REPORT JANUARY 1 – SEPTEMBER 30, 2013: Strategy execution proceeding in demanding market environment
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)
-- Revenue decreased by 3%, to EUR 454.7 (7-9/2012: 470.3) million,
Construction Services Finland -7% and International Construction Services
+7%. At comparable exchange rates, revenue decreased by 1%.
-- Order backlog increased by 2% to EUR 2,813.4 (9/2012: 2,748.4) million. The
order backlog was at the same level as at the end of June 2013.
-- Operating profit decreased by 29% to EUR 37.4 (7-9/2012: 52.5) million,
Construction Services Finland -23% and International Construction Services
-20%.
-- Operating profit excluding non-recurring items decreased by 18% to EUR 37.4
(7-9/2012: 45.5) million, Construction Services Finland -23% and
International Construction Services +10%. The operating profit in the
comparison period included a non-recurring release of a provision of EUR 7
million in International Construction Services.
-- Profit before taxes decreased by 33% to EUR 29.9 (7-9/2012: 44.6) million.
-- Earnings per share decreased by 36% to EUR 0.18 (7-9/2012: 0.28).
January-September 2013 (segment reporting, POC)
-- Revenue decreased by 5% to EUR 1,337.6 (1-9/2012: 1,403.6) million.
However, the revenue of International Construction Services increased by
9%. At comparable exchange rates, the Group's revenue fell by 4%.
-- Operating profit declined by 16% to EUR 111.6 (1-9/2012: 133.1) million.
-- Operating profit excluding non-recurring items decreased by 11% to EUR
111.6 (1-9/2012: 126.1) million.
-- Profit before taxes decreased by 18% to EUR 90.3 (1-9/2012: 110.5) million.
-- Earnings per share decreased by 20% to EUR 0.55 (1-9/2012: 0.69).
-- The partial demerger was successfully finalized on June 30, 2013.
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.
KEY FIGURES
Segment reporting, POC
Revenue, EUR million 7-9/13 7-9/12 Change 1-9/13 1-9/12 Change 1-12/12
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Construction Services 287.5 308.9 -7% 892.7 986.4 -9% 1,329.0
Finland
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International 164.3 153.3 7% 429.0 394.6 9% 599.6
Construction
Services
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Other items 2.9 8.1 15.9 22.6 30.3
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Group, total 454.7 470.3 -3% 1,337.6 1,403.6 -5% 1,959.0
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Operating profit, EUR 7-9/13 7-9/12 Change 1-9/13 1-9/12 Change 1-12/1
million 2
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Construction Services 22.2 28.9 -23% 71.6 93.8 -24% 134.1
Finland
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International 20.5 25.7 -20% 49.8 49.5 1% 80.4
Construction Services
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Other items -5.4 -2.1 -9.8 -10.2 -13.4
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Group, total 37.4 52.5 -29% 111.6 133.1 -16% 201.1
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Operating profit margin, % 7-9/13 7-9/12 1-9/13 1-9/12 1-12/12
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Construction Services Finland 7.7 9.3 8.0 9.5 10.1
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International Construction Services 12.5 16.7 11.6 12.5 13.4
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Group, total 8.2 11.2 8.3 9.5 10.3
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Operating profit 7-9/13 7-9/12 Change 1-9/13 1-9/12 Change 1-12/1
excluding non-recurring 2
items, EUR million
--------------------------------------------------------------------------------
Construction Services 22.2 28.9 -23% 71.6 93.8 -24% 134.1
Finland
--------------------------------------------------------------------------------
International 20.5 18.7 10% 49.8 42.5 17% 73.4
Construction Services
--------------------------------------------------------------------------------
Other items -5.4 -2.1 -9.8 -10.2 -13.4
--------------------------------------------------------------------------------
Group, total 37.4 45.5 -18% 111.6 126.1 -11% 194.1
--------------------------------------------------------------------------------
Operating profit margin excluding 7-9/13 7-9/12 1-9/13 1-9/12 1-12/1
non-recurring items, % 2
--------------------------------------------------------------------------------
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
--------------------------------------------------------------------------------
Group, total 8.2 9.7 8.3 9.0 9.9
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Order backlog, EUR 9/13 6/13 Change 9/13 9/12 Change 12/12
million
--------------------------------------------------------------------------------
Construction 1,555.1 1,584.0 -2% 1,555.1 1,541.0 1% 1,499.0
Services Finland
--------------------------------------------------------------------------------
International 1,258.3 1,226.8 3% 1,258.3 1,207.4 4% 1,266.1
Construction
Services
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Group, total 2,813.4 2,810.8 0% 2,813.4 2,748.4 2% 2,765.1
--------------------------------------------------------------------------------
7-9/13 7-9/12 Change 1-9/13 1-9/12 Change 1-12/1
2
--------------------------------------------------------------------------------
Profit before taxes, EUR 29.9 44.6 -33% 90.3 110.5 -18% 169.6
million
--------------------------------------------------------------------------------
Profit for the review 23.1 35.1 -34% 69.5 86.1 -19% 130.4
period, EUR million 1)
--------------------------------------------------------------------------------
Earnings/share, EUR 0.18 0.28 -36% 0.55 0.69 -20% 1.04
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Operating cash flow -82.0 -5.0 -164.2 41.9 49.9
after investments, EUR
million
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9/13 9/12 Change 9/13 9/12 Change 12/12
--------------------------------------------------------------------------------
Personnel at the end of 6,384 6,756 -6% 6,384 6,756 -6% 6,691
the period
--------------------------------------------------------------------------------
Return on investment 12.3 n/a 12.3 n/a 15.0
(last 12 months), %
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Equity ratio, % 37.0 37.9 37.0 37.9 43.1
--------------------------------------------------------------------------------
1) Attributable to equity holders of the parent company
Group reporting, IFRS
9/13 6/13 Change 9/13 9/12 Change 12/12
--------------------------------------------------------------------------------
Net interest-bearing debt, 774.4 688.1 12% 774.4 617.2 4% 543.9
EUR million (2012 non-IFRS)
--------------------------------------------------------------------------------
Gearing ratio, % (2012 123.7 109.8 123.7 106.1 80.9
non-IFRS)
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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):
FI: +358981710461
SE: +46850556483
UK: +442033645372
US: 18557161589
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 News conference, conference Recorded webcast
published call and live webcast available
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EEST 8:00 10:00 12:00
(Helsinki)
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CEST (Paris, 7:00 9:00 11:00
Stockholm)
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BST (London) 6:00 8:00 10:00
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US EDT (New 1:00 3:00 5:00
York)
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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
YIT CORPORATION
Kari Kauniskangas:
President and CEO
For further information, please contact:
Timo Lehtinen, Chief Financial Officer, YIT Corporation, tel. +358 45 670 0626,
timo.lehtinen@yit.fi
Sanna Kaje, Vice President, Investor Relations, YIT Corporation, tel. +358 50
390 6750, sanna.kaje@yit.fi
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
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