Yit Oyj Unsp/Adr

Hi, everyone. Welcome to YIT's third quarter 2025 results webcast. My name is Essi Nikitin and I'm heading the investor relations at YIT. The results will be presented to you by our CEO, Heikki Vuorenmaa, and CFO, Tuomas Mäkipeska. Without further ado, I will hand over to Heikki now to go through the latest developments in the company. Please go ahead, Heikki.

Thank you very much, Essi, and welcome also from my behalf to the third quarter 25 webcast. In third quarter, we overall delivered solid performance in line with our expectations. The contracting segment's profitability continues to improve, and they were the main profit drivers during the third quarter. Our apartment sales and production keeps increasing in the residential segments. And CEE has taken the role as our primary market in terms of revenue, volume and profits. Order book for the contracting segments are developing well and broader demand environment remains healthy as we move into the fourth quarter. In fact, our next year order book is stronger than in the recent years. Our recently executed employee survey indicates strong commitment from the team towards our new strategy. And supported by the good operative progress, we revised our full year guidance. But let me share numbers and some key highlights from the quarter. The low amount of apartment completions in the residential business impacted our numbers on a group level as expected. The revenue declined to 402 million euros burdened by the residential segment volumes. Also, it impacted our adjusted operating profit, which was on the level of 12 million euros. What we are really pleased is that our contracting segments trend is improving all the time and the contribution to profitability is increasing. Infra revenues continues to increase during the quarter to 127 million euros, increasing 30% compared to last year. Assisted operating profit reached almost 6% in infra and 4.5% in the building construction segment. But as we then look at our business performance over the past 12 months, we can clearly see how the three out of four segments are delivering as they operate in the favorable market. Revenue is still primarily coming from the contracting segments and representing altogether 65% of the rolling 12 months revenue. The residential operations in the CEE are expected to grow strongly, as you can see here. The project completion schedule for the next year worth of 450 million would imply or indicate even almost 60% volume growth compared to the rolling 12-month figures. And of course, those starts, what we have been doing, those are done with the healthy gross margin levels. The resilience of the group is increasing and the dependency to single market or a single segment is declining. Our contracting segment operates with a strong order book, so all in all, the company is heading to the right direction. But let's move then to individual segments and we start with the residents of Finland. As I mentioned already, the revenue has been on the declining trend, and the same trend continued this quarter as we didn't have any completions during the third quarter 25. We mostly sold apartments from our inventory during the quarter and focused to launch new projects that will be then completed during 26 and 25. Key for us is to ensure that our product designs meet the market expectations and consumer preferences. And the team here is working on with the internal efficiencies to manage the costs and identify further opportunities across the operations. The inventory of unsold apartments is reaching a normal level. Helsinki metropolitan area still carries excess from the decisions done during the 22 Our focus on reducing the inventory has now yielded results, and the inventory is no longer an issue for us. Actually, when we look outside of the capital area, we start to already have some shortages, like in Oulu, Turku, Jyväskylä, to mention a few of the cities. Altogether, we started 224 new apartments during the quarter, and those were done mostly on the outside of the capital area. And the reason is on the previous slide, as discussed, that we still carry an excess supply and we make those starts on the regions where we see that the demand is healthy and we are convinced that those products are on a good micro locations that will be sold to consumers during the construction period. And as I mentioned here, the story actually is quite the same as in the second quarter, so no completions, and it had the implications that we already discussed. Our revenue and profits on this segment, same as in the CEE, is based on completion, and it has then the meaningful impact on our profitability. The overall completions this year, if we look 274 units, this could be actually the lowest point in time. This is just 20% of the completions on 2023 when we are comparing to the previous years. And here we can see the implications where the residential business bottomed out. Now we have been starting new projects and gradually we see that the market is improving and heading towards better times. But then we move to the residential CEE, which is our primary residential business in the future. The segment performance is very strong, which is hard to observe from our IFRS numbers, as this records revenue only at completion. It's also good to note that this team at the moment is managing a substantial amount of new projects and the future revenues, which is not yet visible on the figures here. And I said this has now become our principal market. There is about 60 million people living on the operating countries that we are building the homes for consumers, and we see that there are future opportunities still to grow. Revenue and profits for the segment are heavily tilted towards the Q4 this year. The sales speed continues to increase and reach new levels. now over 1,200 units in a rolling 12 months basis. We also continued with the new starts, a bit more than 300 units during the quarter. And by now, projects valued almost 450 million are in production that are estimated to be completed in 2026. And the sales of those projects are progressing well. Favorable market conditions will reinforce the segment roles as a key driver for the growth in the future during our strategy period. We actually had one project completion during the Q3 ahead of schedule, and that was the city in Krakow, Poland. It was one of our newest cities that we opened, and I'm very pleased that the team were able to find lead time acceleration opportunities to get the project completed already ahead of schedule. However, majority of the completions are scheduled for the final quarter this year. And total, we talk about 10% more during 2025 than what we had in 2024 in terms of completions. But let's leave the residential segments and move to the contracting segments, starting with our infra operations. Infra solid performance continues, top line and profitability continue to grow. The rolling 12 months revenue is to reach half a billion Euro level soon. As we do during the quarter, we saw already, again, a 30% growth in revenue. The business has a strong order book, tendering pipeline, extremely active, and the customer NPS is increasing. But I would like to double-click on one part of the market, what the segment is operating in. This is one of the megatrends that we have highlighted, and it relates to the data centers. The data center investments may play a big role for the Finnish construction companies in the coming years. We have already publicly announced three data center partnerships by now. The market in Finland strongly increasing, investment plans announced reaching already 12 billion euros. We made a decision a couple of years ago to invest in capabilities, both in our project management and general terms, but also in the MEP. And that decision is now yielding results. Data center market offers great potential for us, and we are happy to work with the close cooperation with customers to deliver the solutions on time under the tight schedules that the data centers typically has. Our recent wins further strengthens YIT's position as the leading builder of data centers here in Finland, and this is supporting our strategic focus. We are capable to actually offer full EPC solutions for the data centers as well through our diverse capabilities and as we have capabilities both in infra as well as the building construction segment. And as we combine all that, so that makes us competitive in those tendering processes. But coming back to infra order book and it has remained on the steady level, but the content here is a bit shifting. We actually observe increasing amount of orders from B2B customers in our order book. We still see that we have probably one of the strongest order books among the industry players, and it's approximately 19 months of work. It gives us an opportunity to develop the projects with our customers, such a way that we will find the best solutions for them, which suits for their project. But before moving to building construction, I have to say that it's yet again a solid quarter from our infra team. We also have positive news from our building construction segment. The revenue growth is still ahead of us, but the profitability of the segment is taking steady steps forward. This quarter we recorded 7 million euro profit, and on the rolling 12-month basis, we are approaching 3% level. The balance sheet continues to have a lot of opportunities to release the capital. Yet it also negatively impacts the segment's profitability. The negative impact from the capital employed, what we have, exceeds the gains from the balance sheet, which is the fair value gains that we are recording during the quarter. We have secured a good level of new orders and we are looking actually ahead with a quite positive outlook. We have about 17 months of work in our books and enabling us here again also to focus on the long-term customer development activities. The market continues active and so does the tendering. Then a view to our operations. Overall, our operations are running smoothly, even though we have significantly scaled up our production volume in the residential segments. The production has now increased 60% in the residential business year on year, above 4,000 homes in production today. Project margin net deviations are positive in the contracting segments and supports the profitability. Our supply chain is under control. However, we start to observe workforce availability tightness in our operations, especially in Slovakia and Czechia, which needs attention from our supply chain teams going forward. Then to overall market view before handing over to Tuomas. We have actually updated our view on infrastructure market here in Finland from normal to good. Our operations in the central Eastern Europe benefits from the favorable market conditions and the strong demand, what we are seeing, especially on the residential segment, but also there is a normal to good market in the building construction segment, depending a bit on the specific country. The residential market in Finland is improving. However, it is still on the weak level and there's still way to go before we are reaching a normal level of residential market here in Finland. But that concludes my first part and time to hand over to you, Tuomas, to cover our financial performance of the quarter.

Yes, thank you, Heikki. Let's go through our financial development in the third quarter and start with a summary of our key metrics there. So our return on capital employed was at 3% and gearing at 85% at the end of the third quarter. Our key assets amounted to well over 1.6 billion euros, while the net debt decreased to 669 million euros at the end of the third quarter. The cash flow for the quarter was zero million. So all in all, the quarter was very stable and according to the plan, also from the financial perspective. And as a result of the stable performance year to date, actually, we revised our guidance and we now expect the adjusted operating profit for the year to be between 40 to 60 million euros. But let's look at each of these topics in more detail in the following slides. Our return on capital employed improved from the comparison period, but was at a lower level than in the past two quarters. The low amount of consumer apartment completions during the quarter, which impacted adjusted operating profit in both residential segments, is also visible in this metric. We will continue to drive profits and capital turnover to reach our financial target of at least 15% by the end of the 2029. But some highlights regarding capital employed from the segments. So in residential Finland, the capital employed has been on a downward trend, supported by the efficient use of our plot portfolio and sale of the completed apartments from the inventory. In residential CEE, we have been able to release some 75 million euros of capital over the past 12 months, even though at the same time our apartments under production have increased by over 70%. So this is mainly thanks to our strong plot portfolio, solid apartment sales and other capital efficiency measures. The infrastructure segment continues to operate with negative capital employed, supporting the whole group's financial performance. And the capital employed in building construction continues to include non-core assets, which burden the segment's profitability, as Heikki mentioned before. Let's move on to the cash flow development. Cash flow after investments for the third quarter was zero, and we can see from the graph that the cash flow in our business is cyclical and typically heavily tilted towards Q4. When looking at the longer time period, the 12 months rolling cash flow was almost 70 million euros positive at the end of the third quarter, and has now been actually positive for the last seven quarters. Cash flow from plot investments in the third quarter was minus 9 million euros, and the plots we invested in during the third quarter were mainly located in Poland, which supports our growth in the region in the future. So this demonstrates our ability to operate the businesses with a positive cash flow while investing in growth where the returns are the highest. Net interest bearing debt decreased from the comparison period and remained stable when comparing to the previous quarter, amounting to 669 million euros at the end of Q3. Gearing was at 85% and decreased from the comparison period. In addition to the positive rolling 12-month cash flow, the decrease was supported by a hybrid bond issuance, which took place during the second quarter this year. The net interest-bearing debt included IFRS 16 lease liabilities of 260 million euros, as well as housing company loans of 138 million euros. and the combined amount of these items has decreased by over 80 million euros from the comparison period. This is thanks to our decreasing inventory of unsold apartments, as well as capital efficiency actions relating to leased plots. When excluding the before mentioned lease liabilities and the long maturity housing company loans from our net debt, the adjusted net debt amounted to some 270 million euros. This translates to an adjusted gearing ratio of 35%. We remain determined to reduce the indebtedness of the group and operate within the set financial framework of 30 to 70 percent gearing. We have an asset-rich balance sheet. Our key assets amount to well over two times the net debt. When comparing the components of our key assets to the year ago situation, the changes in the company are clearly reflected there. Production has increased by around 60 million euros, as we have accelerated our production, especially in the favorable markets of the CE countries. As we have accelerated starts, our plot reserve has decreased by some 100 million euros, but it continues to remain strong, enabling the construction of approximately 30,000 apartments across our operating countries. Completed inventory in our balance sheet has decreased by over 80 million euros from a year ago, as we have continued to successfully sell the excess apartment stock. So all in all, we have effectively used our balance sheet and will continue to do so going forward. Capital release from the balance sheet and capital efficiency in business operations continue to be top priorities in our strategy. As communicated, we identify potential to release up to 500 million euros of capital from our current department inventory and through divestments of the non-core assets. These non-core assets include real estate, plots and ownerships in associated companies that are not in the core of our current strategy. And the released capital will be reallocated to fund residential segments' profitable growth and reduce indebtedness of the company, which will consequently lower the financing cost and support the net profit generation. In maturity structure of the interest bearing debt, having only limited amortization scheduled for this and next year, allow us to focus on profitable growth of the businesses. The amortizations maturing in 2027 and 2028 will be addressed as a part of normal refinancing planning. Then to the guidance, which has been revised. We have narrowed the range for the adjusted operating profit guidance. We now expect group adjusted operating profit for continuing operations to be between 40 to 60 million euros in 2025. Previously, we expected the adjusted operating profit to be between 30 to 60 million euros. The guidance update is a result of the stable financial performance of the businesses during the first nine months of the year. Our outlook, however, remains unchanged. So, to summarize the Q3 financial development before handing back over to you, Heikki, The stable financial performance across our businesses seen during the first half of the year continued in the third quarter. Our plot portfolio continues to be strong, which enables us to start new residential projects and consequently support profitable and capital efficient growth. And releasing capital is a strategic priority as we continue to allocate capital to our most profitable businesses. So based on these facts, our current financial position clearly serves as a basis for the targeted profitable growth according to the strategy. So that covers the finance part of the presentation. So now back to you, Heikki.