Yit Oyj Unsp/Adr

Welcome to YIT's third quarter 2026 results webcast. My name is Essi Nikitin and I'm heading the investor relations at YIT. Together with me here are our CEO Heikki Vuorenmaa and CFO Erkka Repo. We will first hear Heikki to go through the third quarter developments in the company. Following that, Erkka will walk you through the latest financial developments. We arranged a capital markets update in September to clarify how YIT is positioned to benefit from the current data center market growth. At the end of the presentation today, Heikki and Erkka will summarize the key messages from that event. After the presentation, the participants will have an opportunity to ask questions from Heikki and Erkka. But now, without further ado, I will hand over the floor to Heikki.

Yes, thank you very much, Essi, and good morning also from my behalf. Welcome all to the third quarter webcast. And as tradition, we start with the key highlights from our third quarter performance. Our revenue increased 14%, driven by the strong growth in our contracting segments, as well as in the residential CEE. Profitability also improved and adjusted operating profit increased 26% to 30 million euros. We recorded over 900 million worth of orders for the contracting segments from several customer segments. And we can clearly say that our order book will also support the growth going forward. But let's go more into the details. The group's quarter revenue stood at 530 million euros and adjusted operating profit margin reached 5.7%. This was now the third consecutive quarter that our revenue continued to increase, and the growth for the full year now exceeds 7%. Revenue and adjusted operating profit improvement came from the residential CEE, building construction and infrastructure segments. Let's start with the CEE. The revenue growth was close to 10% compared to previous year, while the profitability continued on the good level at 13%. It's overall a solid performance in a favorable market. Building construction revenue increased 35% and the profitability also took a clear step forward. This profitability improvement is supported by some very successful project completions significantly ahead of schedule. Infrastructure revenue growth was above 20% with the profitability exceeding 6% level. This was now seventh quarter in a row that infra-revenue continued to increase and we maintained solid profitability on that segment as planned. Residencial Finland continues to operate in the muted market conditions, and the team is working hard on turning the segment profitable with taking cost efficiency measures. We are seeing a progress, yet it's fair to say that as the top line continues to decline over 35%, the task is fairly challenging for the organization. The overall group operative performance direction is something we expected, and we are on track to deliver our strategic targets. Let's go to the segment level details and we start with the residential Finland. While we still see year on year significant decline in revenue, compared to actually the previous quarter, the development is now more stabilized. This is due to the fact that now most of the projects are for consumers and the investor part of the business is at its lowest level. We do still see challenges with the investor market during 2026. However, improving occupancy rates might positively impact the outlook for the investor project in the coming year. We will continue to adjust our operations for this declining revenue and prevailing market conditions, obviously, and the cost-saving measures now implemented earlier this year is only partially reflected in the segment performance by now. Apartment sales were modest at 116 units, which is still a slight improvement from the previous quarter. We started two projects with a total of 43 units, but what is more significant is that these projects represent our new customer-centric residential concept launched during the year, Olo and Formia. The third concept, Fiksu, has also been launched, and the first projects are now on pre-marketing. The new concepts Olo and Formia have received a positive response from our customers. Looking forward, we see that there are no further barriers in this Finnish residential market actually to prevent the market recovery to start. Economy is growing, purchasing power is increasing, and the housing is affordable. Also in the new build we see that the reservations for those good projects are accumulating faster than in the past few years and the funding for projects and the customers is available. Stock is at normal level and there is a limited amount of new build ongoing. So to conclude, there are conditions for a rebound in the residential construction in 2027 when we look at the consumer market. There were 131 apartment completions and 43 starts. Hence the apartments under construction decreased to 514 units. And as mentioned, the production for investors is at historically low level. Only one project with the 61 apartments. Sales rate remains stable at 30%. It's actually reflecting very well the consumer behavior of postponing the purchase decision closer to completion. and today we have some 15 to 20 newly designed projects ready for pre-marketing and launch as the market conditions are right for those. But then we move to our main residential business, the residential CEE. Revenue increased by close to 10% from the comparison period and now the rolling 12 months revenue keeps climbing and it's at 392 million euros. Also on the rolling basis, profitability is now at a solid level of 13.3%, quite close to the strategic target of 15. It's overall a solid performance from the residential CE, but at the same time, on the group level, we are focusing our efforts to allocate further capital to this segment and accelerate growth even more in this favorable market. Apartment sales were 406 units for the quarter. And the starts were moderate level of 148 units as we communicated already earlier. However, when we look the next quarter, we are anticipating that to be much more active as much of the project launches in 2026 are expected to take place in Q4 this year. Overall, market remained favorable across operating countries. Apartments under construction decreased somewhat to 3400 units as there were a bit more completions than the starts. Sales rates of the apartments under construction is at 51% which is reflecting the good market conditions as well as our excellent product and brand fit on those specific markets and cities that we are operating in. Let's move then to our contracting segments and this time we are starting with our building construction segment. The revenue was a strong 217 million euros, growing 35% from the comparison period. While the data center construction was obviously the fastest growing sector, we are also seeing growth from the various other customer segments. Our improved operative efficiency, as well as increasing volumes, are supporting the profitability. And the profitability continues to improve. On a rolling 12-month basis, the profitability is now at 3.1%, and for the single quarter was at a very good level of 5.2% in this segment. Moving on to infra. And the growth in our infrastructure segment continues. This was now the seventh consecutive quarter for the growth. Revenue increased by 23%. The story is very much the same here. The data centers are the fastest growing sector, obviously, but we are seeing growth also from other customer sectors. Our adjusted operating profit margin remains stable at a good level of 4.2% on the rolling 12-month basis. Overall, our infra continues solid and strong performance. As we discussed on the previous pages, both of the segments are on the growth mode and already in the opening I was discussing the amount of orders we recorded and it's a pleasure to say that the contracting segments recorded total over 900 million euros of new orders, which will then support the growth going forward as well. Launches of this order was the data center at North in Kovola, which we already announced in July, with a total value of approximately 300 million euros. Also, there was other orders from the data center sector. Another order from our long-term collaboration with XDX was recorded to order book in third quarter. Activity continues strong in the other segments and during the quarter we recorded also the implementation phase of Jätkäsaari swimming pool and sports center, value of 94 million euros, as well as orders from the Reiland defense sectors. The strong order intake is visible in both building construction and infrastructure order books, which increased 32% and 24% respectively. But let's then one more time double click on the data center business. So as said, the data centers are providing a considerable boost to both of our contracting segments, as well as outlook for the group, as we will discuss a little bit later with Erkka here. If we look at during the past 12 months, the data centers have now generated more than 250 million euros in revenue, which is translating close to 20% of our contracting segments combined revenue. And these figures has continuously obviously increased. And with our strong order book and the recent order intake from this sector, we expect this development to continue. In addition, we are having several ongoing discussions with the customers that are planning to invest in Finland. But then we move to market environment. We see that an economic recovery in Finland, as well as other visible positive indicators, combined with the decline in the residential supply, are creating conditions for a rebound in the residential construction in 2027, especially when we look at the consumer market. Therefore, we are upgrading our view on the Finnish residential market short-term outlook from stable to improving. However, the market is still weak and remains consumer-driven, and a broad-based recovery remains still some way off. No other change is in our outlook, with the CE residential market and the Finnish infrastructure market continuing as our strongest markets. But that's all from my first part, and time to hand over to you, Erkka, to cover the financial development for the quarter.

Thank you, Heikki. Let's start with the summary of our Q3 financial development. Operating cash flow after investments improved from the comparison period and was 19 million euros positive for the third quarter. Gearing was at 90% and net debt was 604 million euros at the end of the quarter. Net debt decreased by over 60 million euros from Q3 2025. Return on capital employed improved and was 6.7% at the end of the quarter, up from 5.7% a year ago. Let's look at each of these topics in more detail in the next slides. Our operative capital employed amounted to roughly 1 billion at the end of the quarter, which is close to 40 million less than a year ago. On a segment level, there were no significant changes during the quarter. Return on capital employed is on a positive trend and increased by one percentage point from the comparison period to 6.7% at the end of the quarter. Capital efficiency in business operations as well as the improved adjusted operating profit are visible in this metric. It is good to note that these figures are excluding our non-strategic items, which we intend to dispose of during the strategy period ending in 2029. Non-strategic items amounted to 257 million euros at the end of the quarter. We will continue to drive profits and capital turnover to reach our financial target of at least 15% return on capital employed by the end of 2029. Let's move on then to the cash flow development. Operating cash flow after investments was 19 million positive for the quarter, which is an improvement from the comparison period. If we look at a longer time period, we have generated close to 140 million euros of positive cash flow during the past 12 months, which is 60 million more than in the comparison period. This increase in cash flow has allowed us to increase our investments to plots to secure our future growth in the residential CEE. We will continue our work to further improve gas generation across the operations. Net interest bearing debt decreased both from the previous quarter and from the comparison period, amounting to 604 million euros at the end of the third quarter. The net interest-bearing debt includes IFRS 16 lease liabilities of 254 million euros as well as housing company loans of 180 million euros related to unsold apartments. When excluding these items, the adjusted net debt amounted to some 230 million euros. Gearing remained at the previous quarter's level but increased by five percentage points year on year and was at 90% at the end of the quarter. Gearing has been impacted by the redemption of the outstanding 2021 issued hybrid bond of 46 million euros in the first quarter of this year. We aim to reduce the debt level of the group and operate within the Z financial framework of 30-70% gearing. Our balance sheet remains asset rich. We have over 700 million euros worth of plots enabling a pipeline of almost 30,000 apartments across our operating countries, which we see as an important platform for future profitable growth in the residential segments. Completed apartments and real estate in our inventory amount to 225 million euros and investments amount to 168 million euros. The book value of Tripla is now 93 million euros, reflecting a 19 million negative fair value change during the quarter due to an increase in the yield requirement and the fair value impact of the profit sharing agreement. In maturity structure of the interest bearing debt, having only minor amortizations to be performed this and next year, providing us stability and allows us to further allocate capital for growth in residential CEE. Moving on to the guidance. We have now narrowed the range for the adjusted operating profit guidance. We now expect group adjusted operating profit for continuing operations to be between 80 to 90 million euros in 2026. Previously, we expected the adjusted operating profit to be between 70 to 100 million euros. The guidance update is a result of stable financial performance of the businesses during the first nine months of the year. Our outlook remains unchanged. Thank you and now back over to you Heikki.