Financial Statements Bulletin 2016 Kari Kauniskangas, President and CEO Contents
1 Group development in Q4/2016
2 Housing Finland and CEE
3 Housing Russia
4 Business Premises and Infrastructure
5 Financial position and key ratios
6 The year 2016
7 Focus areas and outlook for 2017
8 Appendices Aviapolis railway station Vantaa, Finland
YIT | 2 | Financial Statements Bulletin 2016 1
Group development in Q4/2016
Wanha Mylly residential project Kuopio, Finland Key messages in Q4/2016
• Exceptionally strong residential sales to consumers in new projects in Finland and the CEE countries
• Good progress in ongoing projects and a solid order backlog in Business Premises and Infrastructure
• Operating profit positive in Housing Russia due to good sales and high number of completions
• Despite the improvement, financial key ratios still on an unsatisfactory level
UPM headquarters Helsinki, Finland
YIT | 4 | Financial Statements Bulletin 2016 Group: Revenue grew and profitability improved in Q4
• Revenue increased by 10% y-o-y, 9% at comparable exchange rates • Operating profit margin improved y-o-y in all segments • Order backlog remained stable q-o-q, share of sold backlog continued to increase
Revenue and adjusted operating profit margin (EUR million, %) Order backlog (EUR million)
2015: EUR 1,651 million, 4.6% 2016: EUR 1,784 million, 4.5% -1% 10%
9.0 % 2,641 2,613 514 8.0 % 469 464 444 416 7.0 % 375 392 5.6% 362 6.0 % 56% 60% 4.5% 4.3% 4.3% 5.0 % 5.5% 3.6% 5.2% 3.3% 4.0 %
3.0 %
2.0 % 44% 40% 1.0 %
0.0 % Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 9/2016 12/2016 2015 2016 Revenue Adjusted operating profit margin Unsold Sold
All figures according to segment reporting (POC) Note: The adjusted operating profit margin does not include material reorganisation costs, impairment or other items impacting comparability YIT | 5 | Financial Statements Bulletin 2016 EBIT-bridge Q4/2015–Q4/2016
• Positive profitability development in Housing Finland and CEE due to less capital release actions and shift in the sales mix
Adjusted operating profit (EUR million), change Q4/2015–Q4/2016: 72% 28.7 1.3 -0.1 2.3 1.4 1.9 0.2
16.6 5.7 -0.7
YIT Group Volume Profitability Volume Profitability Volume Profitability Other items FX-impact YIT Group Q4/2015 Q4/2016 Housing Finland and CEE Housing Russia Business Premises and Infrastructure
YIT | 6 | Financial Statements Bulletin 2016 2
Housing Finland and CEE
Užupio etiudas Vilnius, Lithuania Housing Finland and CEE Operating environment in Finland in Q4
• Consumer confidence improved • Good demand especially for • Mortgage interest rates stayed on in Q4 small, affordable apartments in a low level and margins continued the growth centres to decrease • Investor demand remained on a good level • Some improvement in demand for • The volume of new housing loans larger apartments continued to increase y-o-y
Prices of old apartments New drawdowns of mortgages and Consumer confidence (index 2010=100) average interest rate (EUR million, %)
25 120 2,000 5.0 1,800 20 115 1,600 4.0 1,400 15 110 1,200 3.0 10 1,000 105 800 2.0 5 600 100 400 1.0 0 200 -5 95 0 0.0 2013 2014 2015 2016 2017 2013 2014 2015 2016 2013 2014 2015 2016
Consumer confidence Finland Capital region New drawdowns of mortgages, left axis Long-term average Rest of Finland Average interest rate of new loans, right axis
Sources: Statistics Finland and Bank of Finland
YIT | 8 | Financial Statements Bulletin 2016 Housing Finland and CEE Operating environment in the CEE countries in Q4
• Macro environment remained • Prices of new apartments • Interest rates of mortgages on a positive remained relatively stable or low level increased slightly in the CEE • Residential demand on a good countries • Consumers’ access to financing level remained good
Consumer confidence House price index, new dwellings (2010=100) Average interest rate of mortgages (%)
10 220 7.0 5 200 6.0 0
-5 180 5.0 -10 160 4.0 -15
-20 140 3.0
-25 120 2.0 -30 100 1.0 -35
-40 80 0.0 2013 2014 2015 2016 2017 2013 2014 2015 2016 2013 2014 2015 2016
Estonia Latvia Lithuania The Czech Republic Slovakia Poland
Sources: European Commission, Eurostat and National Central Banks
YIT | 9 | Financial Statements Bulletin 2016 Housing Finland and CEE Revenue decreased slightly in Q4
• Revenue declined by 5% y-o-y due to less capital release actions in Finland • Exceptionally high share of unit sales for consumers was from recently started projects • Order backlog declined by 5% q-o-q due to high completions and on average smaller size of started apartments
Revenue (EUR million) Order backlog (EUR million)
2015: EUR 778 million 2016: EUR 728 million
-5% -5%
221 208 210 880 184 185 833 166 166 167
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 9/2016 12/2016 2015 2016
All figures according to segment reporting (POC)
YIT | 10 | Financial Statements Bulletin 2016 Housing Finland and CEE Profitability improved in Q4
• Profitability improved y-o-y due to less capital release actions in Finland and positive change in sales mix • ROI continued to improve due to improving operating profit
Adjusted operating profit and adjusted operating profit margin Return on operative invested capital (EUR million, %) (EUR million, %)
2015: EUR 56.0 million, 7.2% 2016: EUR 59.9 million, 8.2%
38% 500.0 453.5 20.0% 437.1 442.0 441.4 432.0 18.4 450.0 18.0% 16.2 15.8 400.0 16.0% 14.2 350.0 13.4% 14.0% 13.4 12.3% 12.9 12.9 11.0% 11.6% 12.3 300.0 10.8% 12.0%
250.0 10.0%
8.5% 8.7% 200.0 8.0% 7.7% 7.8% 7.4% 7.7% 7.7% 6.0% 150.0 6.0% 100.0 56.0 54.7 54.3 54.8 59.9 4.0% 50.0 2.0%
0.0 0.0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 12/2015 3/2016 6/2016 9/2016 12/2016 2015 2016 Adjusted operating profit Adjusted operating profit margin Operative invested capital Operating profit, 12 month rolling Return on operative invested capital
All figures according to segment reporting (POC)
YIT | 11 | Financial Statements Bulletin 2016 Housing Finland and CEE Sales and start-ups in Finland in Q4
Sold apartments (units) • Strong consumer sales, 2015: 3,192 2016: 2,730 number of units sold to consumers grew by 88% 1,100 y-o-y in Q4/2016 858 715 718 659 705 726 612 555 240 • Share of units sold to 441 332 444 330 298 264 consumers in Q4/2016: 72% 618 (Q4/2015: 50%) 271 374 277 329 314 373 291
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 • 72 apartments from projects 2015 2016 initially started for To consumers To investors (funds) consumers sold to investors (Q4/2015: 66 units) Apartment start-ups (units)
2015: 2,864 2016: 2,877 • In 2016, consumer sales grew by 28% y-o-y, share of 1,097 units sold to consumers 817 819 58% (2015: 39%) 635 629 657 559 579 262 185 584 309 277 168 • In January, sales to 269 264 555 634 consumers around 150 units 462 320 380 416 290 315 (1/2016: around 70 units) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2015 2016 To consumers To investors (funds)
YIT | 12 | Financial Statements Bulletin 2016 Housing Finland and CEE Sales and start-ups in the CEE countries in Q4
Sold apartments (units) • Number of units sold to 2015: 1,023 2016: 1,197 consumers grew by 10% 560 y-o-y in Q4
240 • Apartment building project of 275 256 290 90 apartments was sold to a 202 201 235 201 83 private co-operative in 320 192 Prague
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 • Two apartment building 2015 2016 projects in Tallinn and Consumer sales Co-operative or housing fund Prague with a total of 150 Apartment start-ups (units) units were sold to a newly established housing fund, 2015: 1,021 2016: 1,300 YCE Housing I
489 • In 2016, start-ups increased 344 331 by 27% y-o-y 316 286 206 209 140 • In January, sales to consumers around 80 units (1/2016: around 50 units) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2015 2016
YIT | 13 | Financial Statements Bulletin 2016 Housing Finland and CEE The production volume (units) continued to grow in Q4
• Number of unsold Apartment inventory (units) completed apartments on 6,152 6,237 a low level 5,863 5,971 335 352 5,389 352 381 5,817 5,885 5,047 • Sales rate of the inventory 4,994 4,916 447 5,482 5,619 increased due to strong 562 611 573 4,942 4,474 sales in recently started 4,432 4,305 projects 63% 61% 61% 60% 61% • The share of CEE of the 59% 57% 52% sales portfolio (units) 47% (12/2015: 45%)
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2015 2016 Under construction Completed, unsold Sales rate, %
YIT | 14 | Financial Statements Bulletin 2016 3
Housing Russia
Novo Orlovsky St. Petersburg, Russia Housing Russia Operating environment in Q4
• The ruble continued to • Demand focused especially on • Mortgage subsidy program was strengthen during the quarter small apartments in effect until the end of 2016
• Residential prices remained • Mortgage interest rates for new stable apartments at around 12%
Prices of new apartments Mortgage stock and average interest rate, EUR/RUB exchange rate (index 2012=100) (RUB billion, %)
135 5,000 16.0 95 130 4,500 14.0 125 4,000 85 12.0 3,500 120 75 3,000 10.0 115
Tuhannet 2,500 8.0 65 110 2,000 6.0 105 55 1,500 4.0 100 1,000 45 95 500 2.0
35 90 0 0.0 2013 2014 2015 2016 2017 2013 2014 2015 2016 2013 2014 2015 2016 Moscow Yekaterinburg Mortgage stock, left axis Rostov-on-Don Kazan Average interest rate of new loans, right axis St. Petersburg
Sources: Bloomberg, YIT and Central Bank of Russia
YIT | 16 | Financial Statements Bulletin 2016 Housing Russia Revenue grew clearly in Q4
• Revenue increased by 32% y-o-y at comparable exchange rates due to strong sales and high completion rate of sold apartments
• Order backlog grew slightly q-o-q due to ruble strengthening, FX impact EUR 41 million
Revenue (EUR million) Order backlog (EUR million)
2015: EUR 266 million 2016: EUR 268 million
36% 3%
451 463 84 76 71 70 64 62 59 49
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 9/2016 12/2016 2015 2016
All figures according to segment reporting (POC)
YIT | 17 | Financial Statements Bulletin 2016 Housing Russia Profitability improved in Q4
• Operating profit was positive and profitability continued to improve due to good sales and lower fixed costs • ROI is on an unsatisfactory level, target to reduce the operative invested capital and continue to improve operating profit
Adjusted operating profit and adjusted operating profit margin Return on operative invested capital (EUR million, %) (EUR million, %)
2015: EUR 10.9 million, 4.1% 2016: EUR -2.3 million, -0.9% 450.0 405.1 40.0% 382.6 388.5 400.0 363.0 362.8 35.0% 284% 350.0 6.2 30.0%
300.0 8.7% 25.0% 2.8 250.0 2.3 20.0% 1.7 200.0 3.2% 2.7% 0.7 0.7 15.0% 1.2% 3.3% 150.0 0.9% 10.0% -4.6% 100.0 -6.3% 5.0% 50.0 0.6 0.0% -2.7 0.0 -3.1 0.2% -50.0 -2.1%-8.7 -13.6 -31.4 -29.3 -5.0% -3.3% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 -100.0 -10.0% -8.4% -7.6% 2015 2016 12/2015 3/2016 6/2016 9/2016 12/2016 Operative invested capital Adjusted operating profit Adjusted operating profit margin Operating profit, 12 month rolling Return on operative invested capital
All figures according to segment reporting (POC)
YIT | 18 | Financial Statements Bulletin 2016 Housing Russia Sales and start-ups in Q4
Sold apartments (units) and share of sales financed with a mortgage (%) • Number of sold units grew 2015: 3,129 (50%) 2016: 3,523 (51%) by 28% y-o-y in Q4
967 892 880 925 • Full-year start-ups in the 769 826 672 721 level of 2015 58% 58% 56% 54% 52% 50% 49% • Share of sales financed with 34% mortgages on a high level
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 • In January, consumer sales 2015 2016 Sold apartments Financed with mortgages, % around 150 units (1/2016: around 200 units) Apartment start-ups (units)
2015: 2,542 2016: 2,782
1,125 879 742 782 607 486 314 389
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2015 2016
YIT | 19 | Financial Statements Bulletin 2016 Housing Russia Apartment inventory decreased due to high completions
• Exceptionally high Apartment inventory (units) completions in Q4 resulted in decreased inventory 9,718 9,619 9,350 8,895 9,030 311 243 8,584 8,255 378 345 9,407 9,376 484 449 7,032 8,972 8,685 366 • Sales rate declined due to 8,100 8,446 7,889 414 6,618 high completions and start- 49% 49% 42% 43% 46% 43% ups 40% 37%
• At the end of December, YIT Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Service is responsible for the 2015 2016 maintenance and the living Under construction Completed, unsold Sales rate, % services of over 26,000 apartments (9/2016: over Apartments under construction by area (units) 24,000) 9,407 8,972 9,376 8,685 8,100 8,446 7,889 2,680 2,296 2,610 6,618 3,153 2,886 3,117 2,452 3,141 2,972 1,660 2,990 2,349 2,357 1,736 2,481 2,687 3,970 3,794 3,302 3,211 3,211 3,211 2,956 2,271
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2015 2016
St. Petersburg Moscow Russian regions
YIT | 20 | Financial Statements Bulletin 2016 4
Business Premises and Infrastructure
Lauttis shopping centre Helsinki, Finland Business Premises and Infrastructure Operating environment in Q4
• Investor demand stable on a good • The contracting market was • Positive macro outlook supported level active and several large projects the business premises market in were in tendering phase the CEE countries • Several large tenants looking for new premises in Helsinki region • The volume of construction increased
Confidence indicators in Finland Volume of new construction Retail trade confidence in the Baltic (index 2010=100) countries and Slovakia
20 140 25
130 20 10 120 15 0 110 10 100 -10 5 90 0 -20 80
70 -5 -30 60 -10
-40 50 -15 2013 2014 2015 2016 2012 2013 2014 2015 2016 2013 2014 2015 2016
Manufacturing Construction Commercial and office premises Estonia Latvia Public service premises Lithuania Slovakia Services Retail trade Industrial and warehouse
Sources: EK Confederation of Finnish Industries, Statistics Finland and European Commission
YIT | 22 | Financial Statements Bulletin 2016 Business Premises and Infrastructure Revenue grew in Q4
• Revenue increased by 18% y-o-y, growth due to construction of Mall of Tripla and the sale of Duetto I office premises in Vilnius
• Order backlog remained high
Revenue (EUR million) Order backlog (EUR million)
2015: EUR 616 million 2016: EUR 797 million
18% 1% 1,310 1,316 223 222 203 188 164 141 149 122
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 9/2016 12/2016 2015 2016
All figures according to segment reporting (POC) 2015 figures restated due to transfer of YIT’s equipment business from Other items to Business Premises and Infrastructure YIT | 23 | Financial Statements Bulletin 2016 Business Premises and Infrastructure Good profitability in Q4
• Profitability improved y-o-y due to strong performance both in Business Premises and Infra Services • ROI improved due to solid operating profit of the segment
Adjusted operating profit and adjusted operating profit margin Return on operative invested capital (EUR million, %) (EUR million, %)
2015: EUR 22.7 million, 3.7% 2016: EUR 38.1 million, 4.8% 250.0 35.0%
48% 194.7 197.6 30.0% 200.0 183.9 173.3 12.7 168.6 25.0% 11.2 21.6% 150.0 18.3% 20.0% 8.3 8.2 16.7% 7.5 15.0% 100.0 11.7% 6.0 5.7% 11.9% 5.1% 5.0% 3.7 4.0% 4.0% 4.0% 10.0% 3.1 38.1 50.0 25.6 34.6 18.2 22.7 5.0% 2.5% 2.6%
0.0 0.0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 12/2015 3/2016 6/2016 9/2016 12/2016 2015 2016 Operative invested capital Adjusted operating profit Operating profit, 12 month rolling Adjusted operating profit margin Return on operative invested capital
All figures according to segment reporting (POC) 2015 figures restated due to transfer of YIT’s equipment business from Other items to Business Premises and Infrastructure YIT | 24 | Financial Statements Bulletin 2016 Business Premises and Infrastructure Several successes in Q4
• LOI signed on the implementation of the Tripla hotel • The implementation agreement on Tampere light rail project signed, ~EUR 110 million booked in the order backlog • YIT awarded the contract on first excavation work phase for Posiva's final disposal facility, value ~EUR 20 million • New care projects signed and started, value ~EUR 26 million • Metropolia’s Myllypuro campus project booked in the order backlog, value >EUR 70 million • Duetto I office building in Vilnius, Lithuania sold to Baltic Horizon Fund, value ~EUR 15 million • Regenero, a JV formed by YIT and HGR Property Partners, acquired its first property in Espoo for a development project in January
Metropolia’s Myllypuro campus Helsinki, Finland
YIT | 25 | Financial Statements Bulletin 2016 5
Financial position and key ratios
Suomi-Hloubětín residential project Prague, The Czech Republic Cash flow after investments negative in Q4
• Negative cash flow due to 2015: EUR 184 million 2016: EUR -43 million investments in JVs and increase in inventories in 309 Housing Finland and CEE 280 • Cash flow of plot investments 179 184 EUR -32.2 million 144 (Q4/2015: EUR -53.3 56 million) 113 22 15 12 43 26 • Long-term financial target -25 -23 -21 is to have sufficient operating cash flow after -43 investments for dividend payout Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2015 2016
Operating cash flow after investments Rolling 12 months
YIT | 27 | Financial Statements Bulletin 2016 Invested capital and ROI in Q4
• Invested capital increased slightly • ROI is unsatisfactory, but started to improve due to strengthening operating profit • Target to reduce invested capital in Russia by approximately RUB 6 billion by the end of 2018
Invested capital (EUR million) Return on investment (%), rolling 12 months
1,344 1,308 1,196 1,175 1,132 1,141 1,103 1,131
7.5% 6.4% 5.1% 5.3% 4.7% 5.0% 4.7% 3.6%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2015 2016 2015 2016
All figures according to segment reporting (POC)
YIT | 28 | Financial Statements Bulletin 2016 Negative cash flow led to increase in net debt
Interest-bearing debt (EUR million), IFRS • Increase of net debt due to negative cash flow during the year 797 716 677 678 700 119 663 651 629 129 67 66 • Capital efficiency in focus going forward 88 122 122 72 • Strong liquidity buffer 678 633 587 575 529 555 557 611 • Cash and cash equivalents of EUR 66.4 million Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2015 2016 • Undrawn overdraft facilities of EUR 74.6 million Net debt Cash and cash equivalents • Undrawn committed revolving credit facility of 1 Maturity structure of long-term debt 12/2016 (EUR million) EUR 200 million
106 100 • Maturities in 2017 moderate, solid plan for refinancing
52 50
14
2017 2018 2019 2020 2021 1Excluding construction stage financing
YIT | 29 | Financial Statements Bulletin 2016 Despite the improvement, financial key ratios still on an unsatisfactory level
• Improvement in key ratios despite of increase in net debt • Positive translation difference in equity of EUR 35 million q-o-q
Gearing (%) Equity ratio (%) Net debt/EBITDA (Multiple, x)
13.1 13.0
117.3 118.9 112.3 36.4 106.1 108.6 104.8 35.2 36.0 35.5 35.5 35.1 98.7 101.1 34.1 33.8 8.1 9.5 6.6 6.9 96.2 33.8 5.9 91.5 89.6 91.8 33.1 32.9 33.0 5.2 85.9 84.0 82.5 83.3 32.1 31.5 31.2 5.0 7.3 30.1 6.5 6.1 5.2 4.6 4.6 3.9
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2015 2016 2015 2016 2015 2016
POC IFRS POC IFRS POC IFRS
Financial covenant tied to gearing (maximum level of Financial covenant tied to the equity ratio (minimum 150.0%, IFRS) in the syndicated RCF agreement and level of 25.0%, IFRS) in some bank loans, the in one bank loan. syndicated RCF agreement and the bonds issued in 2015 and 2016.
YIT | 30 | Financial Statements Bulletin 2016 Summary of financials in Q4
• Positive margin development in all business segments • New ways to improve capital efficiency taken into use • Ruble strengthening had a positive impact on the Q4 figures • Despite the improvement, financial key ratios still on an unsatisfactory level • Cash flow improvement through increased capital efficiency going forward • Financial expenses (POC) estimated to be around 15% lower y-o-y in 2017 assuming the current operating environment Ranta-Tampella residential area Tampere, Finland
YIT | 31 | Financial Statements Bulletin 2016 6
The year 2016
Central Library Oodi Helsinki, Finland Highlights in 2016
Renewed strategy published – focus back to growth in addition to profitability
Increased revenue and improved profitability in Business Premises and Infrastructure thanks to solid execution of major projects, success also in ensuring new projects
Tripla proceeded as planned; investor deals of Mall of Tripla signed, LOI signed on the implementation of the hotel project
Residential sales to consumers started to pick up in Finland – Smartti concept launched and 9 projects started
Expansion in the CEE countries proceeded well, a housing fund established to support the growth in the area in a capital-efficient way
Russian operations stabilised and adjusted operating profit was positive in H2
Capital release programme completed successfully Tampere light rail project Tampere, Finland
YIT | 33 | Financial Statements Bulletin 2016 EBIT-bridge 2015 – 2016
• Positive development driven by Business Premises and Infrastructure segment
• In Housing Finland and CEE, shift from investor sales back to consumer sales and less capital release actions in Finland had a positive impact on profitability
• In Housing Russia, profitability burdened by lower project margins
Adjusted operating profit (EUR million), change 2015 – 2016: 5%
79.9 -2.2 76.0 1.1 8.7 0.3 -3.6 7.4 -14.5 6.7
YIT Group Volume Profitability Volume Profitability Volume Profitability Other items FX-impact YIT Group 2015 Housing Housing Business Premises and 2016 Finland and CEE Russia Infrastructure
YIT | 34 | Financial Statements Bulletin 2016 Proposal to AGM: Dividend of EUR 0.22
Dividend / share (EUR) Note: Historical figures prior to 2013 are YIT Group pre demerger
0.80 0.75 0.70 0.65 0.65
0.55 0.50
0.40 0.38 0.35 0.30
0.22 0.23 0.22 0.22 0.19 0.18 0.15 0.11 0.09 0.07
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
YIT | 35 | Financial Statements Bulletin 2016 7
Focus areas and outlook for 2017
Mall of Tripla Helsinki, Finland Key priorities in 2017
Improving profitability • Improving business mix 1 • Decreasing construction costs • Improved and proactive care for customers
Intensifying growth • Strengthened resources in early-phase project 2 development • Living and renovation services • Managing Tripla and strong backlog of orders
Increasing capital efficiency • Further increasing the role of partnerships in 3 investments • Continuing capital release • Reducing invested capital in Russia
YIT | 37 | Financial Statements Bulletin 2016 Market outlook, expectations for 2017
Finland
• Consumer demand to remain on a good level and to focus on small, functional and affordable apartments
• Investor activity to decline slightly, even more focus will be paid on the location
• Residential price polarisation between growth centres and other Finland to continue
• Availability of mortgages to remain good
• Tenant interest for business premises to pick up slightly in the growth centres. Investor activity on a good level, focus on prime locations in the Capital region
• Business premises contracting to remain active
• New infrastructure projects to revitalise the market
• Construction costs expected to increase slightly
• Construction volume growth expected to slow down
• Bank regulation and increased capital requirements might have an impact on the construction and real estate development
• The increased competition for skilled labour due to high construction activity expected to continue
YIT | 38 | Financial Statements Bulletin 2016 Market outlook, expectations for 2017
Russia
• Macro environment to remain stable on the current level, the stabilization of the economy to have a moderate positive impact on the residential market
• Residential prices stable
• Residential demand to focus on small and affordable apartments
• The ending of the state mortgage subsidy program will create uncertainty, however the significance of the program has diminished due to decreased interest rate levels
• Construction cost inflation to moderate
CEE
• Residential demand to remain on a good level
• Good access to financing, low interest rates to support the residential demand
• Residential prices to remain stable or increase slightly
• Construction costs to increase slightly
• Business premises tender market estimated to pick-up in most of the CEE countries
YIT | 39 | Financial Statements Bulletin 2016 Guidance for 2017 (segment reporting, POC)
The Group revenue is estimated to grow by 0%-10%. The adjusted operating profit1 is estimated to be in the range of EUR 90-105 million.
In addition to the market outlook, the 2017 guidance is based on the following factors: • At the end of 2016, 60% of the Group order backlog was sold. • Projects already sold or signed pre-agreements are estimated to contribute nearly 50% of 2017 revenue. • The increased share of consumer sales in Housing Finland and CEE is likely to have a moderate positive impact on the adjusted operating profit of the segment but the impacts of the shift to consumers will be visible in the result gradually. • In Housing Russia, the adjusted operating profit is estimated to be positive but to remain on a low level. Capital release actions in Russia are likely to have a negative impact on the profitability. • Q1 expected to be the weakest quarter in terms of the adjusted operating profit but to improve slightly y-o-y.
1The adjusted operating profit does not include material reorganisation costs, impairment or other items impacting comparability
YIT | 40 | Financial Statements Bulletin 2016 More information
Esa Neuvonen Chief Financial Officer (CFO) +358 40 5001 003 [email protected]
Hanna Jaakkola Vice President, Investor Relations +358 40 5666 070 [email protected]
Follow YIT on Twitter @YITInvestors
YIT | 41 | Financial Statements Bulletin 2016 7
Appendices I
Key figures and additional information about financial position
Niemenrannan Johannes Tampere, Finland Key figures
EUR million 10–12/2016 10–12/2015 Change 1–12/2016 1–12/2015 Change Revenue 513.7 468.5 10% 1,783.6 1,651.2 8% Operating profit 28.7 16.6 72% 52.9 65.7 -19% Operating profit margin, % 5.6% 3.6% 3.0% 4.0% Adjusted operating profit 28.7 16.6 72% 79.9 76.0 5% Adjusted operating profit margin, % 5.6% 3.6% 4.5% 4.6% Order backlog 2,613.1 2,172.9 20% 2,613.1 2,172.9 20% Profit before taxes 21.3 6.1 249% 13.8 27.0 -49% Profit for the review period1 16.1 4.6 253% 7.4 20.0 -63% Earnings per share, EUR 0.13 0.04 253% 0.06 0.16 -63% Operating cash flow after investments -21.4 43.4 -43.1 183.7 Return on investment, last 12 months, % 4.7% 5.3% 4.7% 5.3% Equity ratio, % 35.1% 35.5% 35.1% 35.5% Interest-bearing net debt (IFRS) 633.1 529.0 20% 633.1 529.0 20% Gearing (IFRS), % 112.3% 101.1% 112.3% 101.1% Personnel at the end of the period 5,261 5,340 -1% 5,261 5,340 -1%
1Attributable to equity holders of the parent company All figures according to segment reporting (POC), unless otherwise noted Note: The adjusted operating profit does not include material reorganisation costs, impairment or other items impacting comparability
YIT | 44 | Financial Statements Bulletin 2016 Ruble strengthened in Q4
Revenue split 1-12/2016 (POC) • EUR/RUB exchange rates: • Average EUR/RUB rate in 1-12/2016: 74.15 RUB (1-12/2015: 67.99) 15% • Year-end EUR/RUB rate: 64.30 (12/2015: 80.68) Other 2% Principles of managing currency risks:
• Sales and project costs typically in same currency, all foreign currency items hedged EUR 83% no transaction impact • Currency positions affecting the income statement are hedged Impact of changes in foreign exchange rates (EUR million) • Loans to subsidiaries in local currency, Q4/2016 1-12/2016 12/2016: EUR 26.2 million to Russian subsidiaries
1 Revenue, POC 2.7 -24.0 • Equity and equity-like investments in foreign Adjusted EBIT, POC1 -0.1 0.3 currency not hedged • Considered to be of permanent nature Order backlog, POC 40.62 93.63 • FX changes recognized as translation difference in equity 2 3 Equity, IFRS (translation difference) 35.2 75.2 • Exposure in Russian subsidiaries in 12/2016: EUR 362.4 million 1 Compared to the corresponding period in 2015 2 Compared to the end of previous quarter 3 Compared to the end of 2015
YIT | 45 | Financial Statements Bulletin 2016 Balanced debt portfolio
Debt portfolio at the end of the period 12/2016, EUR 700 million Maturity structure at the end of the period 12/2016
Maturity profile, excluding construction stage financing (EUR million)
Bonds, 21% 450 Commercial papers 400 Commercial papers, 10% 350 Pension loans Construction stage financing, 44% 300 Bank loans Pension loans, 12% 250 Bonds 200 Bank loans, 13% 150 100 50 0 12/2016 12/2017 12/2018 12/2019 12/2020 Floating rate, 11% Average interest rate 6.83% 400 350 RCF Fixed rate, 89% 300 Average interest rate 3.08% 250 200 150 Average interest rate: 3.48% 100 50 0 12/2016 12/2017 12/2018 12/2019
YIT | 46 | Financial Statements Bulletin 2016 Solid plot portfolio, a basis for growth and financial flexibility
Plot reserves in the balance sheet 12/2016, EUR 621 million Use of plot reserves in the balance sheet in 2016, EUR 91 million
Housing Finland and CEE 60
Finland2 35 2391 277 1542 124 The CEE countries 25
105 Housing Russia3 21
Business Premises and Infrastructure 11
Business Premises and Infrastructure Housing Russia Housing Finland and CEE Finland The CEE countries
1Includes Gorelovo industrial park 2In Finnish housing, several projects are being constructed on rental plots, thus the balance sheet value and use of plot reserves in the balance sheet don’t give accurate picture of the usable plot reserves. 3Calculated at the 12/2016 EUR/RUB exchange rate: 64.30 YIT | 47 | Financial Statements Bulletin 2016 II
Share ownership YIT’s major shareholders
December 31, 2016
Shareholder Shares % of share capital 1. Varma Mutual Pension Insurance Company 12,000,000 9.43 2. Herlin Antti 4,710,180 3.70 3. OP funds 3,556,859 2.80 4. Elo Mutual Pension Insurance Company 3,335,468 2.62 5. The State Pension Fund 2,600,000 2.04 6. Danske Invest funds 2,583,762 2.03 7. Nordea funds 1,894,419 1.49 8. YIT Corporation 1,646,767 1.29 9. Etera Mutual Pension Insurance Company 1,410,000 1.11 10. Aktia funds 1,217,663 0.96 Ten largest total 34,955,118 27.47 Nominee registered shares 36,810,954 28.93 Other shareholders 55,457,350 43.60 Total 127,223,422 100.00
YIT | 49 | Financial Statements Bulletin 2016 More than 40,000 shareholders
Number of shareholders and share of non-Finnish ownership, December 31, 2016
43,752 44,312 41,944 40,016
36,547 36,064
32,476 29,678 52.9% 25,515 45.9%
39.9% 36.5% 38.7% 37.9% 34.8% 33.8% 32.2% 29.5% 27.9% 15,265 29.3% 14,364 26.3% 24.8% 22.1% 9,368 7,456 4,928 3,271
12/2002 12/2003 12/2004 12/2005 12/2006 12/2007 12/2008 12/2009 12/2010 12/2011 12/2012 12/2013 12/2014 12/2015 12/2016
Number of shareholders Non-Finnish ownership, % of share capital
YIT | 50 | Financial Statements Bulletin 2016 III
General economic indicators Strongest growth expected in the CEE countries
GDP growth in YIT’s operating countries, %
4%
2%
-1%
-3% 2015 2016E 2017E 2018E -5% Finland Estonia Latvia Lithuania The Czech Slovakia Poland Russia Republic
Unemployment rate in YIT’s operating countries, %
20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% 2010 2011 2012 2013 2014 2015 2016E 2017E Finland Estonia Latvia Lithuania The Czech Republic Slovakia Poland Russia
Sources: GDP growth: Bloomberg consensus, Unemployment: IMF YIT | 52 | Financial Statements Bulletin 2016 IV
Housing indicators Finland The CEE countries Russia Finland Start-ups expected to decrease slightly in 2017
Residential start-ups (units) Consumers’ views on economic situation in one year’s time (balance)
35,573 30 33,525 32,807 32,900 Own economy 32,033 31,300 31,500 29,842 29,900 20 27,778 26,273 6,700 16,531 12,477 6,200 7,200 23,361 23,385 11,614 7,400 10 15,337 9,772 8,117 6,870
9,283 0 11,493
25,100 26,200 24,300 -10 21,193 22,500 19,042 21,048 20,070 19,661 19,403 16,696 Finland’s economy 14,102 11,868 -20
-30 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016E 2017F 2018F Block of flats and terraced houses Single family houses and other
Prices of new dwellings (index 2010=100) Volume of new mortgages and average interest rate (EUR million, %) % 125 3,500 16
120 3,000 14 12 115 2,500 10 110 2,000 8 105 1,500 6 100 1,000 4
95 500 2
90 0 0 2010 2011 2012 2013 2014 2015 2016
Finland Capital region Rest of Finland New drawdowns of housing loans, left axis Sources: Residential start-ups: 2006-2014 Statistics Finland; 2015 – 2018F Euroconstruct, December 2016, Consumer Average interest rate of new housing loans, right axis confidence: Statistics Finland, Residential prices: Statistics Finland, Loans and Interest rates: Bank of Finland YIT | 54 | Financial Statements Bulletin 2016 Finland Housing indicators have improved slightly
Unsold completed units (residential development projects) Residential building permits, start-ups and completions (million m3)
Permits
Completions , 12 month summonth , 12
3 Starts Million m Million
Construction cost index (2005=100) Construction confidence (balance) 130 40 125 20 120 0 115 -20 110 -40 105 -60 100 -80 95 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Total index Labour Materials Other inputs Unsold completed units: Confederation of Finnish Construction Industries RT, Residential building permits, Start-ups and completions: Confederation of Finnish Construction Industries RT, Construction cost index: Statistics Finland, Construction confidence: Confederation of Finnish Industries EK YIT | 55 | Financial Statements Bulletin 2016 The Baltic Countries Residential construction is expected to level off
Residential completions in Estonia (units) Residential completions in Latvia (units)
5,300 8,100 4,700 4,500 1,100 4,400 2,000 3,969 1,300 1,400 1,200 3,000 2,756 1,270 4,200 2,300 1,000 2,079 1,918 1,990 976 4,200 6,100 1,800 2,662 2,631 800 2,087 2,237 2,242 710 870 966 3,100 3,400 3,200 1,900 1,900 1,800 2,000 2,699 1,022 1,392 2,000 1,376 1,136 1,500 1,780 1,371 1,000 1,000 1,100 1,208 1,120 1,113 2,400 1,500 1,640 1,239 1,106 400 716 861 900 800 900 2008 2009 2010 2011 2012 2013 2014 2015 2016E 2017F 2018F 2008 2009 2010 2011 2012 2013 2014 2015 2016E 2017F 2018F Block of flats Single family houses Block of flats Single family houses
Residential completions in Lithuania (units) New residential construction volume (EUR million)
1,300 11,800 11,300 1,200 Lithuania 10,700 10,177 10,200 1,100 9,400 4,000 1,000 900 7,624 5,700 5,500 800 4,000 5,200 5,926 6,118 700 5,066 5,221 600 4,691 500 Latvia 3,700 3,597 400 7,800 3,342 Estonia 3,815 300 5,400 5,200 5,600 5,000 3,000 4,059 200 2,933 2,329 100 1,251 1,879 700 0 2008 2009 2010 2011 2012 2013 2014 2015 2016E 2017F 2018F 2013 2014 2015 2016E 2017F Block of flats Single family houses
Source: Forecon, December 2016 YIT | 56 | Financial Statements Bulletin 2016 The Czech Republic, Slovakia and Poland Start-ups forecasted to grow in the Czech Republic and Poland
Residential start-ups in the Czech Republic (units) Residential start-ups in Slovakia (units)
43,500 28,400 37,300
30,600 20,300 19,600 25,100 28,200 27,500 27,300 13,800 19,000 26,400 25,700 17,800 16,900 23,800 24,400 16,200 15,800 20,700 22,100 14,700 13,100 18,000 11,100 12,700 11,100 18,400 15,000 17,200 11,500 10,500 18,900 13,700 16,400 9,600 9,600 9,900 16,000 13,700 9,200 9,100 14,600 9,400 18,400 16,600 9,200 8,500 10,700 11,400 12,600 6,600 5,500 6,200 7,500 7,300 7,000 9,800 8,600 7,800 8,400 9,300 10,100 3,300 4,000
2008 2009 2010 2011 2012 2013 2014 2015 2016E 2017F 2018F 2008 2009 2010 2011 2012 2013 2014 2015 2016E 2017F 2018F Block of flats Single family houses Block of flats Single family houses
Residential start-ups in Poland (units) New residential construction volume (EUR million)
174,700 180,000 3,500 12,000 168,000170,000172,000 158,100162,200 148,100 3,000 10,000 142,900 141,800 127,400 85,000 2,500 96,300 79,000 80,000 82,000 8,000 90,500 86,500 74,700 2,000 89,800 79,700 6,000 72,700 1,500 4,000 1,000 89,000 90,000 90,000 95,000 78,400 71,600 71,700 73,400 2,000 53,100 62,100 54,700 500
0 0 2008 2009 2010 2011 2012 2013 2014 2015 2016E 2017F 2018F 2012 2013 2014 2015 2016E 2017F 2018F Block of flats Single family houses Czech Republic Slovakia Poland, right axis
Source: Euroconstruct, December 2016 YIT | 57 | Financial Statements Bulletin 2016 Russia Housing indicators
House prices in primary markets (thousand RUB per sq. m.) New residential construction volume (EUR billion*)
110 220 55
100 200 50 90 180 45 80 160 70 140 40 60 120 35 50 100 30 40 80 30 60 25 20 40 20 2013 2014 2015 2016F 2017F
Yekaterinburg Rostov-on-Don Kazan *Fixed EUR/RUB exchange rate of 68.072 St. Petersburg Moscow (right axis)
Inflation in building materials (%) Consumer confidence
12% 0
10% -5 -10 8% -15 6% -20 -25 4% -30 2% -35
0% -40 1/2013 7/2013 1/2014 7/2014 1/2015 7/2015 1/2016 7/2016 3/2009 3/2010 3/2011 3/2012 3/2013 3/2014 3/2015 3/2016 Consumer confidence Long-term average** Sources: House prices: YIT, New residential construction volume: December 2016, Inflation in building materials: PMR Construction review, January 2017, Consumer confidence: Bloomberg **Average 12/1998-12/2016 YIT | 58 | Financial Statements Bulletin 2016 V
Business Premises Finland The Baltic countries Slovakia
Infrastructure Finland New non-residential construction forecasted to pick up slightly in the Baltic countries in 2017
New non-residential construction volumes (index 2012=100) New non-residential construction in Finland (EUR million)
200 1,600 180 1,400 160 1,200
140 1,000
120 800
100 600 400 80 200 60 0 40 2012 2013 2014 2015 2016E 2017F 2018F 2013 2014 2015 2016E 2017F 2018F Finland Estonia Latvia Lithuania Slovakia Office buildings Commercial buildings Industrial buildings
New non-residential construction in the Baltic countries (EUR million) New non-residential construction in Slovakia (EUR million)
1,000 700 900 600 800 700 500 600 400 500 400 300 300 200 200 100 100 0 0 2013 2014 2015 2016E 2017F 2018F 2012 2013 2014 2015 2016E 2017F 2018F
Estonia Latvia Lithuania Office buildings Commercial buildings Industrial buildings
Sources: Euroconstruct and Forecon, December 2016
YIT | 60 | Financial Statements Bulletin 2016 Finland Prime yields expected to decrease slightly
Prime yields in Helsinki Metropolitan Area (%) Vacancy rates in Helsinki Metropolitan Area (%)
Vacant office space and the vacancy rate Q2/2016 (thousand sq.m, %) Rental levels of office premises (excl. VAT), new agreements (EUR / sq. m. / year)
Source: Catella Finland Market Indicator, September 2016
YIT | 61 | Financial Statements Bulletin 2016 The Baltic countries Yields are expected decrease slightly
Prime office yields in the Baltic countries (%) Prime office rents in the Baltic countries, (%, EUR / sq. m. / year)
Prime retail yields in the Baltic countries (%) Prime retail rents in the Baltic countries, (%, EUR / sq. m. / year)
Source: Newsec Property Outlook, October 2016
YIT | 62 | Financial Statements Bulletin 2016 Infrastructure construction in Finland Market expected to remain stable in 2017
Infrastructure market in Finland (EUR million) Infrastructure sectors in Finland (2016)
7,000 Other 11% 6,000
5,000 Roads 36%
4,000 Energy & water works 3,000 26%
2,000
1,000
0 Telecom- Railways 2012 2013 2014 2015 2016E 2017F 2018F munications Other transport 12% 11% 4% New Renovation
Sources: Euroconstruct, December 2016
YIT | 63 | Financial Statements Bulletin 2016 Disclaimer
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YIT | 64 | Financial Statements Bulletin 2016