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.