YIT Oyj : Interim Report Q1/24

Q1

YIT Corporation

Interim Report 1-3/2024

Table of contents

Interim Report January-March 2024	3
Comments from the President and CEO, Heikki Vuorenmaa	5
Guidance and outlook for 2024	6
Market environment	7
Strategy	8
Results	9
Cash flow	10
Financial position	11
Housing	12
Business Premises	13
Infrastructure	14
Shares	15
Personnel	15
Governance	15
Significant risks and uncertainties	15
Interim Report January-March 2024: Tables	17

YIT Corporation

Interim Report 1-3/2024

Interim Report January-March 2024

Cash flow and financial position improved, profitability impacted by the Finnish housing market and rising yields

First quarter 2024 in brief

• Order book was EUR 3,091 million (31 Dec 2023: 3,157). Order book remained stable in Housing and Business Premises
  and decreased slightly in Infrastructure. At the end of the quarter, 74% of the order book was sold (31 Dec 2023: 74%).
• Revenue decreased to EUR 412 million (455). In Housing, revenue decreased mainly due to lower number of completions in the Baltic and CEE countries. Revenue increased in Business Premises and decreased in Infrastructure, mainly due to revenue decrease in businesses to be closed down.
• The underlying operating performance was on the previous year's level, but the adjusted operating profit decreased to EUR -14 million (-3). The decrease was mainly due to a decrease in the fair value of Tripla Mall caused by a yield increase, impacting the adjusted operating profit by EUR -12 million. The adjusted operating profit margin was -3.4%(-0.7).
• Operating cash flow after investments increased significantly to EUR 1 million (-216). Cash and cash equivalents at the end of the period amounted to EUR 268 million (31 Dec 2023: 128), supported by the successful financing arrangement.
• Net interest-bearing debt decreased to EUR 768 million (837), and gearing improved to 89% (101). Both net interest-bearing debt and gearing also decreased compared to the previous quarter.
• In Housing, adjusted operating profit decreased to EUR -4 million (4), impacted by low consumer sales in Finland and a lower number of completions in the Baltic and CEE countries. Consumer apartment start-ups increased to 478 (29), All the start- ups in the first quarter were in the Baltic and CEE countries. The number of unsold completed apartments increased to 1,359 (31 Dec 2023: 1,267).
• In Business Premises, adjusted operating profit decreased to EUR -11 million (-7). The underlying performance for the segment improved and was positive. Based on market data, the yield for the Tripla Mall was increased during the quarter. The increase in the yield impacted the adjusted operating profit of the segment by EUR -12 million.
• In Infrastructure, adjusted operating profit amounted to EUR 1 million (1).
• On 9 January 2024, YIT announced that it had agreed on the sale of the entire share capital of service equipment business YIT Kalusto Oy to Renta Oy. The transaction was completed on 29 February 2024.
• Result for the period was EUR -16 million (-14).
• On 12 March 2024 YIT announced that it had executed a substantial financing arrangement including equity and enhancements to existing loan terms, leading to an improvement in liquidity in excess of EUR 100 million. The financing arrangement comprised a directed share issue of EUR 33.5 million at market price, an issue of EUR 36 million convertible notes due in March 2029 with a coupon of 8% p.a. and a strike price of EUR 2.25 per share. Furthermore, lenders agreed to make amendments to the existing revolving credit facility (EUR 300 million) and the term loan (EUR 140 million) including maturity extensions and other positive amendments to key loan terms and postponements of amortisations. Combined, the amendments to loan terms increase available liquidity by over EUR 30 million. Above mentioned agreed amendments to existing loan facilities have entered into force in April 2024.

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YIT Corporation

Interim Report 1-3/2024

Key figures

EUR million	1-3/24	1-3/23	1-12/23
Revenue	412	455	2,163
Operating profit	-8	-7	51
Operating profit, %	-2.0	-1.6	2.4
Adjusted operating profit	-14	-3	41
Adjusted operating profit margin, %	-3.4	-0.7	1.9
Result before taxes	-22	-19	-5
Result for the period	-16	-14	3
Earnings per share, EUR	-0.08	-0.07	-0.01
Operating cash flow after investments	1	-216	-137
Net interest-bearing debt	768	837	795
Gearing ratio, %	89	101	94
Equity ratio, %	33	33	33
Return on capital employed, % (ROCE, rolling 12 months)	1.8	6.0	2.5
Order book	3,091	3,542	3,157
Combined lost time injury frequency (cLTIF, rolling 12 months)	11.4	13.5	12.1
Customer satisfaction rate (NPS)	53	47	54

Unless otherwise noted, the figures in brackets in this report refer to the corresponding period in the previous year.

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YIT Corporation

Interim Report 1-3/2024

Comments from the President and CEO, Heikki Vuorenmaa

Year 2024 started on a positive note, with continued strong housing sales in Central Eastern Europe and a clear pick-up in the Baltic countries, and in total, our consumer apartment sales increased by 59% compared to the previous year. Expectations of a decline in the euro area interest rates have moderated since the end of last year, and the outlook for interest rates remains subject to considerable uncertainty. As expected, this led to a continued low level of housing sales in Finland during the first quarter. The unique characteristics of the Finnish housing market and its sensitivity to interest rates is postponing the recovery of the market.

We improved our Group operating cash flow after investments by over EUR 200 million on a year-on-year basis. Our cash flow for the last 12 months was positive, and indebtedness decreased. Progress is connected to the successful execution of the transformation program and the capital release actions. There is still work to be done to bring the capital efficiency to the desired level and to reduce the indebtedness of the company. We will determinately continue to take the required measures towards these goals.

The Housing segment's profitability continued to be muted due to prevailing market conditions in Finland and significantly less completions in the quarter in the Baltic and CEE countries. In the Baltic and CEE countries, the market recovery started earlier and has continued positively, especially in Poland, the Czech Republic, and Latvia. The past quarter was the fifth consecutive quarter with increased consumer apartment sales for YIT in the Baltic and CEE countries. This year, over 70% of our apartments will be completed outside Finland, so the good market conditions are key to the segment's performance. While there remains uncertainty regarding the timing of the recovery of the Finnish housing market, we are at full speed with our housing operations in our other operating countries.

In Business Premises, revenue increased and the underlying performance improved. Burden from the fixed price contracts starts to be behind and segment can focus on increasing margins. While the segment's underlying performance improved and was positive, the reported adjusted operating profit decreased mainly due to a decrease in fair values driven by the increase of the market yield for Tripla Mall.

In Infrastructure, the operations continued to be solid in the quarter. As a result of the decision to close down the Swedish operations and the successful divestment of the equipment services business, we focus on businesses in which we have a competitive advantage. The Finnish infrastructure market is active and there are several tenders ongoing, that fit our expertise well. As an example of the recent successes, we signed an agreement on the implementation of the excavation contract for Espoo City Rail in March.

Given the market uncertainty in Finland, we have focused on securing our cash and liquidity position. The substantial financing arrangement announced in March was a major milestone on our journey, including equity, convertible notes and enhancements to existing loan terms. It improved our liquidity by more than EUR 100 million and enables us to carry out the required capital release measures with optimized timing. We continue to firmly focus on improving our segments' profitability and completing our transformation. As we do this, a strong financial position will allow us to evaluate growth opportunities, both in the contracting segments and in the Baltic and CEE operations.

Heikki Vuorenmaa

President and CEO

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YIT Corporation

Interim Report 1-3/2024

Guidance and outlook for 2024

YIT expects its Group adjusted operating profit for continuing operations to be EUR 20-60 million in 2024. The operating cash flow after investments is expected to be positive.

The housing market recovery in the Baltic countries and Central Eastern Europe is expected to continue. In Finland, the housing market is expected to continue to be weak in the second and third quarters of the year. In Business Premises and Infrastructure, the underlying operational performance is expected to improve.

YIT's performance will be supported by the increased efficiencies from the transformation program launched on 10 February 2023.

Changes in the macroeconomic environment, especially in interest rates, may impact the housing market demand and the fair value of investments. Delayed apartment completions could lead to the postponement of revenue and profit from one quarter or year to another. Actions to release capital may have an impact on the company's profit.

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YIT Corporation

Interim Report 1-3/2024

Market environment

Housing market

In Finland, consumer demand continued at a low level as a result of the continued generally weak consumer confidence. In the investor market, the higher interest rates have had a significant negative impact on activity levels. Although interest rates have shown signs of levelling off, uncertainty in the market remains high. The housing market is expected to continue to be weak in the second and third quarters of the year.

In the Baltic and Central Eastern European countries, inflation has slowed down, and the higher interest rates have started to decrease in Poland and Czech Republic. Demand in Poland, the Czech Republic and Latvia continued to further improve during the first quarter. The gradual market recovery is expected to continue, and the overall market outlook shows signs of improvement.

Real estate market

In Finland, demand remained moderate, but general low market confidence is slowing down customers' decision making, especially in the private sector. Activity in industrial projects is expected to increase in the coming years, driven by the green transition. Inflation in construction material prices has stabilised. The competition for new projects has intensified as a result of the overall decline in construction volumes. In the investor market, the low availability of financing and increased financing costs and yields have decreased activity levels in transactions and new developments.

In the Baltic and Central Eastern European countries, overall demand and market activity remained stable, supported especially by private-sector demand for new industrial premises in certain countries. Price inflation in construction materials has stabilised, but new project start-ups are facing challenges due to the low availability of financing and high financing costs and yield requirements.

Infrastructure market

In Finland, public-sector demand in infrastructure is expected to remain at a relatively stable level, with many investments currently in the design phase. Private-sector demand is driven by industrial construction and the transition to renewable energy. Lower construction volumes in residential construction are reflected in the demand for earthworks and foundation construction, but the long-term outlook for the overall market remains stable. The development span of infrastructure projects is relatively long, and changes in the market environment may lead to postponements of upcoming projects.

Housing market

Real estate market

Infrastructure market

Finland

Baltic countries

Central Eastern Europe

Q1 market environment		Short-term market outlook
Good	Normal	Weak	Improving	Stable	Weakening

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YIT Corporation

Interim Report 1-3/2024

Strategy

YIT launched its 2022-2025 strategy in November 2021. The objective of YIT's strategy is to be the most reliable partner for all its stakeholders, delivering predictable market-leading results. During 2023, YIT continued the implementation of its strategy and specified the action plans for the Housing, Business Premises and Infrastructure segments on how the business segments contribute to YIT's common goals. The company strengthened its focus on the customer and continued the determined work to improve productivity and sustainability. In February 2023, YIT launched a transformation program to accelerate the implementation of the strategy.

Transformation program

The purpose of YIT's transformation program is to improve competitiveness, generate efficiency gains, achieve cost savings and release capital, and to increase agility and strengthen customer focus.

The transformation program has progressed faster than originally expected, and YIT has launched all the planned measures to achieve the targeted annual inflation-adjustedrun-rate cost savings of EUR 40 million by the end of 2024. With the actions taken by the end of March 2024, YIT will gain annualised run-rate cost savings of EUR 30 million, which will be fully realised by the end of 2024. Savings have been achieved by streamlining the organisation and reducing IT and premises costs, for example.

In addition to the cost savings, YIT is expecting to achieve a significant amount of project-related and capital efficiency gains. Competitiveness is improved by increasing efficiency in procurement, project management and productivity. YIT has changed the procurement model from project-level procurement to selective and partner-based cooperation, gaining savings by utilising YIT's and partners' combined knowledge. To reduce project management risks, an emphasis has been placed on project management training and supporting the starting projects in the early phases. Productivity development measures have focused on shortening the construction time and improving site coordination.

Program costs are estimated to be EUR 50-70 million, of which EUR 24 million was realised by the end of March 2024. Program costs are recorded in operating profit adjusting items.

In June 2023, YIT estimated that as part of the transformation program, the company had the potential to release approximately EUR 400 million in capital, excluding current assets such as self-developed projects, unsold apartments and land plots. Measures aiming to achieve the potential are ongoing. With the actions taken by the end of 2023, YIT had released approximately EUR 100 million of the stated potential. YIT will continue to evaluate alternatives for releasing capital, including YIT's share of the Mall of Tripla Ky, considering the market situation. The actions to improve net working capital are proceeding according to plan.

Safety development

YIT's combined lost time injury frequency improved to 11.4 (13.5) compared to the comparison period. Lost time injury frequency also improved compared to the previous quarter. YIT continued its systematic work to increase transparency and openness in safety communication and to strengthen day-to-day safety management within the company and with its partners.

Cumulative annualised cost savings secured from the transformation program (EURm)

40

30

20

10

0

1Q23 2Q23 3Q23 4Q23 1Q24 4Q24 Target

(at

least)

Benefits secured (cumulative)

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YIT Corporation

Interim Report 1-3/2024

Results

January-March

YIT's order book decreased slightly from the previous quarter to EUR 3,091 million (31 Dec 2023: 3,157). The order book remained stable in Housing and Business Premises and decreased slightly in Infrastructure. At the end of the quarter, 74% of the order book was sold (31 Dec 2023: 74%).

YIT's revenue decreased from the comparison period to EUR 412 million (455). In Housing, revenue decreased mainly due to lower number of completions in the Baltic and CEE countries. Revenue increased in Business Premises and decreased in Infrastructure, mainly due to the revenue decrease in businesses to be closed down.

The underlying operating performance was on the previous year's level, but the adjusted operating profit decreased to EUR -14 million (-3). The decrease was mainly due to a decrease in the fair value of Tripla Mall caused by a yield increase, impacting the adjusted operating profit by EUR -12 million. Adjusted operating profit margin was -3.4% (-0.7).In Housing, adjusted operating profit was negatively affected by low consumer sales in Finland and the lower number of completions in the Baltic and CEE countries. In Business Premises, adjusted operating profit decreased. The underlying performance for the segment improved and was positive. Based on market data, the yield for the Tripla Mall was increased during the quarter. In Infrastructure, adjusted operating profit remained stable.

YIT's operating profit was EUR -8 million (-7). Adjusting items were EUR -6 million in the first quarter (4), mainly related to the gain on sale of the equipment services business YIT Kalusto Oy, offset by the costs of transformation program and operating profit from operations to be closed down. Net finance costs increased to EUR 14 million (12) due to increased market interest rates and interest rate margins. The result for the period was EUR -16 million (-14).

Order book (EURm)							Revenue (EURm)
5,000									800
4,000									600
3,000									400
2,000								Sold order book
							Unsold self-developed projects	200
1,000
0									0
1Q23	2Q23	3Q23	4Q23	1Q24	1Q23	2Q23	3Q23	4Q23	1Q24

Adjusted operating profit and adjusted operating profit margin

20	6%
10	3%
0		0%				Adj. OP (EURm)
				Adj. OPM (%),
-10	-3%				rolling 12 months
-20	-6%
	1Q23 2Q23 3Q23 4Q23 1Q24

Adjusted operating profit per segment (EURm)

40
30
20						HO
10						BP
0						Infra
-10						Other
-20
	1Q23 2Q23	3Q23	4Q23 1Q24

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YIT Corporation

Interim Report 1-3/2024

Cash flow

January-March

YIT's operating cash flow after investments increased to EUR 1 million (-216). Cash flow was supported by YIT's improved net working capital efficiency and the successful divestment of the equipment services business YIT Kalusto Oy. Operating cash flow after investments in the comparison period was burdened by the Housing segment's low consumer sales, payments for plot investments made before the reporting period, and apartments under construction. Cash flow from plot investments amounted to EUR -6 million (-47).

Operating cash flow after investments (EURm)

100

50

0

-50

-100

-150

-200

1Q23 2Q23 3Q23 4Q23 1Q24

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