Earnings call transcript: YIT Oyj sees stock rise on Q2 2025 results

YIT Oyj reported its second-quarter 2025 earnings, showing a group-adjusted operating profit of €10 million and revenue of $412 million. The company’s stock price experienced a notable increase, climbing 9.01% to $3.12 following the earnings announcement. According to InvestingPro data, YIT is currently trading near its 52-week high, with the stock showing impressive momentum, delivering a 28% return over the past year. This surge reflects investor optimism driven by YIT’s strategic initiatives and market recovery signals in key segments. Based on InvestingPro’s Fair Value analysis, the stock appears to be trading above its Fair Value.

Key Takeaways

• YIT reported a group-adjusted operating profit of €10 million for Q2 2025.
• Revenue reached $412 million, with a focus on sustainability in new projects.
• The stock price increased by 9.01% post-earnings announcement.
• Finnish residential market shows signs of recovery, with mortgage drawdowns up 18%.
• YIT aims for a return on capital employed of 15% by 2029.

Company Performance

YIT’s performance in the second quarter of 2025 showed resilience amid challenging market conditions. The company reported a group-adjusted operating profit of €10 million, reflecting a solid operational performance. Revenue reached $412 million, driven by new residential projects in Finland and Central and Eastern Europe (CEE). YIT’s focus on sustainability in building construction projects and the stabilization of its order book at €1 billion underscore its strategic priorities.

Financial Highlights

• Revenue: $412 million
• Group-adjusted operating profit: €10 million
• Adjusted operating profit margin: 2.4%
• Rolling twelve months operating profit margin: 3.2%
• Return on capital employed (ROCE): Nearly 4%
• Gearing: 84%
• Net debt: €670 million
• Cash flow: -€29 million for Q2

Market Reaction

Following the earnings announcement, YIT’s stock rose by 9.01%, reflecting positive investor sentiment. The stock closed at $3.12, which is within its 52-week range of $1.98 to $3.21. This upward movement aligns with the company’s strategic initiatives and improved market conditions, particularly in the Finnish residential sector.

Outlook & Guidance

YIT has set an ambitious target for a return on capital employed of 15% by the end of 2029. The company plans to release €200 million from its apartment inventory and potentially divest €300 million in non-core assets. These initiatives are part of YIT’s focus on profitable growth in its residential segments.

Executive Commentary

CEO Heikki Vorema stated, "We are gradually moving towards improving market conditions," highlighting the company’s proactive approach to market recovery. CFO Thomas Makipesk emphasized, "Capital release from the balance sheet and capital efficiency are top priorities," reflecting the company’s focus on financial stability and growth.

Risks and Challenges

• High gearing at 84% poses financial leverage risks.
• Negative cash flow of €29 million for Q2 could impact liquidity.
• Market volatility in the residential sector may affect future performance.
• Dependence on favorable market conditions in Finland and CEE.
• Execution risks in releasing capital from inventory and non-core assets.

Q&A

During the earnings call, analysts focused on several key areas, including capital employed, cash flow dynamics, and plot investments. Questions were raised about YIT’s strategies for apartment inventory management and sales approaches in Finland and CEE, reflecting investor interest in the company’s operational strategies and market positioning.

Full transcript - YIT Oyj (YIT) Q2 2025:

Essen Nikke Dien, Investor Relations Head, YIT: Hi, everyone. Welcome to Viati’s Second Quarter twenty twenty five Results Webcast. My name is Essen Nikke Dien, and I’m Heading the Investor Relations at YIT. Together with me today are our CEO, Heikki Vorema and CFO, Thomas Makipesk. But now without further ado, I will hand over to Heikki to go through the latest developments in the company.

Please go ahead, Heikki.

Heikki Vorema, CEO, YIT: Yes. Good morning all, and thank you, Essi, for opening the second quarter investor call. Second quarter was a positive quarter for YIT. Overall, we delivered solid performance. Amid company results were largely driven by Contracting segments, as both Residential segment had zero completions during the quarter.

The Finnish residential market recovery continued. Mortgage drawdowns are up by 18% year on year in the first five months. And we are launching new projects with good reservation rates. Markets in Central And Eastern Europe are, on the other hand, already in full swing. Number of apartments under construction exceeded 3,000 units, which will support our coming year profits.

Today, we will highlight three main areas. I will start with the detailed performance of each segment and market conditions. Thomas then will cover our financials and the strength of our balance sheet. And then I will close with a view on how we’re actually progressing as we implement our strategy. Let’s get going.

And we start with our financials for the second quarter. Our second quarter group adjusted operating profit increased to €10,000,000 Revenue declined to $412,000,000 and our adjusted operating profit margin increased to 2.4%. As there were no completions in the Residential segments, revenue and profit were muted accordingly. Also, both segments’ operative performance was solid during the quarter. Contracting segments, Infrastructure and Building Construction, improved operative performance and delivered solid results for the quarter.

The Building Construction top line is still impacted by the selectiveness of tendering, while the Infra segment recorded a solid 36% year on year growth in revenue. Let’s get to the segment deep dives and we will start with Residential Finland. We are gradually moving towards improving market conditions and back to new project starts. Over past two years we have taken actions to improve our operational efficiency, customer insights and supply chain capabilities across the organisation. As we eventually are now ramping up new production, we see our actions have been effective.

It is still a long way to our strategic targets. However, segment is moving in the right direction and the team is really excited about it. At the same time, our capabilities in terms of plot portfolio and our internal competencies and capabilities are in place to scale up the production according to market demand. Our inventory of apartments continues to decline. This is due to successful work with the customers to help them identify suitable high quality YIT home as their next new home.

Inventory has reached normal level already outside of the capital area. We still have approximately four fifty apartments in the Helsinki Metropolitan Area. Situation is gradually normalizing towards end of the year. Inventory is not a factor anymore as we consider new project starts, not even in the capital area. We have leaned on these assets, our inventory portfolio, for some time already and we continue to do so, as there are limited completions in the market in the coming quarters.

We started one project in Q2, which took place in Kuapio, and announced also another project in Helsinki during the third quarter after the pre marketing period. As you can see, this was already a third consecutive quarter for us to ramp up our production in Finland. We are quite excited about the consumer feedback and the interest towards our projects in pre marketing. With those refreshed customer insights have been taken to our project designs, the products resonates well with consumers’ expectations. So far, we have started projects in Finland according to our internal plans.

Pre reservation rates have been above 50% and financing in place. We are optimistic to see further project starts during second half of the year as the market recovery continues. As I stated already in the key highlights, there were no completions during the quarter in Finland. The remaining completions during this year will take place in Q4. Same situation is also true for our operations in Central And Eastern Europe, which we will go through next.

Of course, from the Group perspective, this is not optimal for profit distribution within the year as the both segment profits are recorded mostly in Q4. But as promised, now we move to Residential CEE. And the second quarter was quite muted quarter due to the zero completions. Profit for the segments are expected in Q4 as there were no completions, and the same situation continues in Q3 as well. The segment’s rolling twelve months revenue is now at €300,000,000 and I propose we keep that number in mind until the next page.

Our quarterly adjusted operating profit declined from previous year and was negative €2,000,000 On a rolling twelve month basis, segment margin looks to decline. However, the reason is the uneven completions between the years. Operatively, the segment is executing as planned and the project margins are under control. During the quarter, we announced changes in the leadership as Justina Filiczak will take the position as Head of the segment starting August 4. I actually take this opportunity to thank you to Amaz for taking the interim role.

And as we can see from the numbers, you have really boosted the agenda of our capital efficiency within the past six months. Results are visible when we look the year on year decline of €70,000,000 on capital employed, while we have been gearing up the volumes in all markets. We have really focused now on launching new projects across our operating countries in the first part of the year. By now, the projects valued in total at almost €400,000,000 are in production and estimated to be completed in 2026. And the sales is progressing well.

And as we all remember from the previous slide, the rolling Feldman’s revenue number of €300,000,000 one could expect clear growth from this segment on coming years. Market is favorable. We have plots with the building rights. We actually have amazing product and dynamic theme, which is focused on execution. Our sales team is also doing excellent work.

Our rolling twelve months sales rate has doubled since Q2 twenty twenty three and amounts now close to 1,200 homes. Inventory is under control and the segment profitability is healthy, also in new projects. This is all well in line with the strategy and we will continue to boost our residential operations outside of Finland also going forward. The key insights here is quite repetitive. Completions will take place in Q4 this year.

The total completions within the expected to exceed previous year and be slightly over 1,000 apartments. The situation is similar in the project that we are also executing under the associated companies and joint venture structures. Sales is increasing, inventory is under control and operations are progressing well. Completions are again Q4 this year, although overall completions for the year are down over 50% compared to 2024. But now it’s time to leave the Residential segments and move to Infrastructure segment.

Our Infrastructure segment is in good shape. Revenue growth continued with solid profitability. Our rolling fell months revenue is above €450,000,000 and trending upwards. On a year to date basis, our revenue has increased over 30% in this segment. And our adjusted operating profit exceeds 4%.

Our capital employed is negative and their projects under control. What I’m especially pleased with is that we have done investments and upfront recruitments towards the future growth, as planned, while keeping good care of our profitability. YRT Infra is an attractive employer among the professionals and we are capable to attract the best talent from the industry to our team. To answer, we have also a positive future ahead of us. We have probably one of the strongest order books among the industry players with approximately twenty months of work.

We are really thankful that customers are placing their trust on us with highly complex and demanding projects. This trust needs to be earned every day. Hence, the elements such as work safety and timely execution of projects are critical for us. Market outlook is favourable, especially in defence, industrial investments and data centres, in which we actively work with potential customers. Moving on to Building Construction.

The Building Construction segment continued to improve profitability during the quarter. The transition from the self developed project to preferred partner in contracting sector is in progress. As a result, our underlying operating profitability is now at 2.4 on rolling twelve months basis, despite the decline in the revenue. Segment’s quarterly profit improved to €6,000,000 Systematic work within the segment starts to be gradually visible on the numbers as well. Capital employed still continues to be impacted by historical reasons and burdens our profitability.

Thomas will talk about this more later. Our order book in Building Construction segment has stabilized now to around €1,000,000,000 Typical projects we win are complex with a strong emphasis on sustainability and joint development project. A few examples from the quarter: Alexandrine School in Tambre and total of seven daycare centers in Turku, which we are executing with the Life Cycle Agreement. But now we move on to our Group’s supply chain status. So as a result of our accelerated production, apartments under construction for consumers and investors increased by 30% and are close to 4,000 units at the end of the quarter.

To put that in perspective, the sale number was approximately 9,000 units at the end of twenty twenty one. Average sales rate has remained solid at 50%, even though some of the new projects did not achieve readiness of sale during the quarter. Contracting segment projects are under control and Rolling Feldman’s project margin net deviation positive for both segments during this year. Material availability continues on the good or normal level. We continue carefully to monitor supply and price development across the categories, and we will react if there are any material changes on this picture.

Finally, before handing over to Thomas, an update on the overall market. We upgrade our view on CEE market from normal to good. No other changes since previous quarter. Finnish residential market recovery continues. However, market is still weak in the short term from our perspective.

Thank you for your attention for the first section. And Thomas, now it’s time to hand over to you to cover the group’s financial development. Yes. Thank you, Pekki.

Thomas Makipesk, CFO, YIT: Let’s go through our financial development in the second quarter, and I will start with a summary of our key metrics. Two important KPIs in our financial targets, the return on capital employed and gearing, both developed positively. Return on capital employed improved from the previous quarter as well as from the comparison period and amounted to nearly 4%, while gearing decreased to 84% at the end of the second quarter. Our key assets amounted to over €1,600,000,000 while net debt decreased to €670,000,000 at the end of the second quarter. Our underlying asset base continues to be very strong and amounts to over two times the net debt.

Cash flow amounted to minus €29,000,000 for the second quarter. We changed our guidance and we now expect the adjusted operating profit for the year to be between 30,000,000 to €60,000,000 But let’s look at these topics in more detail in the following slides. Our return on capital employed continued to improve and it is on a positive trend as we reached approximately 4% level at the end of the quarter. The increased adjusted operating profit and successful capital release measures as well as capital efficiency in business operations are all actually contributing to the ROCE improvement. We will continue to drive profits and capital turnover to reach our financial target of at least 15% by the end of twenty twenty nine.

A couple of key highlights regarding capital employed from the segments. In Residential CE, capital employed has been on a downward trend despite accelerated starts and higher production volumes, as you mentioned, Hekki. This is mainly thanks to our strong plot portfolio, solid department sales and other capital efficiency measures in the segment. The Infra segment continues to operate with negative capital employed, supporting the whole group’s financial performance. In Building Construction, capital employed increased during the quarter as a part of normal business cycle.

Capital release from the balance sheet and capital efficiency are top priorities in our strategy. On group level, we identify potential to release approximately €200,000,000 of capital from our current apartment inventory and up to €300,000,000 through divestments of non core assets, in line with our strategy communicated for the years 2025 to 2029. The non core assets include real estate, plots and ownerships in associated companies that are not at the core of our current strategy. The released capital will be reallocated to fund Residential segment’s profitable growth and reduce indebtedness of the company, which will consequently lower the financing costs and support net profit generation. Let’s move on to the cash flow development.

Cash flow after investments for the second quarter was 29,000,000 negative, affected by the usual business cycle. If we then observe a longer time period, the twelve month rolling cash flow was €70,000,000 positive at the end of the quarter and has now been positive for the last six quarters. We will continue the work to improve cash conversion across the operations to generate positive cash flow. Increasing volumes in residential and contracting segments will strongly support the cash flow going forward. Also, only a limited need for plot acquisitions will also support the cash flow over the coming quarters.

Net interest bearing debt decreased both from the previous quarter and from the comparison period amounting to €670,000,000 at the end of the second quarter. The net interest bearing debt included IFRS 16 lease liabilities of €265,000,000 as well as housing company loans of €158,000,000 related to the unsold apartments. The housing company loans have decreased by some €60,000,000 from the comparison period, along with our decreasing inventory of unsold apartments. When excluding the IFRS 16 lease liabilities and long maturity housing company loans, the adjusted net debt amounted to some €250,000,000 Gearing decreased to 84% at the end of the period. In addition to the positive twelve months rolling cash flow, the decrease was supported by a successful hybrid bond transaction, which took place in the second quarter.

The transaction was part of our proactive management of financing position and highlights the Capital Markets’ continued confidence in YIT and the outlook for our business. We remain determined to reduce indebtedness of the group and operate within the set financial framework of 30% to 70% gearing. When comparing the interest bearing debt to our key assets, we can see that our underlying asset base continues to be very strong and amounts to well over two times the net debt. I would like to highlight that we continued to have a strong plot portfolio, which amounted to some €720,000,000 at the end of the quarter. This portfolio enables us to construct approximately 16,000 new homes in Finland and 13,000 new homes in CE countries.

This is a critical platform for future profitable and capital efficient growth in our both residential segments. Completed apartments and real estate in our inventory amounted to €355,000,000 and investments to €272,000,000 As communicated, we see potential to release significant amount of capital from these balance sheet items. In maturity structure of interest bearing debt, having only limited amortization scheduled for this and next year allows us to focus on improving the financial performance of the businesses. Then a few words about the change in our guidance. So we have narrowed the range for the adjusted operating profit guidance.

We now expect group adjusted operating profit for continuing operations to be between 30,000,000 to €60,000,000 in 2025. Previously, we expected the adjusted operating profit to be between 20,000,000 to €60,000,000 The guidance update is a result of solid financial performance of the businesses during the first half of the year. Our outlook, however, remains intact. So to summarize the Q2 financial development before handing over back to you, Heikki. YT’s financial performance is on a positive track and strong financial position enables the targeted profitable growth.

Our operational and financial performance have improved, which is demonstrated in the positive development in return on capital employed. We will reallocate a significant amount of capital to fuel profitable growth in Residential business and reduce indebtedness to lower financing costs and support the net profit generation. And finally, we have a strong plot portfolio to enable starts and consequently profitable capital efficient growth in the Residential segments. Thank you. And now back to you, Heikki.

Heikki Vorema, CEO, YIT: Yes. Thank you, Thomas, very much. And so as promised in the opening, we would also like to share a few insights on how we track against our strategic targets before we are then opening for Q and A. First overview on our financials. We are making progress against the strategic targets what we have set for ourselves.

Our rolling twelve months operating profit margin continues to improve and is at 3.2%, target being over 7% by end of twenty nineteen. Consequently, our return on capital is on our improving trend, like Thomas you mentioned, as our capital is reallocated from investments to our Residential business growth. The revenue development is still impacted by the market conditions and not yet on the growth trend, despite the fact that we have seen a strong growth already in Infrastructure segment during the first half of the year. Let’s pick an operative highlight from the quarter and that is coming from our strategic priority to generate targeted growth and improve our resilience through diversified sources of revenue. Markets which we are today including to our residential CEE segment includes Baltic countries, Poland, Czech Republic and Slovakia.

Altogether, in those growing economies, the combined population is 60,000,000 people and the cities are growing at a fast pace. By now, we have already launched worth of nearly €400,000,000 of projects scheduled to be completed in 2026. Window for new project starts is still open, the projects that can be completed in 2026. And with prevailing market conditions, we look forward to launch more new projects in the near future. Plot portfolio supports the construction of over 13,000 homes with healthy margins.

Driving the growth in the Residential CEE segment has been a clear strategic decision for the company. And that decision will shift the Group to be a more European based company and reduce our historical dependency on one single market. But thank you for your attention. And operator, I believe it starts to be time for the questions.

Conference Operator: The next question comes from Ansi Rousey from SEB. Please go ahead.

Ansi Rousey, Analyst, SEB: Yes. Hi, all, and thank you for the presentation. A few questions from me and as usual one by one. First, maybe just to double check that was this positive fair value change of €2,000,000 in triple mall included in your €10,000,000 or adjusted EBIT during this quarter?

Thomas Makipesk, CFO, YIT: Thank you, Ansi. Yes, it is included.

Ansi Rousey, Analyst, SEB: Okay. Yes, just double checking because it was not mentioned on the front page. Then on your capital in work in progress, this figure increased quite significantly quarter on quarter. So can you disclose what was the driver here? And also, was there something other drivers worth of highlighting which impacted your operating cash flow?

Heikki Vorema, CEO, YIT: So just maybe, Ansi, to clarify, are we in a Building Construction segment or on a group level on this question?

Ansi Rousey, Analyst, SEB: A group level of capital inventories and work in progress items.

Thomas Makipesk, CFO, YIT: Yes. Okay. Thank you, Ansia. I’ll take this one. So our work in progress increased really due to the accelerated volume of production in the CE countries.

So that’s the main driver there. And then regarding the cash flow, your second part of the question, so that’s really as mentioned, so related to the normal business cycle.

Ansi Rousey, Analyst, SEB: Okay. And maybe continuing on the cash flow. So your plot investments were EUR 8,000,000. So were there something opportunistic? Or did you have commitments in place to acquire this?

And also your I think your investment commitments increased a bit quarter on quarter. So can you disclose or give any additional comments on this?

Thomas Makipesk, CFO, YIT: Just briefly to comment that, that was part of normal plot acquisition operations and building the future profitable growth for the Residential segments. So not it’s actually quite a low number for the quarter, but no drama there.

Ansi Rousey, Analyst, SEB: Okay, clear. And maybe finally, there was some really good development in your inventory of completed unsold apartments. And I think you mentioned that in Finland, your new start ups are not, you know, linked to the inventories anymore. So is it just that you’re already happy with the level at the end of q two, or has there been like accelerating momentum in early Q3?

Heikki Vorema, CEO, YIT: Thank you, Ansi. And yes, so the inventory is developing as there are no completions, and we continue to sell from the inventory. What I meant with the statement there is that we have good results for the pre marketing and as we kind of forecast our future outlook, so we don’t think that the amount of inventory in Capital Area is anymore a factor in that consideration. The inventory is in decline. All inventory outside of Capital Area is already on normalized level.

We, however, continue the inventory to decline in the Capital Area. It’s $458,000,000 I believe was the end of the quarter number. And we would like to see, of course, a somewhat lower number there.

Ansi Rousey, Analyst, SEB: Okay. Thank you. That’s all from me and congrats on a great quarter. Thank you.

Conference Operator: The next question comes from Svante Krokhvars from Nordea. Go ahead.

Svante Krokhvars, Analyst, Nordea: Good morning. Svante from Nordea. Thank you. Thank you, Thomas and Essi for the presentation. First question regarding Residential Finland.

You sold 133 apartments, up from 108 in Q1, I think it was. Could you elaborate a bit on measures that you have taken to accelerate the sale of funds or departments in Finland in particular?

Heikki Vorema, CEO, YIT: Yes. At the moment, the sales is quite much connected to the consumer demand in Finland. And we have been running a couple of campaigns, promotional activities in order to boost that, in the capital area. So those have been the activities there.

Svante Krokhvars, Analyst, Nordea: Okay. And then on new starts, what kind of pre reservation rates do banks require, especially in Finland, but perhaps you could touch the subject also on CEE?

Heikki Vorema, CEO, YIT: In Finland, it differs, of course, between the different banking partners. Our internal approach is to be over 50%. I think in the most recent was actually 55%. So and in the Q1, we already reached 70% before starting. So there are differences there, what is the banking requirements as well as then what we internally want to achieve.

Do want to Thomas on CE, I think the Yes, I

Thomas Makipesk, CFO, YIT: can continue with the CE. So basically, no requirements for the pre reservations exist in the CE countries. So basically, that’s not a consideration factor there regarding new starts.

Conference Operator: There are no more questions at this time. So I hand the conference back to the speakers.

Essen Nikke Dien, Investor Relations Head, YIT: As there are no more questions, we thank you all for participating and wish you all a great rest of the summer. Thank you.

Heikki Vorema, CEO, YIT: Thank you. Thank you.

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