I didn’t happen to find a dedicated YIT thread here, so let’s open one with this morning’s news.
City of Helsinki proposes YIT and A-Kruunu Oy consortium as the winner of the Kalasatama Nihti quality competition
The City of Helsinki proposes reserving four residential apartment building plots (the so-called Lukki residential block) located in the Kalasatama Nihti local detailed plan area for a consortium formed by YIT and A-Kruunu Oy.
The Urban Environment Committee will process the city’s proposal at its meeting on September 29, 2020. The Nihti local detailed plan is complete and legally binding. Construction in the area can begin at the earliest in early 2022.
YIT and Nordisk Renting Oy have signed a five-year extension agreement for the maintenance of five administrative buildings primarily used by government agencies. The properties are located across Finland and have a total area of approximately 42,000 m2.
The agreement is a life-cycle model full-service contract and includes property maintenance, which covers energy responsibilities, maintenance and repair operations, and the upkeep of properties and outdoor areas. The agreement also includes property upkeep with annual repairs and PTS (Planned Technical Systems) measures. The parties will not disclose the more detailed content or value of the agreement.
“We are pleased with the trust that Nordisk Renting, which owns the properties, has shown in YIT. The five-year extension agreement is significant for us, and we strongly believe that our extensive experience in managing service packages for life-cycle projects will contribute to the high-quality implementation of this agreement for the benefit of users and the owner,” states Kari Pekkanen, YIT’s Director responsible for property services.
YIT Corporation Press Release, October 14, 2020, at 8:00 a.m.
YIT has won several infrastructure construction contracts in Lithuania
YIT has signed contracts for several infrastructure construction projects in Lithuania. The total value of the contracts is over 20 million euros, and they have been recorded in the third quarter’s order book.
Among other projects, YIT will build a two-level intersection, maintain gravel roads, renovate the road between the cities of Skuodas and Plungė, and renovate 30 kilometers of Lithuania’s main highway, A1.
“The A1 highway, running between Vilnius, Kaunas, and Klaipėda, is one of the most important connections in Lithuania. The average daily traffic volume on the road is approximately 13,000 cars. The surface of the road section to be renovated has deep ruts and damages that need to be repaired to ensure safe and pleasant driving,” says Kęstutis Vanagas, Head of YIT Lithuania.
This wasn’t what I expected, although it does contain some positive news, as it states that housing sales are going well. The adjusted operating profit guidance will likely fall short of Inderes’ forecasts, but might be close to the consensus (mid-point 100 M)?
According to Vara, the consensus (Adjusted operating profit) is actually 117.6 M, which is much higher than the guidance. Is this fully comparable to what has been reported now? Should we take into account the -25 M figure here… 125 M versus 117.6 M?
Edit 2: At a quick glance, Q3 went well if we don’t consider the -25 M euro write-down for commercial premises. If I interpret correctly, taking this into account, the result would be +41 M. Vara’s consensus is +37.6 M.
Just sticking to the point a bit, isn’t @Olli_Koponen’s guidance 90-110 MEUR? The tweet likely contains an error. At the same time, a question: how should the -25 M item for premises be interpreted? That lowers the result, even though it’s clearly one-off… so is the old consensus fully comparable?
This was a profit warning, but not entirely bad. Views and one-off items were quite openly disclosed to investors at this stage. It’s good if houses are completed and business is doing well.
However, I would like to comment on two things.
Firstly, the guidance of Finnish companies is rather amusing. The previous quarter ended 2.5 weeks ago, and now a negative profit warning is given for Q2 :D. 80% of the year is behind us, and now they already (!) dare to restore the guidance for the current year, albeit with a 20 million euro range…
Comment 2:
These construction companies are truly considerable skakasoja (value traps). More politely put, value traps. If you buy construction companies when their PE <10, PB <1, and P/S < 0.4, then in a year or two, the share price will have halved as the profit collapses from bad to miserable, and if you wait another year, there will be a share issue. This seems to apply to every Finnish construction company.
When looking at these pictures, one can only bang their head against the wall and ask why I haven’t just closed my eyes and bought only IT companies…
Good point and it has been corrected! 100 MEUR is indeed the midpoint of the guidance, from which the 118 MEUR consensus clearly fell short.
That 25 MEUR belongs to the adjusted operating profit, but another 25 MEUR (write-down of Russian plots 13 MEUR, Norwegian infrastructure 12 MEUR) does not belong to the adjusted operating profit.
So, YIT had a total of 50 MEUR of so-called one-off items for Q3, half of which are adjusted.
Without that negative impact of 25 MEUR from Business Premises, the company’s Q3 result would have been 41 MEUR, which was also our forecast before the announcement.
The Tampere City Council debated the tram line late into the night and finally approved the second phase of the tram line with a clear majority (56-11).
The total value of the project is over 112 million euros, of which YIT’s share is approximately 62 million euros. The second phase of the tram line consists of two parts, the first of which, approximately 25 million euros for YIT, will be recorded in the order book in the last quarter of the year after the two-week appeal period related to the project ends. The second part, approximately 37 million euros for YIT, will be recorded in the order book when the water area filling permit required by the contract becomes legally binding, estimated by 2022.
Town plan and property deal for Kruunuvuorenranta’s central block progress
YIT OYJ Press Release October 20, 2020 at 12:00 PM
The preliminary property agreement and town plan proposal for the planning and implementation of YIT’s and the City of Helsinki’s Kruunuvuorenranta central block are progressing to be heard by the Urban Environment Committee on October 20, 2020. YIT was selected as the City of Helsinki’s negotiating partner for the central block through a registration and negotiation process organized in 2017. The city and YIT have jointly developed the project plan and town plan.
The maritime central block Kruunis, bordered by Haakoninlahdenkatu, Varisluodonkatu, and Pitkäluodonkatu, is a complex combining housing and services next to a school and daycare block, with good public transport connections. The Kruunusillat tramline, to be completed in 2026, will run next to the block, connecting Kruunuvuorenranta and the city center. The central block consists of three building groups and a pedestrian urban space between them.
YIT: Several Major Pipe Renovation Contracts in the Helsinki Metropolitan Area
YIT OYJ Press Release 21.10.2020 at 10.30 AM
During July-September, YIT Building Services has won pipe renovation contracts in six locations in the Helsinki, Espoo, and Vantaa regions. The total value of the contracts is approximately 23 million euros, and there are a total of 497 apartments to be renovated. Some of the projects are already underway, and the rest will start in the coming months.
In all locations, a so-called traditional pipe renovation will be carried out, meaning all building services technology will be renewed and wet rooms will be renovated. The common areas of the housing companies will also be refurbished. Renovation projects will last 8-16 months, depending on the size of the buildings, the technology used, and the extent of the renovation.
{“content”:“Generally, if a company has strongly underperformed, such a positive development is good. Especially if a meritorious CEO arrives to replace them. This happened, for example, at Nokian Tyres.\n\nNow, however, I don’t expect a significantly positive reaction.\n\nEdit:\nI’ll add that I don’t expect a significantly positive reaction because there’s no information about the new CEO yet. But it has underperformed somewhat, though nowhere near as badly as many other players in the sector. I was a bit surprised by the decision myself for that reason.\n\nEdit 2:\n
It’s quite amusing that the analyst’s comment is very neutral and politically correct, while the company’s comment is very direct. Normally, when a CEO changes, the company’s press release profusely thanks them and wishes them well, even if the CEO was essentially fired. Now, the press release practically blames the old CEO for the entire group’s poor performance.
A new CEO is a new opportunity, and with them can come focus, new ideas, and operating models. The old organization may be shaken up, sinecures may be cut, and tough performers may be brought into leadership positions. Now the CEO is dismissed immediately before a new one has even been recruited! This is a very strong vote of no confidence in the old CEO and leaves the company in a period of uncertainty. The organization is left waiting for a new CEO, and investors now have to wait to see if they like the next CEO recruitment or not. Markets rarely like uncertainty…
Just throwing in some more positive news. The University of Helsinki’s renovation project has been selected as the construction site of the year 2020, and judging by the picture, it seems to have been Kari’s last official event in YIT’s service :
In my opinion, the analyst’s comment and YIT’s press release are well in line with each other. Perhaps I can’t read between the lines, but YIT’s press release clearly stated the reasons for the dismissal/resignation and thanked the CEO for his work.
Below are the comments from the Chairman of the Board, from which everyone can draw their own conclusions. I myself see these comments as perfectly correct.
“YIT’s business is based on sustainable urban development. In its strategy, the company emphasizes the growth of its property and service businesses in addition to construction. The company has recently faced significant profitability challenges in its Business Premises segment. The implementation of the strategy, ensuring operational efficiency, and strengthening a customer-oriented and inclusive culture will be the new CEO’s most important priorities in a rapidly changing market.”
“I want to thank Kari Kauniskangas for his long career in the company’s service. YIT has undergone a significant transformation in recent years. Kari has done uncompromising and committed work, including the extensive integration following the Lemminkäinen merger and the sale of our Nordic paving and aggregates businesses. YIT is a stable and strong company and a pioneer in its industry. Kari’s deep industry knowledge and inspiring leadership have been invaluable in the company’s renewal process.”
: