YIT Oyj (YIT) Earnings Call Transcript & Summary

Good afternoon, and welcome to YIT Capital Markets Day 2021. Today is special. First of all, it is special as we are hosting a live audience after a very long time. This is wonderful as we have lots of new members in our management team who are eager to meet all of you in person. Secondly, today's special, I have just heard that we have a huge audience following our event online. And I would like to warmly welcome all of you also listening to us over the web. Thirdly, today is special as we will be introducing YIT's new strategy. At YIT, we want to deliver predictable market-leading results. We will be driving growth in our housing segment and unlock significant productivity improvements across our businesses. We also want to be the industry forerunner in sustainability and we are taking decisive steps in ESG more decisive than ever before. So how are we going to do this? This question will be answered today by our CEO, Markku Moilanen and his management team. But before we get started, let's go through a couple of practical details. First of all, safety. Safety is the top priority at YIT. If you hear a fire alarm, it is real. So then please proceed to the exits on your right side and then to the meeting point outside. We will be hosting 2 Q&A sessions today, first of them will be after the 2 presentations by our CEO and CFO. And another Q&A then will be at the end of the day in the afternoon after all the segment presentations. In both Q&As, we will be taking questions from live audience here as well as from the webcast. Please note that you can send your questions also during the presentations through the webcast platform. Markku Moilanen started as the President and CEO of YIT last April. Markku has taken determined actions to strengthen YIT's performance. And next, Markku will take us through how we are creating sustainable success through sustainable living. Please welcome Markku Moilanen.

Thank you for joining. It's really great to see all of you here face-to-face at the great Mall of Tripla. And welcome all of you behind the scenes on the webcast as well. We in YIT are in a business of creating sustainable success through sustainable living. So let's have a look how are we going to do that? But before starting, there are 3 things I would like you to remember from this session. Firstly, we will grow in housing. Secondly, we will focus around our great core competencies to deliver predictable, market-leading results. And thirdly, we'll step up in ESG and in sustainability, in particular. During the last few months, we have worked hard, looked at our businesses and defined clear strategies for YIT as a group but for each of our business segments as well. We have defined targets specifically for each of them. We are well positioned to deliver predictable market-leading results as well. And we have defined a clear direction when it comes to sustainability, which we see a big opportunity for us. Our planet has a challenge. Sustainable Living is something which is a big challenge and a big opportunity for all of us. If we think of the megatrends, there are 2 mega trends that are affecting our industry and YIT in particular. The first one is urbanization. There are more and more people moving to the growing cities, and that makes -- gives a lot of demand to their built environment. The second one is climate change and sustainable development. So climate change means that we need to rethink how resources are used and it means that life cycle thinking is becoming more critical as well. YIT will turn 110 years next year. Throughout these years, we have been in a business of creating better living environments. Being customer focused, we have a clear purpose to deliver better built environments. So today, we have a strong position to build our company and our strategy. We have a strong brand. We have talented people. Over the last months, when have visiting the sites, the construction sites, it's so great to see our people who have a winning team spirit over there. And of course, we have the great people in the offices as well. We have satisfied customers. We are measuring customer satisfaction in each of our segments, but then there are external bodies, which gives us high strength customer satisfaction as well. And then we have strong local presence as well. Everywhere where we are, we know the market, we know the clients, we know how the market works. However, it's evident that during the last times, our performance has not been satisfactory. So we have been looking at really behind the scenes, finding the root causes of our performance. The first one is that we have had an inconsistent focus. So we have been searching growth on areas where we haven't really been competitive. That has led to non optimal capital allocation. In addition, we have had issues in a few projects when delivering them. And finally, after mergers and acquisitions, our operating model has turned out to be inefficient. So now it's time to launch a new strategy a way forward during the coming years 2022 to 2025. Our strategy has 3 components. Firstly, we have redefined and clarified our business model with a clear focus and role of each of the business segments. Secondly, we have 3 strategic priorities through which we will implement the strategy. And then we have our targets and KPIs. And as a group, our goal is to reach an EBIT margin of 6%. So let's start from the first one, the business model. Like I told you in the beginning, we will grow in housing. Housing is our largest and most profitable business unit -- business segment, and the market is very good. The growing city, there's more need for new homes. So it will be our growth engine. It has its own customer base. It's consumer business, which we know very well as well. Housing is a process, whereas infrastructure is project business. And there, the role of infrastructure is to leverage the core competencies to generate strong profits and a stable cash flow. Like infrastructure, business premises is also project business. It will focus moving forward on core project types to generate strong profit and a stable cash flow. Both of these segments have their own customer base, infrastructure serving mostly public sector. But together, building the foundations of the great houses or schools or hospitals we are building in business premises as well. In the past, some of you have been asking about our Partnership Properties segment. And I have to say when I joined YIT I was asking, if I may, so what kind of animal is this. So we will dissolve that segment, but we will build a new segment called Property Development. And as the name says, it will concentrate on property development and the role as part of the group is to fuel the growth in housing and then increase the profitability of the other segments by adding the property development margin on top of the construction margin that we are doing in the construction segments. So the second element of our strategy are the 3 strategic priorities. So like I mentioned, each of the business segments have their own focus areas and the heads of the segments will elaborate those much more in deep. But in a big picture, yes, we are growing in housing and part of that, like we have informed yesterday, we are evaluating our strategic options in Russia, which would release significant amount of capital to be used in the other growing areas. You might ask what is different in this new strategy compared to the old or existing one. In the old strategy, we defined 4 areas that we are doing construction, development, ownership and services. In this new one, we'll concentrate on what we are really good and that's construction and development and the ownership and the services are no more in focus. So it is our goal to divest the noncore assets as well. The second part -- the second priority -- strategic priority is productivity. The first 1 in a big picture is the transformation that we are already doing in infrastructure and business premises. We started the turnaround in 2020 in business premises and now this year in infrastructure. And now they will turn to transformation, which will improve their profitability. And again, the segment heads will open that a bit more in detail. Then we will drive efficiency in our production through lean construction, we will utilize our economies of scale in supply chain or procurement. And then thirdly, we'll implement a new operational model that we have designed this year, and we will gain the cost efficiency through that as well. And the third priority is ESG, where we, as we informed, announced Friday last week as the first Finnish construction industry company committing to the 1.5% global warming goal according to the Paris Agreement. We will continue our rigorous work to decrease our accident frequency. And what is important? We will demand that everybody in our supply chain, so all subcontractors have to qualify with the same criteria as we will as YIT. All of these will take us to the 6% EBIT from last year's 2.1% level. And our CFO, Tuomas Mäkipeska, will open you the numbers and the journey later today a bit more in deep. Let's now next have a look at quickly on each of these different segments. And like I mentioned, the segment heads will open that elaborate a bit more in detail. In housing, they will really focus on the growing cities. Looking at the market, where the growth is really happening in those geographies we are in, they are the Helsinki capital area, the Tampere, the Turku in Finland. It is Warsaw and Gdansk in Poland. It is Prague in Czech Republic, and then it's Bratislava in Slovakia. We already have a strong plot reserve, which enables us to build 44,000 new homes. And with releasing capital throughout this strategy period, means that we will invest additional EUR 200 million in attractive plots in order to build additional 5,000 homes. Each of the segments will have their productivity programs in housing, this means that our goal is to reduce lead times, production times by 20% by '25. All in all, we are targeting a 20% revenue goal and an EBIT margin over 10%, which is a market-leading level. Business Premises, which is building both public and private buildings is focusing on their core projects. I've been in project business more than 15 years. And there are 2 phases where you can fail or where you can succeed. The first one is the project selection and the tendering phase. And in the past, like I said, yes, our risk management has been inadequate on that area. The second part is when we are delivering the business. And we are tackling and we have started to tackle this already this year in Business Premises. So we will increase the share of the project types like our self-developed projects together with our property development segment, life cycle projects like schools, kindergartens and competence-based project as well. This year, 2021, we have already said no to EUR 500 million worth of projects, which we would have tendered before. So EUR 0.5 billion project, we have said no, because they are not fulfilling our criteria. At the same time, we have a very high order book. So it's about selection. Then it's about the delivery. And over 1 year, we have worked hard on our project management program to improve the delivery part as well. All in all, with these actions, we are targeting above 4% market-leading margin. Infrastructure, which is building the backbone of sustainable societies. We'll focus around the core competencies. And again, Pasi Tolppanen is open in explaining this a bit more. And in a similar way, when the project fulfill the technical and the financial and the contractual drivers will go for that. We'll continue our project portfolio renewal and ensure that we follow the project management processes, practices, report, forums that we have defined during the past year. And we are sure that we will get to over 4% market-leading margins. Our property development segment then. Their focus is to start 1 to 3 self-developed project to generate gross margin for entire YIT. So it's not only the property development margin or construction margin, but it's the combination that we are striving for. Whereas in the past, we have been targeting a wide set of really large projects. Going forward, we will only go for them when we have a clear competitive advantage when we can manage the risks and our capital employment is optimal. When it comes to profitability, we have gathered all the major project directors, managers in the same organization to ensure that we have an endless delivery from the early phases of development, even urban development towards the delivery of the building, what we are doing. Their role is also to take care of our investment portfolio, rightsize it and divest the noncore assets. The KPI for this segment is the return capital employed and their target is to be above 10% level. So to summarize the goals, we are targeting an EBIT margin of 6%, while maintaining a solid balance sheet, and that's important for us moving forward. So our gearing target will be below 50%. And of course, it's our shareholders, and we want to ensure a stable growth in dividend for them. Let's go back to the sustainability. Why are we focusing on sustainability? Buildings are generating almost 40% of annual global CO2 emissions. So we need to do something and we can do something. And that's the reason that we have committed to the science-based target. So let's have a look at how are we going to do it? So let's open the ESG by capital. On the environmental side on E, it is about the goals in the science-based targets. And again, we are now defining that together with a science-based organization. And there are a few scopes, the scopes 1 and 2 are the emissions from our own operations, and we continue to have a goal to have them. The second one is then our indirect emissions. So it's like the materials that we are using in the buildings or infrastructure or the energy we are using there as well. On the social side, I want to highlight that we are really building the social infrastructure, being it the hospitals, the schools, the homes, the transport we are doing. So that's an important role for us. But then it's about our people as well. And it's -- we will continue to decrease our accident frequency on our construction site. And overall, as a company, we really have an ambition to have a zero-harm workplace. When it comes to G, the good governance. We continue to have zero tolerance when it comes to gray economy, corruption, labor exploitation and discrimination. And on the governance side, again, I want to repeat that it's important that we'll make sure that everybody on our site, every subcontractor will have to fulfill the same strict criteria. So let's summarize. We have defined clear strategies and targets for our businesses. And in a while after the break, you will hear more about the details. But the big thing is really the growth in housing. The market is good. There's a need for new homes, new apartments that we are doing by ourselves and together with our partners as well. The second one is that we really want and will deliver predictable market-leading results. Our group EBIT margin goal is 6%, which is a result of the components of each segment. So going forward, we will report the results of each segment as well. It is the sum of the segments that we are reaching the above 10% in housing and above 4% in Business Premises and Infrastructure as well. And thirdly, we have a clear direction what we are going to do in ESG. And the big thing really where we want to show the way is the commitment to 1.5% global warming as well. As a company, as a CEO, as a management team, we are now ready to build the better tomorrow for all of our key stakeholders. We want to be the most reliable and high-quality company for our customers. So customer-centric in everything we are doing will remain. We are the ideal employer among both professionals and students in Finland. We want to keep that position by enabling individual growth for our people. But then it's about the team spirit and the winning teams that we want to support moving forward. And then, of course, it's our shareholders through the profitable performance that we will do in the coming quarters and years. So now it's time to deep dive a bit more to the numbers. So the next speaker will be our new Chief Financial Officer, Tuomas Mäkipeska. So Tuomas, please, the floor is yours.

Thank you, Markku, and good afternoon on my behalf as well. We will take a step change in our financial performance. And that is the #1 priority in our strategy. Let's first revisit the financial targets. First of all, we are targeting the 6% EBIT margin, which is nearly tripling our current financial performance. We are also targeting, as Markku mentioned, less than 50% gearing in order to manage risks and keep our balance sheet healthy in order to maneuver in the changing situations in the market. And thirdly, of course, we will increase our shareholder value by paying out stably growing dividend. We've taken the 6% EBIT target to serve as a financial target because it is suitable for the group level since ROCE, the return on capital employed differ so much between the segments since we have in some of the segments, negative capital employment and in other ones, more heavy capital employment. So on a group level, it is more wise to follow and target relative profitability in terms of EBIT margin, 6%. Let's now look at the means how these targets will be reached. There are basically 3 key means to reach this step change in financial performance. First of all, the productivity in terms of profitability improvement. Secondly, more wise capital allocation; and thirdly, a rigorous strategy execution. We will start with the productivity improvement. Markku already opened this up from a segment point of view, how will the productivity and profitability improvement be reached by segment. But here, you can see the same thing split to different components. First of all, as mentioned, we are nearly tripling our relative profitability. The biggest and the strongest lever in doing so is the productivity leap. Secondly, there's the investment returns and growth in housing business. The productivity leap is the biggest lever, and I will elaborate on each of these a bit more. First of all, the operating model that we've been designing during this year, it's more customer-centric. It is more agile. It's more empowering and it's more cost efficient. We are targeting EUR 15 million to EUR 20 million annual savings of the new operating model by year 2023. We are already gaining benefits from this next year, but at full speed in gaining these benefits we are in '23. The benefit sources in our operating model comes basically from efficiency in our administration. We have increased and we will increase our span of controls. At some instances, we have reduced one organizational level. We will reduce bureaucracy, and we will increase digitalization in our processes. These are the main sources to cost efficiencies in our operating model in the future. The second topic is our project management. Markku already in his presentation, told you that there's 2 phases where you can succeed or fail in project business. As mentioned, so we have said no to worth of EUR 0.5 billion projects that would have been engaged in history. We have put in place clear and strict criteria, which kind of projects we are entering in. And we have focused our capabilities in tendering phase of the projects. Even more importantly, we have been focusing to the delivery phase of the projects. We have started an excellence program in building capabilities throughout our organization in every level, how to minimize and reduce deviations according -- against the original plan in our projects. We have worked already now heavily on this topic. But since this is a fundamental change, which goes throughout the organization, it will require some time to get in full speed. And therefore, we are -- by year 2024, we are at full speed in gaining this annual profitability impact of EUR 50 million. Then the third component in profitability improvement is supply chain management. In supply chain management and procurement, including procurement, we are both targeting direct cost savings by properly using our purchasing power. And moreover, we are targeting cost -- indirect cost savings, both from administrative processes by automating and digitalizing our administrative processes. And most importantly, we are targeting lean in our construction sites. Just to give you an example on a material rebars that we use. It's typically a material which is ordered from site. And since the delivery times are a bit too long, it is often -- it is often kind of taken into account that we order a bit too much so that definitely is enough. And therefore, the rebars, they might lie there on the ground, on the site, which will have a negative impact on the site logistics. It will increase the risk of accidents. It will reduce or it has reduced our productivity on site. And if we take this and turn it around, build the operating model where we can deliver just the right amount of rebars at the right time and at the right price. So this will have both a direct impact on our project margins, but also it will have an indirect impact in accidents and productivity at site. Supply chain management as an area we are digging deeper right now, analyzing the full potential. And we will define targets for ourselves also on that area. Now moving forward to the next component in improving our profitability. It is the investment returns. We are rightsizing our portfolio to achieve a step-up also in investment returns. We will divest noncore assets. Here, it's pointed out that Mall of Tripla where we are, it's a business which is actually doing pretty well right now. But since we have suffered from COVID last year and this year, so the exit is a bit delayed. And we are targeting to exit Mall of Tripla in 2024. And my colleague, Ilkka Tomperi will elaborate on this a bit more later today. Going forward, we are targeting to have less than EUR 200 million investment portfolio, which has a clear criteria, ownership is less than 50% and less than EUR 30 million equity stakes in the projects we are. Again, to manage risk and select where we have competitive advantage. Third component for profitability improvement was the growth. We are targeting growth in our housing segment, both in Finland and in CEE countries in the growing cities, 20% during the strategy period, also targeting EBIT improvement and more than 10% at the end of the strategy period. This will have a positive impact on our EBIT, both in relative and in absolute terms, on a group level. And also about this, my colleague Antti Inkilä will elaborate a bit more in his presentation. Moving on to the second key mean of improving our financial performance is the capital allocation. Markku already described our new business model and the roles of different segments in our group. If we look at the same thing from capital employment perspective, we already now have a negative capital employment in Business Premises. And the capital employment in Infrastructure segment is also modest. But still from both of these segments, we are targeting to release capital. And as already mentioned, from property development, we will release capital. And the capital will be used to gear growth in our housing segment as mentioned. One key thing in releasing capital was the thing that Markku already mentioned was Russian operations. As informed yesterday, we are evaluating our strategic options in Russia. Currently, we have a bit more than EUR 180 million capital employed in Russia. We have been able to reduce our risks there, so far, we have been able to reduce the capital employed during the last quartile. But this is the current situation as a basis that we are evaluating our options there. If we lift up the capital allocation back to the group level. So in a big picture, the free cash from the operations after investments and the capital from the divestments will be used to, of course, increase our shareholder value, paying out constantly growing dividends. It will be used to strengthen our balance sheet, as mentioned, targeting less than 50% gearing, and it will be used to gear growth in Housing segment and keep investing in property development. So this is in a big, big picture how the allocation is going forward. For this capital allocation, we have clear criteria and strict rules how to make decisions. The third topic in improving our financial performance is the strategy execution. And of course, it starts with balance sheet. Does the balance sheet give us room to operate? So yes, it does. We have a solid balance sheet since we've been able to create solid cash flows during the last quartile. We've been able to lower our net interest-bearing debt and we have done it sustainably. Also, the sustainability view is taken into account in our finances. Since, as you already know, so we launched our green finance framework during the spring. We also issued a EUR 300 million green bond during the spring. And now going forward, we are reporting according to the EU taxonomy of this year. And we are, for the first time, also reporting against the green finance framework during the spring. So the sustainability point is also taken into account in our finances. The strategy execution. This is now extremely important. There are 2 takeaways here. First of all, if we look at our situation and our segments, they are a bit different phases in terms of maturity. If we look at housing, housing is in a good shape, it's delivering stable returns, and we are ready to start growing there. We will accelerate our growth in housing starting year 2023. As you already know, so we have been lowering our start-ups because of the COVID, but now we are again accelerating. Business Premises and Infrastructure. In both segments, we are going through a transformation, which will take and require some time. This will lead to the situation we are in business premises a bit further almost ready to accelerate in generating profitable cash. And infrastructure, we've just started the transformation, and it will require next year to be completed, after which we are ready to grow profitably. And in property development, as already mentioned, we have a clean table and a new role in our group. This means that in year '23 and onwards, we will be able to accelerate in profitability improvement. That was the first takeaway. The second and most important takeaway here is the rigorous strategy execution, which will be enabled by integrated performance management meaning that we will break up our strategic targets, set them throughout the organization in every level, incentivize them, have a frequent follow-up processes in every level of the organization, taken immediate corrective actions in order to keep on the path. And this is a thing where we are going to take a step change as well. And this also gives us confidence that we are able to reach our financial targets. To conclude, as I mentioned, there are 3 key means in improving a step change in financial performance. First of all, the productivity and the potential that we have there and the potential that we are realizing. Secondly, the capital allocation and thirdly, the rigorous strategy execution. By this, we are confident that we will reach our strategic targets. Thank you. So now I think we have the first Q&A session coming up.

Yes. Thank you, Tuomas. Thank you, Markku, for your presentations. We are now ready for the first Q&A session. I will start -- we have some questions already from the webcast platform. So regarding the ESG, what time lines are set to reach this target? So we are talking about the scope 1 and 2 and 3 targets, I guess.

Yes. Thank you for the question. So according to the science-based target, the target is up until 2030. But we'll, of course, break it down like Tuomas explained in an annual target for ourselves, but the ultimate target is by 2030.

Second question, at the CMD in 2019. Business Premises EBIT margin and infrastructure project, EBIT margin had a target named good performance level of over 5%. So what has been the main reason for the long-term target of 4% instead?

Yes. We are, of course, doing the benchmarks in the market. And like I said, these are really on the market-leading level. So we are in a competition and that is defining what is -- what does good look like.

Indeed. Do we have any questions from the audience here? You can see, Olli, I think was the first one. Or we can go with Svante first since you have the microphone already.

Svante Krokfors, Nordea. A couple of questions. First one, regarding your targets, you have an EBIT target on group level and divisional level growth target for the housing segment. What should we expect from Business Premises and Infra top line going forward, should we expect a shrinking one or...

Looking forward, and I would like to refer to Tuoma's presentation where we are in different phases. So growth is not the target. It's more the profitability. But looking at the phase, we expect that after '23, yes, if there are opportunities, we would move to a growth path on both ones as well.

And then regarding -- you mentioned that Business Premises and Infra should be cash cows for supporting housing. How does that fit into, I mean, the business leaders for Infra and Business Premises, how do they feel about being cash cows?

Well, they provide strong cash flow then -- and they're actually proud of that. That's part of their business model doing that. But it's about the core competencies, which our people are and we are proud of, which is the key here. And then the cash flow is the role of their business as well.

And then regarding the co-ownerships in future projects. I think you mentioned that it's EUR 10 million to EUR 30 million equity stakes. That's quite small compared to what you have, for example, in Mall of Tripla. And does that mean that you will not participate as a significant owner in the larger project that you have in the pipeline?

Yes, I would say that this is the role of the property development. So we are using it to fuel the growth in housing and then the profitability in the 2 other segments. It is not the long-term investment. So yes, we might take a share sometimes even bigger, but then we want to get rid of it sooner than we have planned in the old strategy.

And if I may add, our colleague, Ilkka Tomperi, he will elaborate on this in his presentation after the Q&A session. So if there are questions after his presentation, we will get back to that in the later Q&A session.

And the last one from me is regarding your profit guidance for '21 that you specified today. Could you elaborate a bit on the EUR 50 million additional margin write-downs that you make. This is purely for Q4 and is this sort of a kitchen sinking operation now?

Yes. Just shortly on that one. Yes, we are looking some legacy projects, and we want to really clean the desk, so to say, we have evaluated them this year to have a stable position moving forward. Then there are projects which are no longer in the focus according to the strategy, which are part of that one as well.

And then, Olli.

Olli Koponen from Inderes. Good questions already. I have a few more left and mainly on the financial targets side. The profitability target seems quite careful, I would say, if we look at all the savings you highlighted. And if we look at the segment targets that you said, do you see this EBIT target as a ceiling for you or as a floor or as a reasonably stable profitability level going forward?

Yes, I can answer that. In a big picture. So we see, as already mentioned, so we see our strategic targets really reachable. It's not a floor. It's really a reachable target for us. So in a sense, it is also possible to go over. But I think for us to get steady improvements in our performance, financial performance, 6% EBIT is ambitious. Also, we are more than tripling -- nearly tripling our profitability.

Okay. And on the housing side, you seek to grow the revenues by 20% during the strategy. Just to clarify, what is the starting level here? Is it counted as Finland, CEE and Russia or only Finland and CEE?

The starting point here is the Finland and CEE for the 20% growth during the strategy period.

Okay. And just on the housing to continue, can you comment on the mix between investors and consumers going forward? Is it going to change? Or how do you see it?

Again, I would refer to Antti Inkilä's presentation, he will elaborate those, and then we will have a Q&A session on that afterwards as well.

Okay. On Infra and Business Premises side, this 4% EBIT margin or close to that has been your target level for years now. But you haven't been able to achieve it. Just to -- can you like give some more light on what is kind of different this time around? How can you achieve it?

Well, like I explained, we have been seeking more growth and profitability. Our project and risk selection has been not on the level that is today and then the delivery part as well. And now we have done and will do as Tuomas explained actions on those to ensure that we gain our target levels.

Okay. And 1 last question, and that's also regarding to the guidance that you released today. Can you give any kind of clarification on the EUR 50 million cost overruns and in which segment do this cost overruns come from because it would be quite helpful to see if it's an old project in Infra, old project in Business Premises or is it Russia? Or where does it come from?

At this stage, we are not opening that. That is our estimate. And of course, after the Q4, we will then release the results in much more detail.

A couple of questions from the webcast again. So the dividend, stable growth, what is the base for the growth of the base year because there's a comment that there's been some volatility with the dividend over the recent years. So where is the base for the dividend?

Well, the base is, this year's dividend, 14% -- EUR 0.14.

Yes, indeed. Then second question, how will you finance the Property Development segment? How shall we think on growth versus group debt level targets for this new division?

Well, as mentioned, on a group level, so we are targeting less than 50% gearing. So that kind of gives a guidance of our balance sheet and how are we operating. And of course, also in property development. So we are keeping that guidance also in that division. But we are not disclosing divisional level gearing.

Another question regarding the Russian business, the ruble, why to sell the business if the business is booming?

Well, I would firstly highlight that the sale is only 1 option. We are looking at the different options as part of the big picture and the group. Then on the other hand, I would say that in a good market, profitable business running machine, I think it's time to look at that option as well.

Any questions from here? Here, Markku.

Yes. Markku Moilanen, from OP. Regarding the housing Russia divestment. What is the timetable on that? And are you still going to report it as a separate segment in Q4? Or are you going to combine it to the housing?

Yes. It is still our business. And again, divestments I'm repeating myself is only 1 option. Yes, Q4, we will continue reporting. When it comes to the time line, we will tell you more in the coming months as we move forward in our evaluation.

Any more questions from the audience? [indiscernible]

[indiscernible] from Nordea Markets. On the behalf of Credit Research, I would be interested to know that you mentioned that you are going to maintain a strong balance sheet structure. And the current gearing level you presented in Q3, it is within the target. So what you see that, for example, with the capital release from the noncore operations, would you use that to strengthen your balance sheet further? Or are you happy with the current leverage level and capital structure, for example?

Yes. Thank you for the question. And as I mentioned in the presentation, so we are using the capital, which are going to be relieved from the segments. We are using it. Firstly, to pay out growing dividends. And we are using it also strengthening our balance sheet in order to maneuver in changing situations in the market. And also, we are using it to gear growth in housing segment.

So just as a summary to clarify that the proceeds that you might get with cost savings and possible divestments, they are not fully earmarked the housing, but to the entire balance sheet.

Exactly.

A couple of questions from the webcast again. You mentioned that you will grow your housing business by 20% by end of 2025, is the starting point for this calculation in 2020 or in 2021?

It is 2020.

Exactly. The next question, you stated housing segment, plot investments up to EUR 200 million. This seems to yield only 20% revenue growth based on comments. Does this mean you expect ROCE in housing to fall?

No, we don't. So we want to keep the level that we are today.

Any questions from the audience here? All right. Let's continue with the webcast questions. How fast will partnership properties be dissolved? Also, what can you say about levels of expected restructuring cost effects?

Well, actually, that is part of our operating model. So from 1st of January 2021 (sic) [ 2022 ], we will have the new property development. So we are well on our way so the details are part of the operational model work as well as the restructuring costs.

Then we continue with the property development. Will it also be JV based or development own-based balance sheet according to IFRS 15?

Well, we will have both. So we'll continue doing attractive JVs. It's a good combination for us to do both.

Next question. How well is today's order backlog supporting the EBIT targets? Or is it needed to get even more profitable orders to get the margin targets? If so, time before we see results externally. So what time?

Good question, and I'll refer to the coming presentations from the Business Premises and Infrastructure businesses because they are opening that a bit more, and we can come back to that if needed later.

Great. Any more questions from the audience here? Svante again.

Svante Krokfors, Nordea. Perhaps a question regarding your plot reserve. What kind of quality do you see in that? I mean you have -- you said that you have 44,000 apartments, you could build on that, and that probably gives a top line of EUR 5 billion to EUR 10 billion roughly estimated. Do you think you can use that entirely? Are you satisfied with the current plot reserves? Or do you see any risks there?

Well, we are satisfied. We have a good plot reserve and Antti can comment that later in the discussion. But we are happy.

Another question from the webcast. In housing, the EBIT margin target is -- in 2019 was over 10%. What is different this time? How much deal that 20% revenue growth depends on market growth in this forecast? Is the growth based on market growth or market share gain our targets and what markets will deliver the growth?

And again, referring to Antti, who will elaborate it a bit more. But it's our selection of these markets that I mentioned, the growing cities in Finland, Poland, Czech Republic and Slovakia, which are growing even more than what is our target.

Great. Any further questions from the audience here? Seems that at this point, we have no further questions. So we will have a short break, and then we will continue at 2:30 sharp. See you in a bit. [Break]

Continues now with the second presentations. And we will hear now first all 4 segment presentations. Then after that, we will host a joint Q&A for all the presenters. As a reminder, you can send your questions over the webcast platform also during the presentations. Antti Inkilä is a true veteran of YIT. He has been with the company since 1994, and he has a very strong background in construction. Antti is currently leading our housing segment. And as we have been talking about, housing is the growth engine for the company over the coming years. Antti Inkilä, please welcome.

Yes. Thank you, Tommi. I guess we could say that I'm some kind of old timer in our management team. But anyway, it is a pleasure to be here today. As Markku and Tuomas has already told, our task in Housing is looking for growth. And let me introduce you how we are going to do that and how to be profitable in that sense also. We design and build homes for our customers to help make their living easy. Therefore, it is essential for us to understand customers' needs now and in the future. The key question for us is buy apartments from us. In residential business, there is a saying that there is 3 things when customer wants to buy an apartment from us. First is location, second is location and third is location. And there is a truth in that sense, but I will come to our plot portfolio later. And let's go that more precisely through. Another important thing is customer experience. We have worked on that already for several years and trained our people throughout the organizations in service-minded and quality-centric thinking. We have developed a digitalized customer journey. It started from the sales opportunities, and it will last as long as the customers are living in our house or in her or his home with our YIT Plus Portal. We have a solid track record of being appreciated and valued brand among our customers. And we have excellent customer satisfaction rate. As an example, in spring 2021, in EPSI rating survey, we were #1 customer choice in Finland. So the customer insight is crucial for us. We have strong sales offices everywhere we operate. We actually sell almost all of our apartments through our own sales. So the market insights of trend changes are at our arm's length. For example, during the COVID time, we have increased our average size of apartments by 3.5 square meter. And now we see that the sustainability theme will be 1 key theme when our customers are making decisions in the future. But yes, we definitely want to be the #1 choice when it comes to the customers also in the future. When it comes to the YIT strategy, we have selected 3 items or key areas: firstly, we will focus on growth on cities of economic growth and stability; secondly, we will continue our work to develop our productivity; and thirdly, we will strive to enable sustainable lifestyle for our customers. So let's move on to these themes in more detail. During the strategy period, we aim to grow our revenue by 20% compared to year 2020. 1/3 of the growth is targeted to come from Finland and 2/3 from Central Europe, from Poland, Slovakia and Czech Republic. Our target is to achieve EBIT margin more than 10%. And the main factor in order to improve that is to increase our productivity, and I will come back to that later. Our track record has been quite good. We have been able to increase our EBIT level from 7.4 in 2019 to 8.4 in 2020. In order to improve our productivity to the level of 10, we have already all requirements in-house: we have a strong brand, we have skillful people, strong processes and good plot portfolio. But let's go a bit more in detail our growth plans and where to grow in the future. In Housing, we are bringing more geographical focus on our housing operations according to growth of local market. So it means that we will see growth in those economic growth areas in Finland. This means Helsinki, Turku, Tampere area and in Central Europe, we are speaking about Prague, Bratislava, Warsaw and Gdansk. We have been able to create an excellent brand already in those, let's say, if compared to new YIT cities. So nowadays, we have already a solid foundation to grow in those areas. Of course, we don't want to lose our market share in other parts of Finland and in Baltics. We don't want to give that to our competitors. Urbanization and demographic changes continue to support housing market and also our growth ambitions. In Finland, 85% of populations are living in urban areas and the level is same in other Nordic countries. The forecast state that the population growth by 2040 in Finland is expected to be highest in the southern part of Finland. And it means Helsinki, Tampere, Turku, Vantaa, Espoo area. And in addition to that, forecast state that we will need more than 700,000 more apartments by the year 2040, so it means that the average demand for apartments is 35,000 apartments in a year. So we can say that despite the economic cycles, there is a demand for long-term apartments. In Central Europe, in European countries, the urban -- the rate of urban population is lower than in Finland. So we can see that people will move to cities more and urbanization will accelerate. In addition to that, in these cities where we are operating, the economic growth rates and high economic activity supports our growth plans. Actually, as you can see, in our operating cities in Central Europe, the GDP per capita is higher than in Helsinki. In those Central Europe cities, we have already very strong local teams and their network to find good plots and run business according to our common housing process. Also Nordic design and Finnish reliability in those countries and cities are great assets to us and our customers. So I see that we have really huge possibilities to grow in those countries. If we then have a look -- a short look for our plot portfolio. We already have a good plot portfolio for future needs. In Finland, we have more than 2.2 million square meters which means that we have plots for 33,000 apartments in our portfolio -- in our coming portfolio. 1.6 million square meters are ready to build and 600,000 square meters are in zoning phase. So the total reserve in Finland, what we have in our portfolio is 33,000 apartments. In Central Europe, we have plots for 11,000 apartments. To boost our growth ambitions, we are investing 200 million more in those growing areas which means that in the strategy period, we are able to increase our offering with more than 5,000 apartments. But of course, it is not worth of investing in something if we don't understand the business, the local market and even differences of micro locations of plots. We are aware of that, and we can deal with that. Like I already mentioned, we have strong local teams with excellent know-how and group-wide proceeds to evaluate business cases plot by plot. So I guess we could move to the productivity side. In addition to growth target, we will also improve our productivity in order to achieve our profitability target level. We are already following very closely what are our lead times in our projects. And our target is to shorten our construction time by 5% in a year during the strategy period. What that actually means, so-called general cost in projects are about EUR 30,000 to EUR 50,000 in a week. So it means that in our volumes, it means that we will get more than EUR 3 million of savings in a year and when we are at the end of the strategy period, the savings will be more than EUR 10 million. We have started those measures already, and we will accelerate our actions further to cut down those turnaround times. We have used lean production methods like takt-timing. And we have already had a good -- received good results about that. We are using prefabricated modules in bathrooms, more than 1/3 of our bathrooms are made of modules. And we have also piloted wood and module construction in 2 projects in Tampere in order to shorten construction time, but also to understand wooden construction and what are the possibilities in that business area. In general, taking and use products on methods, lean production method means that we have to manage our supply chain better and also take the better grip from our preplanning. The result is that we will achieve savings related to waste. And what I mean with waste, I mean materials, time and costs. Excellent and total preplanning always pays back. All the actions to improve productivity will be very interesting journey for us engineers like I am and we have started that already, and I'm sure that we are like somehow enjoying the journey. So we will definitely do that to the end of this story. But let's now move on to environmental issues. Our aim is to enable sustainable lifestyle for our customers. As Markku told us earlier, building environment is responsible for more than 40% of global CO2 emissions. The main emission source is concrete. 8% of world's CO2 emissions are coming from concrete or actually cement. Therefore, it is really important for us to do everything we can to minimize the environmental impacts of our operations. We have calculated all our self-developed projects already since 2020 what are their CO2 emissions level. So we have got information and knowledge about that. And we will use that information in our coming actions to minimize CO2 emissions. Materials represent a large share of building life cycle emissions. To lower these emissions, we have to find ways to utilize low carbon materials. And this requires really a close cooperation with our suppliers and subcontractors. We have done quite close cooperation with Consolis, who is prefabricated manufacturer. And we have been able with them or actually they have, but we have been also involved to decrease CO2 emission by 40% in hollow core slabs. We have plotted also low-emission concrete so-called green concrete with Rudus and also recycled concrete. Recycled means that there is no natural stone in concrete. It is replaced with grass concrete. And with green concrete, it is possible to even decrease CO2 emissions by 60%. So there is lots of piloting ongoing, and I'm happy that our partners are eager to make actions to lower CO2 emissions also in a material part of the life cycle of building. And of course, like Markku said already, it is our duty as a forerunner to enhance reduction of CO2 emissions among all suppliers and subcontractors. It seems that there is a real willingness to do that in our network. Another CO2 emission impact comes from the use base of building, especially related to energy used for heating, cooling or water heating. That is the reason why we want to increase the share of geothermal heat in our projects. We have already used geothermal heating in some projects, and we will increase that. And we have also, already a couple of years ago, geothermal cooling of water in our project in [indiscernible] When it comes to the construction phase, and our own operations, there are a couple of things which have major impacts of CO2 emissions. We can use renewable energy, what we are using already today. We can maximize waste and shorten recycling, and we have to optimize our machinery. So we should aim for fossil-free and mixed waste-free sites. Also in these piloting is ongoing, and I see green light, let's say, over there. But let me recap the main strategic topics of Housing. We will focus our growth on cities of economic growth in Finland and in Central Europe by investing more than EUR 200 million more to the plots. We will continue to increase productivity by decrease in turnaround time by 20%. And thirdly, we will enable more sustainable lifestyle for our customers. With commitment to size-based targets, we will do our share and also as a forerunner, enhance sustainability among our partner network. We have a good track record in Housing, also growth with profitable way. We have talented and skillful people. We have strong and common housing process, and we also have 45,000 plots -- we also have 45 apartments in our plot portfolio already. These are the reasons why I'm confident that we will achieve our target during the strategic period. Thank you. So now it's time to ask my colleague, Tom Ekman to the stage. Tom is responsible for Business Premises. So Tom, come on the stage, please.

Thank you, Antti, and good afternoon, also on my behalf. During my presentation, I will walk you through what we have done in the Business Premises, and what we will do to achieve the EBIT target that was mentioned in Markku's presentation. We have had a quite a journey and the transformation. But as I see it today, we are good on the way. We are making our way towards the EBIT target in a quite good manner. So that we can have a profitable and very cash flow bringing business at the end of the strategy period. What do we do in Business premises? We pretty much build any kind of building that is overground. The underground building we leave to the infra segment and the own development housing we leave to the Housing segment. We're also quite good at renovating old valuable buildings. The latest example that we have renovated is the iconic hotel in Turku, the Hamburger Börs. A couple of years ago, we renovated the Parliament building here in Helsinki and are very successful in also that kind of construction business. We are present in Finland, Estonia, Lithuania and Slovakia. Here in Finland, we are the biggest player in the Business Premises field. In Lithuania, we are amongst the biggest players doing both contracting and real estate development. Also in Estonia, we do both. We do contracting and real estate development. And in Slovakia, we follow the housing when they are changing city zones, there is always a possibility also for real estate development. And we follow very closely what the housing is doing also now in Poland, looking for possibilities also in the real estate development area there. In everything we do, we try to make sure that the usability, sustainability of the built premises and spaces are in place, the entire life cycle and try to add value to our customers using our core competencies that we know we are good at. We have, the past year 2020 and this year, been very, very selective in what kind of projects we will enter into. The first question we ask when we get a request for proposal from the market is, does this look like a YIT project? If it doesn't, we won't participate. We want to use our core competencies in each project so that we can add value through value to our customers. Some of our enlightened customers, even on the public side, at this moment are moving away from only price-driven competition towards RFQs where also sustainability and usability over the time life cycle matters. As a matter of fact, we have won a couple of projects during this year with the highest price, but with great sustainability and usability in the projects. And this is a key factor that we are looking into. We want to be in the front line when it comes to sustainability and usability to make sure that our customers and users get the right kind of premises that they should. A year ago, in the autumn of 2020, we launched a project management program, pro, probably most of you have heard about it. We have trained our people in 3 big matters that have a very large impact on how we do businesses and deliver our projects. We looked into the management of procurement contracts, very big issue in my segment. We took the management of our additional and modification works, went through those and told our people how we want our people to work in that field. And also took a very, very thorough look into how we do the project forecasting, so it can be totally transparent, and we know how our project portfolio looks like. As you can see from this slide, we have ridden quite a roller coaster in the past years when it comes to the EBIT result. We have taken learnings from these unfortunate projects and made changing -- changes to our operating model on to how we conduct projects in the future. These learnings were the base for the earlier mentioned pro program that we developed during 2020 and continue during this 2021 year. Looking at the EBIT target at the end of the strategic period. In the segment management team, we feel very, very confident about the fact that we are able to deliver what we promise. And someone of you asked if that's the floor, definitely not. We have done it before, most of us in the segment management team, and we feel confident about that we are capable of doing at least the 4% EBIT in the future also. When it comes to the selection criteria of the project that we'll enter into, we have looked very thoroughly into the process how we tender our projects. If we don't feel confident, for example, with the contractual terms, we have no problem in making a no-go decision. We don't participate if we don't feel that the contractual terms in -- when it comes to, let's say, obligations and responsibilities and possibilities, if those are not in balance, then we will make a no-go decision. As Markku already told you, during this year, up to the end of October, we have put away EUR 0.5 billion worth of revenue approximately. When we looked into the projects, and we're not happy with either the contractual terms, financial terms or otherwise, it was technically a risky project. When it comes to the financial part, we do not finance our clients' projects. We are looking for a steady cash flow and we will look very thoroughly into the capital employed and have a own KPI where we look to have a negative capital employed throughout our entire doing. At this moment, our order book consists of some 70% to 75% of public customers, which means that we have a very, very strong cash flow and are able to bring the cash flow to the group and have a very, very good negative capital employed at the moment. When it comes to the tender management, this is the -- one of the things that we -- where we can do mistakes when we enter into projects. And we have looked very thoroughly also into the fact how we do the cost estimation and tender management. We have conducted thorough risk analysis of each and one project that we have entered into that we have tendered. And we are ensuring by this way, ensuring our couple -- our guys at the site and in the production teams that they can provide and deliver the projects within the estimated budget. With a rigid cost forecasting and early intervention if issues will raise at our projects we aim to minimize our net deviation. And we see a very, very good -- how the net deviation has developed during this year and then coming towards a very, very narrow net deviation. So I think that we are, at this stage, we are doing the project management on a right basis. We also changed our operating model. And the development that was earlier on the group level is now a common project management office shared with infra. And within that project management office, we will develop best practices when it comes to lean construction, site logistics, beam modeling, management system, et cetera, et cetera. In earlier presentations, you have already heard about the ESG targets that we have committed to on group level. Looking at these 3 projects now on this slide, you can see, for example, in Mansikkala Town of Imatra, we have made a wooden school on a life cycle basis where we can provide healthy and inspiring environment for some 1,350 children, plus the teachers, plus the parents. We have also, at the moment, we are building a central hospital in Vaasa, where we can provide safe premises to serve some 300,000 customers on an annual basis. And also, what could be more sustainable than renovating an old value building like the main building of Helsinki University. That's sustainable, if anything. In all what we do, we aim to have a close and honest cooperation, not only with our customers but also with the end users. So that we can provide sustainable and usable premises to our customers and users. We favor projects where we can add value to our customers during the development phase of a project before we enter into the implementation and construction phase. This will ensure us that we work together with our clients and not only take a price and then argue about what should each of us do and how to go forward with the contractual issues. At this moment, close to 100% of our sites in my segments use green electricity. So we are moving continuously towards the fossil-free sites. Closing this up. As you can see, as you can hear from my presentation, we feel very strongly that during the next years, we will be back on track within the business premises. And now let me introduce my colleague, Pasi Tolppanen to the stage to tell us more about the infra segment. Please, Pasi.

So good afternoon, ladies and gentlemen, also from my behalf. So I've been now more or less 3 months in this organization. So it's kind of about this famous 100 days approaching me. So it's time to make some judgment here as well. Before joining the YIT, actually, I was working as a CEO for a couple of private equity companies. And before that, I was working as a consultant engineer for 20-plus years, within the themes of infrastructure. So that makes me kind of -- I was feeling kind of a coming back home for this building the tunnels and things like that. Going through the organization within thee couple of months now, I was really happy to see the enthusiasm and the proudness of the teams and people and also the huge competencies what we have throughout the organization. It was no matter if I go for people doing the transportation engineering or underground engineering or going for industrial contracting. So people were really proud what they were doing, and we have a lot of good projects in our hand. So it doesn't change the slide. Now, okay. Let's go for the topics in our strategic period infra business, what we want to aim on this period of time. So of course, the profitability hasn't been there. So it was a fair comments from the audience here during the break at where we are and why we're in the position where we are. So profitability is definitely topic number one, we will tackle in this period. Also, we have to focus. We have to focus to our core competencies. So go into the project where we really are good at. And the sustainability as a third component, of course, following us as well. And it was mentioned on the CEO's presentation that is really a hot topic for the company during this time of the year. But I go more deep in those all topics and showing you what we kind of do. During the past years, we have been delivering a lot of demanding projects. So most of them has been really successful in a technical point of view and also financial point of view. However, when I went through the project portfolio, what we have in hand nowadays, we found out that there is a couple of challenging ones in our portfolio still. And this year has been kind of a cleaning year for those old heritage or legacy projects, what we have in the hand. We have to remember that the life cycle of this infra project is rather long. It might take from 2 years up till 5 to 6 years. So sometimes you see the mistakes or the issues rather ending the project life cycle. When I went through these projects and really try to look what is the issues in the project. And actually, it was more or less mentioned by Markku already in earlier his presentation that some of the project, we made kind of a mistakes on selection. So we were taking some projects where we maybe a little not so good. It was too difficult in many, many ways. It can be contractual or it can be technical or whatsoever. Other environmental issues were too high whatsoever. It was too cautious from the client side, setting us to the situation that it was difficult to go through or deliver. Some of the projects, we were a little bit more optimistic about the timing or about the pricing or about the risks related to the projects. And some of them, like said, Markku, the delivery time, when we really do the project, when we do the actions on the site, maybe we were too optimistic and maybe we were a little bit weak on that side as well. So the project management. Some of the projects, you can see one of those issues or elements, some of the projects, you can even see a few of those. So like I said, this last 12 months, if you can see the profitability, it's not really good. And we have to renew that. And of course, we are now targeting this 4% profitability at the end of the strategic period. Like I mentioned that we still have a sum of those legacy low-margin projects in our portfolio. And those are following us for the next couple of years still. So like you can see, even in 2021, we have more kind of 1/4 of the project portfolio still a kind of a low margin. I don't say those are loss making, but those can be a little bit lower profitability than it should be. Kind of a deviation for the expectation in the beginning is totally different. But at the same time, we already started the journey to go to better projects with the profitable ones. So we are backing our order books with the more profitable ones. And you can see that we will build that in throughout the next few years. But we can -- we have to fix those projects. We are doing that. We know where they are. We do the cleaning things and we go for the better project in the future. So how that will happen? Tom has already mentioned a few items, how they are doing the actions. We have similar actions here. We also have these PMOs, project management officers, so we are more selective. We are more tolerant what we're going to offer in the future. So it's really about making a selection. So we want to go from a price-driven to value-adding portfolio. So selection criteria need to be that it's technical and financial and contractually feasible for us, not either or, but and. And this is actually the mistake what we have been doing in the past. That's how it looks like. So portfolio. We want to move from price driven to more for value adding. You can see from the curves here, all these circles here that is kind of a price driven has been more on the agenda. That's typical in the public procurement project where the price is really effecting parameter when selecting the contractor. But today, there is more this kind of open book alliance model project, and we are really good in that, and we want to have more of those. We still have this infra maintenance in our portfolio. That means the road maintenance, it has been kind of a profitable business for us. And we want to continue on that. And also, we want to have the self-development project portion to be bigger in the future because that also gives us a possibility to be more kind of competent what we do, doing together with the colleagues, the good project portfolio. So it's not kind of -- it's nothing rocket science. It's really to be selective, focused on core competencies and shoot for that. If I little bit give you insight about the market, and actually, it looks like that the government wants us to go to the rails. And that of course good for us because we are really good in the rail construction. So there's more than 30 projects in the future coming or in the pipeline of Ministry of Transportation for the rail or tram projects. And of course, we are targeting for those. We are doing already several. We're already there in the Tampere tram. We are already there in Jokeri tram around Helsinki. We are in Crown Bridges tram and more to come. So this is really something for us. Also the regular rail projects where they're upgrading the rail to get more capacity on the track. Also the wind part, we all know that wind park and those are kind of increasing in the future. We are also there. We are developing by ourselves, but we're also contracting doing the geotechniques, doing the road construction or doing the kind of a the whole infrastructure for those wind park projects. And those are actually really sustainable. So I'm actually coming to the third topic of strategic priorities with these projects. I already mentioned a couple of examples that we already -- this Tampere Tramway. It was opened for the public now in August. We have been there since the beginning. And actually, project is still ongoing, even though the main track is in use, but there is some prolongation of the tram coming and going, and we are doing that as well. So there's more than 30,000 commuters using this track on daily basis with renewable energy. Also this Crown Bridges, I also mentioned. The people who live in Helsinki or this region, you know actually, you could read from even from Helsingin Sanomat this morning about the tram projects in the vicinity of Helsinki, so this is one of the biggest coming. So there will be a new bridge. And then there will be a tram line over the bridge towards the East from Helsinki City from the downtown. So more than -- close to 14,000 new residents can use the public transportation in the future. So these are kind of a sustainability for me at least, or for my team. So going to the sustainability kind of issues and topics through the projects. And the third element I want to mention here is this Blominmäki wastewater treatment plants. We've been there since the beginning. We did all the excavation first, and now we are doing the construction inside the treatment plant. It's underground utility which actually gives the clean water for 400,000 people, let's say, the western part of the capital area more or less. There's more than 150,000 cubic meter wastewater going through daily basis, and actually utilize the heat of the wastewater and also the heat from the processes to heat the rest of the plant as well. And also, it takes the biogas from the process and also the solar panels at the outside -- of the outside area to making the electricity for the plant. So it's really the 0 emission plant that we want to be in the future. So I think this is kind of really a sustainable -- example of the sustainability and what we can develop and create in the infrastructure world. This is about the projects -- of sustainable projects. But also, we have to go for our own operation to be sustainable there as well. So Antti was nicely showing about the graph kind of the life cycle of the project and where we can really affect by our own work. And of course, we are following that curve as well. So I don't make a repetition what Antti was saying. So we, of course, there as well. So we have to analyze the carbon footprint of our sites, which is not really typically an infra business actually. It's really -- it's just a building up, but we're already there. We're already doing the calculation in some of our sites. We, of course, come on to go to fossil free sites in the future, the recycling and this kind of sorting and this kind of study. It's kind of a daily base thing on a site already, but more to come. But 1 element what we have a kind of a different job to my colleagues is that we also done the [SQL] certifications. We have experts, for example, in Sweden, we already get on certificate from the [SQL] system to our site in Stockholm. And this is also actually requirements for the Crown Bridges in Helsinki. And the [SQL] is more than just a sorting and utilizing the fossil-free fuels, but it's about the logistics. It's about what kind of material you are using. It's about the communication to the surrounding people, what we do on the site. So it's really a bigger package what comes for the sustainability certificate statements. So we're already there. So there's a lot of elements, a lot of examples what we really can do through the projects, get better sustainable surrounding and also with our own activities. So that was more or less my kind of -- what kind of elements we have in a strategy in the journey forward and how we're going to tackle this 4% profitability road in the next coming years. So it's all about the focus. It's all about the selection, what we're going to do, and we do it in a sustainable way. And yes, somebody was asking about the cash cow. I'm happy to be the cash cow in this company because if we can deliver the cash on the table, I would say that our projects are really healthy. So happy to be there. So that's from my side, thank you all for listening. So I now like to give the floor to Ilkka Tomperi, who is our property development guy. So welcome, Ilkka.

Thank you, Pasi, and good afternoon, ladies and gentlemen. It's very nice to be here in front of you. For me as well, the first Capital Markets Day at YIT. I started in the beginning of August. It's about the same time as Pasi has been spending with the firm, and obviously quite big news as well in regards to the segment property development. As Markku was introducing initially today, a little bit of those changes that we've done. And I'm also one of those who had a little bit of hard time to understand partnership properties and its role for and within YIT. Hopefully, this decision makes it a little bit clearer for sure. The focus of the PD going forward is in urban and project development in selected value-added real estate life cycle services and in the use of YIT's equity in a smart way to enable growth and profitability of our projects and in order to generate attractive development returns. So this could not be done without our clients or customers. And obviously, when we are working with property development, the key is that we do understand our customers and who is our customer. I'd like to tell everybody that we actually have 3 types of clients. Number one, maybe are those investors. So the investors who are buying the properties that we are developing or who are willing to invest alongside with us in our joint ventures to make money and earn on properties. We need to look what their requirements are. These requirements are changing very rapidly at the moment. Other group of clients, which is also extremely crucial to be successful in property development. These are tenants, occupiers of our buildings. We should not be developing anything that our tenants or prospective tenants would not like to occupy. So again, that means that whenever we are thinking about developing something new, we need to look that it is attractive enough for the certain target group that we are doing it for. And finally, ultimately, all these properties built environment is used by people. So those people who are living there, working there, playing there. And we need to make sure that the user experience of our buildings is top-notch in addition to all the other aspects. And only if we are able to fulfill the requirements of these 3 groups of customers, I think we are able to be successful in property development going forward. So the ways how we can fuel the growth and profitability of the YIT. The cornerstones linked to the revised strategy of YIT are listed here. So ESG is obviously an area where in property development and self-started projects, we are playing a very crucial role because we're actually dictating all the choices we have in developing the properties. So we can play a significant role in making our developments more greener. And this is, of course, a requirement from our clients, investors and occupiers alike. So this is at the core of the strategy. We need to be able to feed high-margin projects to our constructing segments. You've been listening to 3 presentations before me from the 3 colleagues who are working on the constructing segments: Housing, Business Premises and Infrastructure. Our role, as shown in the pictures earlier, is actually to support these 3 other segments to be successful as well. All the self-started development projects are very likely to generate higher margins for our constructing segments. And of course, in addition to that, we are supposed to be able to deliver attractive development returns above those returns. And finally, we need to rightsize our investment portfolio. We need to be more efficient in the use of YIT's capital going forward, and I'm spending quite a bit of time on explaining how this will be done in the future. So these 3 areas are the ways how we are linked mostly through the revised strategy. But from here, I'm actually moving to ESG and environmental-related issues where I said that we are playing a key role within YIT as well. You know, 40% of the CO2 emissions on global basis are created by buildings, when they are built or when they are operated, so they're all kind of life cycle emissions and so on. So obviously, we play a big role, as I explained, in property development. We can be deciding out of which materials the buildings are going to be built. We are making the choices, what are the energy sources that are used in our properties that we are developing. And we can be making decisions on any other aspects that are affecting the life cycle emissions of these buildings that we are developing. It's not only energy. We can also look into creating buildings where we take into account opportunities to do change-of-use conversions when the original purpose for which the building has been built is no more valid. If the structure is right, you can also convert and repurpose the buildings. And there, of course, we are saving a lot of, again, emissions because you don't need to knock down the entire building but you can actually repurpose it for something else. There are good examples of that as well. And of course, in our Business Premises segment, we are doing those type of projects for our clients all the time. But in addition to the materials and the solutions to minimize the imported carbon and the carbon emissions during the life cycle of the properties, we need to look into smart technology and well-being and health of those people who are actually working in those premises or using the premises. This is actually becoming even more important after the COVID-19 as well, air quality, user experience and other things are really important for our occupiers and clients and those people obviously use the buildings. And finally, the green finance requirements are becoming much, much tougher all the time. Most institutional investors have been making decisions on allocations for green portfolios. They have strict rules on what sort of buildings they actually can hold and invest and own going forward. And so actually, one could say that the platinum is the new gold standard and the requirements are really increasing rapidly. And of course, we need to be following those trends. Otherwise, we are not meeting the requirements of our clients. So over the next couple of slides, I'm going through the key areas of business that property development will be doing going forward. And these are urban and project development, selected value-adding life cycle services, including the Workery+ space-as-a-service concepts that we have. And finally, smart equity, the use of YIT's equity to boost our projects to make attractive investment returns as well. So if I begin with the hardcore of property development really being the property development itself, the key is to develop sustainable, long-lasting, attractive environments to our clients and their staff and any other visitors. As said in the beginning of today's presentations in numbers, we try to kick off 1 to 3 projects per year. That is enough so that we are having a rightsized volume going forward. And I said as well, we need to be focused on projects that are really kind of in the sweet spot of our strategy, not too small, not necessarily too large or complex but something that is sizable enough but is also doable where we can manage the risk in a proper way. The pipeline we have and we will be maintaining and building up will be consisting of all types of properties, obviously commercial properties mainly. So it includes offices. It will include logistics that we have been doing logistics recently as well. We are doing mixed-use projects, especially when we are in dense urban areas next to a metro station, railway station. This is typically the way how you can be building something new. Social infrastructure: schools, daycare centers, health care properties, obviously extremely attractive to investors. And also, there's the linkage to our life cycle services on the property management side. And finally but obviously, not least important, are wind power parks. Wind power used to be part of our Infrastructure segment and the construction of those still is. But the development of wind parks will be moved under the responsibility of PD going forward. We have a good pipeline there and this is an area where we believe we will be very successful going forward as well. There are good proof of our skills in that part of the business shown already. So another theme related to property development is really the responsibility of the end-to-end process. So really from the early days, which might be the urban development part through the execution to the completion and exit. And we need to be capable in kind of making sure that this linkage is kind of fully covered with our staff, and we are having a good creep of the projects from the early days through execution to the end. And that way, we can safely drive growth in property development. We can be supporting the constructing segments, and we can really kind of make sure that we are also having the great connection with the urban development and project development. So I strongly believe that there are great opportunities. And then if you think about the underlying markets, there have been huge changes. We are today actually in the Mall of Tripla. I don't believe that there necessarily needs to be too many big shopping centers being built in Finland or in the Helsinki capital area going forward. But there is need for new modern offices even if the use of offices is changing a lot, then we are looking into the low occupancy ratios of offices. Most office tenants are really streamingly thinking about what are the solutions, how we can actually attract and retain talent and actually how we need to repurpose our offices to meet the requirements of the new way of work. And I do believe that as property developers, we have a lot to do there and we are well connected there. Logistics, obviously, in addition to residential is another hot segment. And of course, we need to be proactive in trying to identify opportunities to create products that our investor clients are looking for. If I then move to the services side. So we will continue having services, but as I said, we will be strictly focusing into these 2 areas where we truly see a strong linkage to our other main businesses. So that said, real estate management services, which are the life cycle services that we are having in, for example, the public-private partnership projects, the schools and others. There's extremely good linkage to the constructing segment. And this is also a reason why we've been very successful in this segment because we can actually offer our clients, the cities, municipalities, for example, the full package where we are building something and we're also taking care of it for the next 20 or 40 years. These contracts are extremely long. They provide us very steady, safe cash flows as well, so it's a value-adding business that perfectly suits us. The other area where we have a good connection with our business is obviously space-as-a-service, the Workery+. We are currently having 4 of these co-working spaces operational and, of course, the linkage to our office developments is clear. In the future, I do believe that in most multi-tenanted office buildings, there will be probably 20% to 30% of the space that is actually operated as co-working, where you have shared meeting rooms, shared offices, where you have office space for smaller tenants and also kind of readily decorated offices even for larger tenants that are offered on flexible lease terms. And this is a great way for us to stay kind of connected with our office tenants and occupiers and learn about the changing needs of office occupiers as well. But this is it, that's for the services. And finally, if I move into the smart equity. Smart equity to us means that first of all, during the beginning of the strategy period, we will be rightsizing our portfolio. So as you see from the chart, so the pie on the left-hand side, that is our current portfolio of joint ventures and investments. It's about EUR 260 million of net asset value in total and, as you can see, Mall of Tripla is a significant part of that, a bit over EUR 180 million of NAV as we speak. We have been publicizing that our idea and plan is to dispose our ownership in Mall of Tripla by 2024. COVID-19, of course, has been postponing the process of disposing Mall of Tripla from what the thoughts probably have been initially. The center is doing very well. Of course, it has proven that it is well located, it's well functioning. We have a high occupancy rate so the visitor numbers turnovers are very good and have been recovering nicely. But of course, we need to make sure that it's fully stabilized and so on before we move out from the ownership. The rest of the portfolio is well diversified. We do have a number of rental housing investments in our portfolio, a plot fund and some other investments. And these investments are performing as expected. We've already shown during the past couple of years that we've been able to recycle capital. We have been exiting some of these joint venture positions and we have been returning capital that has been invested elsewhere. Now going forward, the idea is that we will have maybe a bit under EUR 200 million of investments in our portfolio. It will be much more equally distributed. So this picture here on the right-hand side, this is more like an illustration of how it might look like. And the key takeaway from that is that we are not going to make any oversized investments. It will be much more equally spread. It doesn't necessarily look exactly like that, but we will have different sectors there. And we will have probably 15 to 25 investments each being around EUR 10 million to EUR 30 million. There might be some investments which are a bit smaller, some investments which are a bit larger. But on average, this is the way how we see that this portfolio will be working. The typical ownership period that we are targeting is probably ranging somewhere between, say, 3 to 5 years max, which means that then we are able to make a couple of new joint ventures and co-investments per year and then we are exiting a couple of investments on annual basis. And this enables us then to boost our development projects but also to support the growth of housing. So there is a strong linkage to the growth plans we have in housing because these type of plot funds and rental housing funds obviously are also enablers to boost our housing production. And for YIT, it's a great way to have the benefit of the ultimate exit where the portfolios are sold after they've been leased out and stabilized. So we are not only selling the buildings to someone else who is leasing out them, taking the benefit of the final stabilization in the value uplift. So I feel that this is the right way to operate the portfolio going forward. If we look into the KPIs, obviously, the best way to measure our success and performance is the return on capital employed where we are targeting a return above 10% going forward. And now if I may, I'll just recap what I've been going through here, so again, just to remind you of the key takeaways. So the ways how we are contributing to the strategy YIT is going to have during the next strategy period, these ESG matters where we are going to play a very big significant role, feeding the growth and profitability of the other segments as well in addition to making good development margins and investment returns with our equity portfolio, and then finally, rightsizing the portfolio so that we have a well-diversified portfolio going forward. Thank you very much. And next, we are going to move to the second Q&A session of the day. I'll just let my colleagues join me. Thank you.

Thank you very much for all the segments for the very interesting presentations. We're now ready to start the second Q&A. And then after Q&A, there still will be final words from our CEO, Markku Moilanen, so it's worth staying tuned until the very end. Again, we will be taking questions from both the webcast and the live audience here. Perhaps we start again from the webcast questions. There's a few that came already. First, I think, goes to property development. Will wind park gain in Q4 be in Infra or PD or actually -- to Tuomas?

The gain from the last year? So it will be in the group numbers, and this is something that we need to get back to you where in which segment it is shown.

Then will you consider splitting Housing Finland and CEE to Housing Finland and Housing CEE to improve visibility on profits and ensure better correlation between KPIs and profits?

If I may start. Of course, we are continuously looking at our organizations. But as you heard Antti Inkilä describing, we are really utilizing the same capabilities and competencies that we are having Housing, so growing now there in Central European countries is a natural way to do it. But again, we are evaluating the situation on an annual basis moving forward.

Then any questions from the audience here? Svante again.

Yes. Svante Krokfors, Nordea. I have actually questions to all divisions. If I start with Housing, could you, Antti, elaborate a bit on the difference in profitability between Finland and Central Eastern Europe? And also regarding the main differences in market dynamics between Finland and CEE when it comes to regulation and compliance and so on.

Well, if I start with the profitability, at the moment, it seems that it is possible to have a better EBIT level in CEE countries than in Finland, but at the same time, return on capital employed is a little bit challenging so it is like balancing all the time. And another one was, so what is the market situation? Or what was the -- sorry?

A bit about the operating and environment in CEE compared to Finland. I mean, what do you have to think of when it comes to, I mean, political risks or compliance issues?

Yes. At the moment, it is not just coincidence that we are in those countries when we have entered those countries. So we have studied different countries and the result was that these countries are suitable for us when it comes to the governance side. And the market environment and circumstances are quite similar than in Finland. But also in those countries, there is quite -- it takes quite a long time, for instance, when it comes to permitting and zoning. So in that sense, we could say that the situation is quite similar than in Finland.

And then on the EUR 200 million that you will use for plots, will that be 2/3 in CEE and 1/3 in Finland, similar to the growth contribution?

Not exactly. We shall see what kind of possibilities we'll have. And also, we have to recall that or remember that in Finland, the price level is higher. So we are looking for growth, 2/3 from CEE countries and 1/3 from Finland. But anyway, the plots in Finland are still higher. So I guess when it comes to the new investment, the remission can be a little bit different.

And then Business Premises and the question to Tuomas regarding, I think, part of your problem has been also a choice of partners when executing on the projects in Business Premises. And what have you learned from this? And could that also limit kind of your opportunities in what kind of projects you will participate in going forward?

We haven't blacklisted any of our subcontractors at this moment. Of course, when it comes to the gray economy, we are very -- looking very thoroughly through that we stay on the white side. We do not accept any gray economy on our sites and we're very cautious to not have that kind of subcontractors on our sites. We continue -- we have had difficult discussions with a lot of our subcontractors, but we managed to close the projects with them in a manner that makes it possible also to cooperate in the future.

And then on Infrastructure and a question to Pasi-- could you repeat a bit what has been done wrong in selecting the approach? I mean, is it only project selection or is it something about contractual things that have been done wrong, thinking of going forward and what you have learned?

It's about the selection. As I mentioned in my presentation, it's about the selection and actually also in some kind of bit too optimism in the pricing and this kind of risk-taking into some of the projects. It goes also to the kind of contract models also because we have had a bit tough contracts in a couple of those projects. So it's not a kind of a clear evidence of that one of those topics are really the kind of a key driver of the issues what we have had in the project. But I can see the elements of many of those in many projects. So we really have to focus what we're going to do and really be more selective and take those projects that we really can deliver and feasible and also contractually are interesting and feasible for us.

And could you perhaps repeat also what will you continue to do in Infrastructure? And what segments will you not continue with? I guess, tram issue is definitely something.

Yes, definitely tram and the rail as a whole. So if it's a kind of a regular train or is it a tram, of course, we want to go for those. But maybe one to mention, not to go is kind of if you go for mid Finland for some kind of a smaller or midsized road project, for example. We actually know it's not -- no usage to go there because the price is really low and competitive is really high. So that's kind of one example or go for nonurban area for harbors or things like that. So those -- we need to be really careful.

And then a couple of questions to you Ilkka, given that you have now clearly defined Mall of Tripla as a noncore asset, how do you look at the investor market especially on the shopping center side? What you expect about yields, rents going forward?

yes. So if I just comment on the market in general, I mean, of course, we know that retail assets have not been that popular during the past couple of years. And if we look into the statistics on how much of the total commercial property transactions have taken place in the retail segment, so it's been coming down. And of course, we can probably see that there are some signs of kind of a comeback for that segment as well. And I think when things are stabilizing, the market, we'll get a bit more active as well. In general, I think that I'm just making a reference to the data points that are publicly available on where the rents and yields have been moving, and I don't have any other information myself.

Thanks. And then a question to Markku regarding the EBIT target of 6% on group level. Does that include property development expected kind of EUR 20 million EBIT contribution annually?

Yes, that's the sum of all the segments so that's what it is.

Then a couple of questions again from the online audience. Do I understand correctly that since you are growing the role of rental housing in property development, that you are not planning to sell your share in those housing funds there at the moment? How many plots they are in those funds altogether?

Yes. Most of those funds or, I guess, all of them are actually closed-ended vehicles technically so we have a due date there. And as I said, in a typical co-investments that we have or club funds, we typically have a lifetime, which may be ranging from 5 years up to, say, 8 years and so on. So ultimately, all these will be liquidated.

Are we going to see any diversity or inclusion actions taken as ESG is in such huge role in the new strategy?

Definitely, we are looking at that as part of ESG as well. And diversity for us is several things. I'm actually very proud of this team even if we are all male. But the background is diverse. So it's different backgrounds bringing more diversity as well. When it comes to gender, overall, we are in 24% women compared to men. But office personnel, it's 50-50. So we are, of course, looking at that. That is bringing value to us. So it's -- then it's different backgrounds on which countries people are coming. So we are definitely following that closely as part of our ESG program.

Few years back in YIT Moscow CMD, I asked how seriously we should take the external financial targets. The reply from Vice CEO was that the targets are partly intended for YIT internal purposes to have stretching goals. I would like to understand better the mindset with YIT's new financial targets. Are those cautious and fact-based or challenging with clear risk?

Well, they are clear. That the internal and the external goals are the same. And I'm sure that you heard that we are, as a team, committed behind those. And again, we have explained in detail that we are committed to deliver them as well.

Questions from the live audience. Matias?

Matias Rautionmaa from Danske Bank. How do you see the current market situation in Housing Finland? According to at least some market studies, demand might be already peaked in Finland. What is your view on the market?

We gave our last market, let's say, prediction in the report last time, and I don't see that there has been any big changes related to that.

Okay. Then I continue with the question about Infra. How can you ensure your competitiveness if you participate only minimally to these price competition projects? Which are like the so-called bread and butter business. How are you -- can you be competitive if you do only those large projects?

I didn't say that we do only a large project. We want to more go for a competence-based project and also on this own development project with the colleagues. And of course, those are better for us. So of course, this price-driven project like a public tender, it will be there, that's for sure. And we will be bidding, but we have to be more selective where to go, like I said, about this Mid-Finland road project, et cetera. So that we have to do. So those will be there but in a more smaller portion in the future.

Can you clarify, what would be the margin in Infra segment if you would only do these price competition projects? What is the effect?

If I only do those, that's impossible to answer because actually in those projects, there's a more severe competition as well. So it's impossible to answer what will be the profit after doing only those because we won't go to that direction.

Okay. Then this one goes to Tuomas, about the margin in this Business Premises segment. Should we expect gradual increase in margin because I imagine that this increased cost level might have some impact on margins. How do you see the situation there?

We have been quite good at tackling the cost increase that we have seen during Q2, Q3 and partly also here in Q4. We don't see any big issues. We have annual contracts with our material suppliers usage -- take the full usage of those at this moment. So looking also into the order book at this stage, we feel confident that the gross margin level will move towards the target for the strategic period. And then we're looking into having a couple of projects from our PD segment will also help us reaching the targets.

Okay. Then this one goes to Ilkka. And you explained well the PD segment, that was very understandable. But I still struggle to see what is the change here compared to the earlier one?

Yes. So the main change is obviously that we've been cutting away a lot of these service development projects we have had. And again, I don't necessarily want to go into those anymore. But we have had, in our past, strategy quite a lot of emphasis on these. And so there, we decided to choose only these 2 which have a strong linkage. Property development, of course, has been part of the strategy and the doings in the past as well. But the role of it will be grown. And I think that obviously, when it's taking a bigger chunk of the segments kind of business, it will be more visible. So there is more emphasis on that. And so in regards to investments, the biggest change is really the way how we see the use of equity going forward. And I explained, it's really a tool that enables us to kickstart projects. And there is much more focus on recycling the capital also rather quickly. So maybe my background, again, as an investor is brought into the way how we're seeing it going forward.

The next question, is it fair to assume that the group EBIT level in 2022 is not likely to grow meaningfully from 2021 and that you expect a more visible improvement in 2023?

The point is that it's really the margin which we are targeting and explaining how we are increasing. So it's really what we are regularly following up that we are improving the margin year after year.

What kind of return on capital employed level would you be satisfied with on a group level?

Well, like Tuomas alluded to, return of capital employed on a group level with so different businesses, that doesn't really make sense so we will not be summing that up.

How much of the margin improvement will be from avoiding the rotten egg effect or is it an overall portfolio improvement on a waterfront?

I think we have -- it's a good question of rotten eggs. Yes, we are avoiding that. But it's concentrating around our core competencies where we are competitive as well. So it's a combination of both.

Any questions from the live audience? Thank you. I think we are running out of time at this point. And now I would like to hand over to you, Markku, for the final thoughts.

Yes. Thank you, everybody, for joining. Thank you for good questions, good discussions during the break as well. So let me sum up what we have heard today. From where I started, yes, we will grow in Housing, and as you have heard, we know the market very well. We understand where and why and how we are going to grow. Secondly, you heard the presentations on how are we going to deliver predictable market-leading results in Business Premises and in Infrastructure. It is really about utilizing our core competencies, selecting projects and then delivering them. And you heard the commitment that we have in the team. You heard about our new Property Development segment that is fueling up the growth in Housing and the profitability in Business Premises and Infrastructure as well. And you heard about the understanding that we have about the property markets and the different subsegments over there. And the last but not least, we explained to you about how are we going to do our commitment when it comes to ESG and sustainability in particular. So you might ask, yes, 2025 comes soon but what is after that? What is YIT turning up 110 years next year going to be beyond 2025? So certainly, we want to be the most reliable and high-quality partner for our customers. We want to remain to be the ideal employer for our people. But if I'm looking at YIT and the whole construction industry, there are items on our current strategy which will impact the whole industry. It is about productivity and it's about sustainability. So those actions and steps we are taking now around productivity, when it comes to lean construction, when it comes to digital tools, we haven't talked about that, but it's that everyday life for us to use digital tools as well. So I see actually that we will be leading ecosystems around the construction industry, which will mean that after 2025, the whole industry will take a leap in productivity. And this is combined with sustainability as well. So I see that in this ecosystem, we'll have the material producers to create low-carbon concrete, low-carbon steel, wooden structures, timber structures, we all will do that together. I see start-ups on these areas. I see start-ups on digital areas, serving then the end customers, being the homeowners or being their offices as well. So beyond 2025, we will go for more productive, more sustainable world where certainly YIT will have a leading role. So I invite you all to follow us to the journey to the next 5 years and beyond. Thank you very much.

Thank you, Markku, and thank you very much for the online audience for following our event over the webcast. This concludes the webcast.