Finnish contractor YIT has announced its new segment structure and reporting practice, following the merger with fellow contractor Lemminkäinen, which took effect on 1 February.

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The company’s reportable segments are housing in Finland and CEE (Central and Eastern Europe), housing in Russia, business premises, infrastructure projects, paving, and partnership properties.

The housing in Finland and CEE segment consists of YIT’s former housing in Finland and CEE segment and the Finnish residential construction business of Lemminkäinen’s building construction segment.

The housing in Russia segment consists of YIT’s former housing in Russia segment and Lemminkäinen’s residential construction and property management business in Russia.

The business premises segment consists of the business premises construction and project development businesses that were previously under YIT’s business premises and infrastructure segment, along with the commercial construction, project development and commercial property and facilities management businesses of Lemminkäinen’s building construction segment.

The infrastructure projects segment consists of the infra services division of YIT’s business premises and infrastructure segment, excluding the maintenance unit, and Lemminkäinen’s infra projects segment.

The paving segment consists of Lemminkäinen’s paving segment and YIT’s maintenance unit.

And finally, the partnership properties segment is responsible for financing the development phases of major development projects, and the ownership and subsequent realisation of plots and developed properties at the right moment.

Going forward, YIT said it would report in accordance with IFRS (International Financial Reporting Standards) principles in both its group reporting and segment reporting.

It has been decided that the group’s office operations will be centralised in Helsinki, Finland, with the head office of the merged company located in the premises of YIT’s existing head office.

Board of directors

The composition of the merged company’s board of directors has also been given final approval.

They will be Matti Vuoria as chairman, Berndt Brunow as vice chairman, and Erkki Järvinen, Harri-Pekka Kaukonen, Inka Mero, Juhani Mäkinen, Kristina Pentti-von Walzel and Tiina Tuomela as members.

Kari Kauniskangas will continue in his position as YIT’s president and CEO, while Ilkka Salonen has been appointed as the company’s CFO and deputy CEO. Salonen was previously Lemminkäinen’s CFO and he had been employed by Lemminkäinen since 2014.

Outlook

Looking forwards, YIT’s outlook for the housing in Finland and CEE sector is fairly steady. Consumer demand for apartments is expected to remain at a good level, while activity among large residential investors is predicted to be lower than in the previous years.

The demand for apartments in Russia is expected to remain at the same level as seen on average in the second half of 2017.

In the business premises sector, the rental demand for business premises is expected to remain at the previous year’s level in growth centres. Meanwhile, the contracting market is forecast to remain active, but the average size of contracts is expected to decrease.

The infrastructure construction market is expected to continue to grow slightly from the level seen in 2017, as is the total volume of the paving market.

YIT has forecast that its adjusted operating profit will fluctuate significantly between the quarters, starting off low in the first quarter of 2018 due to the normal seasonal variation of the combined company.

The total synergies from merging YIT and Lemminkäinen are estimated to come to about €40 million annually, and are expected to materialise fully by the end of 2020.

The integration costs are estimated at €40 million and are expected to have a non-recurring cash flow impact primarily for the years from 2017 to 2019, with the majority expected to be booked in 2018.

Lemminkäinen’s financial statement

In its full-year financial results for 2017, Lemminkäinen reported an order inflow worth €1.21 billion and net sales of €1.85 billion.

The company’s operating profit amounted to €41.8 million, and its adjusted operating profit came to €46.6 million.

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