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Earnings Call Transcript

Earnings Call Transcript
2018-Q1

from 0
H
Hanna Jaakkola
Vice President of Investor Relations

Good afternoon, everybody. Welcome to YIT's First Quarter 2018 Results Info. So nice to see so many of you here in Käpylä. Welcome, also, everybody on the other side of the screen watching this through the webcast and also you guys listening to this through the conference call line.I have here with me our President and CEO, Mr. Kari Kauniskangas; and our CFO, Ilkka Salonen present here with me. They are presenting the results and answering your questions. My name is Hanna Jaakkola, I am head of IR, also at your service for the questions after this.All the material we are presenting here will be -- are available online on YIT Group's web pages under Investors and Materials and Presentations. After the presentation, there is time for questions. We will take first the questions from the audience here in Käpylä, and thereafter, from the conference call line. And in the webcast system, there is a chat function you can use to post questions, and I will ask those questions to the management after the presentation.Our agenda today is such that Kari will go through the group development for the first quarter, first. Thereafter, the integration update and synergy update for the merger with Lemminkäinen. Thereafter is the time for operating environment and segment reviews. Ilkka will present the financial position and the key ratios, outlook and guidance will end the show.A lot of things have changed during the first quarter and one of the major things is that for the first time we are using IFRS figures as our major reporting method for this interim report. That has a major impact, especially for the housing segment figures, and for this quarter, for example, Housing Russia has less or low amount of completions. And in IFRS figures, revenue and profit is recognized, first when the project is completed and for the residential consumer project. We are also giving POC, percentage of completion, figures for Housing Finland and CEE and Housing Russia segments to give you more flavor of the underlying business.Also, Lemminkäinen and YIT merged the 1st of February 2018. So this February, some 3 months ago, and the official figures include Lemminkäinen figures from the beginning of February. And they are marked in the interim report as reported January-March 2018. But to give you more comparability compared with the previous year, we are using pro forma figures for 2018 for the first quarter and comparing that to pro forma 2017 figures. And that means that for the first quarter, we have included Lemminkäinen's general figures to these figures we are presenting now in this presentation and also in the report -- interim report, so that comparison is made with the Lemminkäinen general figures. And also for the year 2017, pro forma income statement is presented as if the merger had taken place the 1st of January 2017 and for the pro forma balance sheet, as if it had taken place the end of December 2017.Also the adjusting items include merger-related fair value cost effects. But more details on that, you can find in the tables in the interim report.But without further ado, to the business. Kari, the stage is yours.

K
Kari Kauniskangas

Good afternoon on my behalf. The [ first ] quarter was quite exceptional for many annals. YIT and Lemminkäinen merged 1st of February, as said. We changed the reporting practice from POC to IFRS. We have changed the segment structure, and we have reorganized the whole company. I'm very satisfied with our development in merging these 2 companies.We have been able to proceed according to our plans and all without -- operations have continued with no breaks through the day 1 and also the transition period. Of course, there are still lot to do in integrating these 2 companies, but the structures are in place 1st of May and the management is already fully focused on markets, projects and competitiveness.We have been also able to verify the integration plans and synergy calculations, and we are now confident that the announced amount of synergies in EBIT level will be realized sooner than we had expected earlier, and that the total amount will increase. The expected cost level has stayed stable.In connection with preparing our new segment structure, we evaluated our project portfolio thoroughly. Based on the evaluation, we had to lower the margins in several projects, especially in Russian contracting business infrastructure project and Business Premises segments. Changes have been done in projects, coming almost evenly from both ex-YIT and ex-Lemminkäinen. This is something which can be part of YIT's culture in the future. At the same time, we have succeeded very well in renting premises for encore tenants in several big office projects, which means that there will be many large projects which we are planning to be sold by end of 2018. Based on these 2 changes, both negative and positive, the group outlook for the whole year is unchanged. Based on the strong seasonality of Paving segment, the investment in Tripla project and investments to our plot portfolio, the cash flow at the beginning of the year was negative as we expected at the beginning of the year.The revenue was lower a year ago, and actually, the revenue lowered in every segment. I will come more accurately to the reasons in segment by segment. The order backlog increased 10%. It's on a very strong level. The profitability was weak and the main difference between the absolute adjusted operating profit -- or the difference between the absolute adjusted operating profit is mainly explained by the weakened margins in several projects, around dozen project in our portfolio.In Housing Finland and CEE, the performance was strong again, and then result improved compared to last year. Changes in margins explains mainly the negative changes in 3 following segments: Housing Russia, Business Premises and Infrastructure projects. In Paving, we are having strong actions ongoing to restore the business, especially in Scandinavia, which is impacting also adjusted operating profit. Also in that segment, the volumes in mineral aggregates was on a low level and that impacted to our profitability.Asset integration has started very well. We are very satisfied on the proceeding. We have now adjusted our estimates on the total amount of -- and timing of the synergies and synergy benefits of the merger. We estimate that the total synergies are larger and they will be reached sooner than earlier announced.Today, we estimate that the total annual synergies related to this merger will have an impact of EUR 40 million to EUR 50 million in operating profit level by end of 2020. And of this, this EUR 40 million announced earlier is expected to be reached earlier, around 1 year earlier starting from the first quarter 2020 already.In addition, there are significant synergies expected from financing below EBIT level in financial statement. During the first quarter, the EBIT impact was EUR 3 million and the expected distribution, how this EBIT impact will be seen, is seen in the table. The estimated integration costs are -- is maximum EUR 40 million, and we are keeping that below that level.Then operating environment, which has stayed quite stable and positive in our main markets. If you look at the confidence indicators in Finland, practically from all areas that the level is extremely high level. So the market situation in Finland is very good.Consumer confidence in CEE countries has as well stayed very stable, even improving still in certain countries, which can be seen also in strengthening sales. In Russia, the situation is better than year ago at the same time, but unfortunately, the recent development in that country, including those new penalties, has had a negative impact to the market development. So the positive development which was seen last autumn has stopped. Situation still is better than it was 1 year ago at the same time.From a business-to-business point of view, the market outlook as well is quite good. If you look at the demand in Business Premises, the volumes are growing and the main limitation is resources. In Infra area, practical in all markets, the demand has stayed stable or it's improving. The value or the price of bitumen is one indicator for the volumes in Paving and asphalt. When the bitumen price is high, it means that usually the amount of tons will be lower because the volumes or the investment projects for the main clients, like governments and cities, are usually fixed.So then to segment reviews. First, Housing Finland and CEE. We have now in this slide 2 figures, both IFRS figures and POC figures. IFRS figures are mainly impacted by a number of completed apartments for consumers. And in that area, the amount was around on the same level than last year. The profitability improved clearly. Then in POC side, in comparison period, Q1 last year, we had lot of cash release actions ongoing, including plot sales to plot fund and then some bundle sales deals. So the revenue dropped, but at the same time, profitability improved clearly and absolute result was almost on the same level than 1 year ago.Order backlog is again clearly stronger, around 10% up. The products and volumes are slightly growing. Number of unsold completed apartments is on a very low level. The amount of -- or the sales rate is on a high level if you look. Long-term track record when the level has been on average in a 50% level. Housing sales for consumers continued on a good level. It was on the same level than year ago at the same time, also in combined portfolio. Number of start-ups stayed stable compared to last year and April sales has been, in Finland, a bit better than a year ago. And also in CEE, the level has been better than year ago, especially when we take into account how the sales of those projects that we already have sold to YCE Housing fund and now we are selling those further to consumers. That sales is taking into account. So in first quarter, [ that ] sales was 113 apartments and in April almost 40 units.Then Housing Russia. So the revenue was on a low level, explained by very small number of completed apartments. During this year, we are expecting that around 3,000 units will be completed and main part of those will be completed in last quarter.In Russia, unfortunately, we had huge changes in contracting business, project profits and that impacted to the profitability and operating profit in POC level, and of course, in IFRS level as well. The operating profit in IFRS is also low due to this small amount of completed apartments.Backlog of orders stayed stable. We started around the same amount of apartments that are sold. In service business, we have already 46,000 clients to whom we are sending an invoice once per month. And as said, the sales level in [ pieces ] has stayed on the same level than it was during the second half of last year, as we expected at the beginning of this year. So clearly above last year's level. Also the sales in April has been good or continued on a good level, clearly above the level than what was a year ago.From sales, clearly bigger amount is happening in Moscow region, which is a bit impacting negatively to our profitability due to low profit level of projects in that area. Also, bigger number of those apartments are small apartments than earlier, overall.Then Business Premises. Revenue decreased a bit. The main explanation is that we have certain projects completed by end of last year, which impact for revenue was quite remarkable. Also that, for instance, in Tripla, we are very heavily constructing at the moment, but we are not recognizing revenue and profit from everything that we are doing at the moment. Operating profit was negative and that was as well due to those weakened margins in few projects.Order backlog has stayed stable, and as you can see, the big projects are proceeding. They are mainly in the middle of the construction and those are proceeding according to plans. Extremely important from this year point of view was the success in renting premises for encore tenants during the first quarter of the year. And as said already earlier, we are planning to sell several bigger office premises by end of this year.Infrastructure project revenue declined due to reason that many of the big projects were in the completion stage, and at the same time, revenue and profit impact has been clearly [ milder ] than a year ago. At the same time, new projects on the backlog has just started with very limited impact in both revenue and the profit. So the low revenue impacted the profitability of this segment and in addition, unfortunately, also there we recognized some weakened margins in certain projects.Strong improvement in backlog of orders, which will be seen then improving revenues during the coming quarters. And here, you can see also the big projects where part are just in completion stage and then some part at the beginning of the project.Then Paving. Revenue decreased mainly due to lower volumes, especially mineral aggregates business. During the winter, we have take serious actions to restore this business. I will come back to next slide on those actions. But at the same time, this winter planning season has went better than year ago, if you look only towards paving units that we have in our companies. Due to those heavy actions to rest of operations in Sweden and Norway, there is also impact in adjusted operating profits.Backlog of order is good. It's improved. And, of course, now the paving season has started strongly in almost all plants, and the business is now ongoing. We have had serious actions to take this business back on track. During the winter, we have closed 6 nonprofitable [ asphalt ] plants. We have reorganized the operations, especially in Norway, but also in Sweden. We have divested 2 partially owned subsidiaries since the reorganization. The second one was closed at the beginning of April. So now we expect that we have done all the structural actions that we are planning to do for this season and now we focus on efficiency in our site operations and planting operations during the season.Partnership Properties is a new segment, where we have -- or where we report all the joint ventures that we have together with our partners. We have committed to invest equity around EUR 150 million in those assets that now are in -- under this segment and the investment is already EUR 137 million. There are some examples on those key assets.Immediately after the revenue period, we established a plot fund, together with Ålandsbanken and Varma, which also helps us to improve our capital efficiency and capital management, overall.Ilkka Salonen will continue with the financial position and key ratios of the company.

I
Ilkka Seppo Salonen

Good afternoon, everybody. [ Just a short ] snapshot where we are after the Q1, what comes to the financial position. Our cash flow was negative as expected, which of course has an impact for the net debt side, our net debt increased from EUR 670 million up to a little bit more than EUR 800 million.After the merger, we have reorganized our loan portfolio. The new EUR 300 million committed revolving credit facility became available, and at the same time, we canceled 200 ex-YIT and 200 ex-Lemminkäinen facilities. And at the same time, we also canceled the EUR 240 million bridge facility.From the operating cash flow side, it was negative and it's quite well explained over there. It's related for the Tripla construction and joint venture investments. The plot investments were roughly about EUR 50 million. Paving seasonality, that's the name of the game, there is not too much business in the beginning of the year, but there are quite a lot costs related for the business running anyway. And by saying that, the major target for us is of course to reach the strategic target and the initial target, what we have raised that after the year. The cash flow will be positive after the dividend payout.From the key ratio side, gearing from 60%, close to 80%. Equity stayed quite stable around 40% and net debt to adjusted EBIT was 3.6 to 4.8.If you look at the Q1 and a little bit for the full year, the equity ratio was on a healthy level. Gearing was affected by seasonality and also the investment for the growth. And the cash flow, there our target is to create positive cash flow after the dividend payout.And I will pass for Kari to look at the outlook as well as the guidance.

K
Kari Kauniskangas

Thanks. Okay. The market outlook table is exactly the same than it was 1st of February a year ago. Few comments still concerning this. So in Russia still, it's green due to reason that when we look second quarter last year, situation was clearly worse than situation today. But if the situation continues like this, also after 3 months, then the outlook will be around the same level than it has been 12 months back as well.Outlook in Infra projects in Finland this year is positive, but due to the missing decision of long-term investment plan of government in Finland, there is weaker outlook for 2019 so far. There is still, during the budget negotiations of government, time to make decisions on several investments to be done and started next year.The outlook has been improved a bit from the beginning of the year. So as we said already then, the adjusted operating profit is expected to [ fluctuate ] significantly between the quarters. We are not expecting any more negative quarters for this year.In our annual planning, as Ilkka said, to have a positive cash flow after paid dividend is a key factor and that's also our target. Secondly, we adjusted our estimate on the total amount and timing of synergy benefits and now the estimation is that the total annual energies related to merger will have impact of EUR 40 million to EUR 50 million by end of 2020 and then of this, this EUR 40 million is achieved starting from the first quarter of 2020, so 1 year earlier than previously.Also that in Finland and CEE Housing segment, there will be around 5,000 to 500 -- 5,000 to 5,500 apartments and approximately 3,000 apartments in Russia that will be completed. And especially in Russia, main part of the apartments will be completed during the last quarter. Also that during this year, at the beginning of the year, we have signed several significant long-term lease agreements, and we estimate to sell several large Business Premises project in Helsinki metropolitan area during the remainder of the year to final investors.During the last -- sorry, let's look this one still. So the market outlook for segments, and then this is as well exactly the same than 3 months ago with those 2 comments concerning Russian environment and also Infra market outlook for next year.During the last few weeks, employees association has organized strikes in certain companies in construction material industry, which has had also a negative impact in some sites of YIT as well. Now at the beginning of this week, they announced that they will widen the strikes also to some companies in building construction and building services area, including YIT's Infrastructure project segment.Yesterday, the Confederation of Finnish Construction Industries [ RT ] announced a lockout for employees starting from the May 9. So there are still 12 or 13 days before that, and I strongly hope that the parties are able to negotiate and find the agreement so that we can keep the peace in the market.I'm extremely proud on high commitments shown and hard work done by our employees during the first quarter. In addition to merging 2 companies and reorganizing it, we have been able to keep our eyes and focus still in projects and on clients, which you can see as increasing backlog of orders and good proceeding in construction sites. Despite of those negative changes in -- or negative impact of total project review, we had at the same time great succeedings in renting premises, and outlook for the company for that reason is unchanged.The market outlook in Finland, CEE especially, is bright and the demand has continued on a good level. I'm very confident that we continue fast in integration, and we are reaching the synergy targets, but also that we will be successful in the markets utilizing that opportunities the current market environment provides. We will organize Capital Markets Day at the end of September, so I invite you all, and you all are welcome to that event.So that was our presentation today. Now if there are any questions, you are ready to ask.

K
Kari Kauniskangas

No questions from Käpylä, so then we have questions on online.

Operator

And we will go to our first caller from the phone from Ari Järvinen with Danske Bank.

A
Ari Järvinen
Analyst

It's Ari from Danske. Is the line fine?

K
Kari Kauniskangas

No, we can't hear you.

A
Ari Järvinen
Analyst

Can you hear me?

K
Kari Kauniskangas

Now we can. Yes.

A
Ari Järvinen
Analyst

Okay, that's great. So first starting on this Paving unit. I know it's coming from the Lemminkäinen side, but we have really seen before this kind of troubles in profitability. I assume it's mainly Norway and Sweden. So this time, what are the actions? And when should we expect some positive impact, because these actions, I assume, were initiated already like last autumn? So what's really happening there?

K
Kari Kauniskangas

I'm very satisfied on the proceeding with those actions during the winter. So we have, as said earlier, closed 6 plants, which are somehow located so that we don't see the opportunities to make positive profits. We have also reorganized that the companies make some changes in management, changed some management practices. Also in tendering processes, we have shared information and people across countries. And of course, now the season has started at the beginning of April. So we will see now the impact, already starting from Q2. I'm quite positive on what we have done. I'm sure that the units will not be still in the highest possible position during this year, but I'm quite confident that there will be clear improvement during this year anyway, in both Norway and Sweden.

A
Ari Järvinen
Analyst

Okay. And then you mentioned that the paving season indeed has already started to like be more active. So what can you tell about the bitumen prices? And I understand the logic that bottom money is pretty stable, usually volumes are coming down maybe. So how have the bitumen prices developed so far? And what should we expect on the profitability, if the volumes are coming down?

K
Kari Kauniskangas

First of all, we have hedged the bitumen price in a way or another practically in all projects. So the changes in bitumen price, as such, doesn't have an impact in our operating profit. Yes, if the bitumen price is high, [ usually the returns ] are smaller during the season than if the prices is lower. We have been quite successful during the tendering stage in first quarter. So at the moment, the expectation of volumes are quite stable, or maybe it's a bit lower than year ago. And of course, it's good to remember that we have closed 6 plants, which has a negative impact to total volumes of the company.

A
Ari Järvinen
Analyst

Okay. So then to Russia basically, you had as a -- YIT as a stand-alone basis had a fairly good like improvement last year in the second half, and now a very big dip. So how big this project write-down has been? And have you been like playing with the prices to get the volumes -- sales volumes up? So these 2 questions only.

K
Kari Kauniskangas

If you look at the housing business stand-alone, the result was quite close to what was the result a year ago. As I said, there is more sales coming from Moscow region, where the project profitability level is lower than it has been in other units throughout the segment. So the -- let's say housing stand-alone profitability was a bit weaker than a year ago at the same time. Even the volumes in units was higher than year ago.

A
Ari Järvinen
Analyst

Okay. And then a little bit shorter ones, couple more questions. So in Finland, I have seen, like, the banners on the various websites that you have given the transfer tax benefit in some Southern Finland housing projects for consumers. So if the market is good and demand is high, consumer is very happy. Why should you give kind of like these kind of small discounts?

K
Kari Kauniskangas

I'm not sure on the projects, but usually that kind of [ actions ] are connected to the, let's say, housekeeping situation. We try to keep amount of -- a number of unsold completed apartments on a low level.

A
Ari Järvinen
Analyst

Okay. And then you already mentioned about this labor market, labor union actions. So have you had some material impact on your concrete availability? For example, at the Tripla project? Or how good visibility do you have on this one?

K
Kari Kauniskangas

So far, we have been able to continue works in Tripla as planned. Also, we have been able to get concrete also in those strike days.

A
Ari Järvinen
Analyst

Do you expect this to continue like that? If it continues with the actions that they have in [ Rostov brand ]?

K
Kari Kauniskangas

According to current announcement of both parties, there will be some strikes still within coming 10 days. And then the whole industry will stop, if [ we ] are not able to reach [ that ] agreement. But I strongly hope that both parties are willing to negotiate, so that we will reach the agreement, that there is no need to go with total lockout of the business.

A
Ari Järvinen
Analyst

Okay. And then finally from me, could you elaborate a bit more on the dynamics of the guidance? You have been talking about planning to provide a numerical guidance for this year, but we are already in May almost. So what's the dynamics? Why aren't you able to disclose any guidance? Or are you planning to do such?

K
Kari Kauniskangas

It's actually quite easy. So we have the whole structure in place 1st of May. Today is 27th or 26th of May -- of April. So we can finalize the targets according to current organization after 1st of May. Then as said earlier, Board of Directors will consider do we give a numerical guidance or not.

Operator

We'll go next to Robin Nyberg with Carnegie.

R
Robin Nyberg
Financial Analyst

It's Robin Nyberg from Carnegie. I have 2 questions. First one is on the Housing Russia segment, which was quite weak now in the first quarter. Could you go through those reasons for the weakness? And do you expect to reach still breakeven result for the full year on POC basis?

K
Kari Kauniskangas

As said, this weakened margins in contracting business in Russia has remarkable impact to operating profit and the housing business stand-alone was quite close to the last year's level. To estimate the whole year figures, especially if we are talking on IFRS figures, it's much more difficult. And also in POC figures, we are not making more estimations. Of course, we can say that the estimation is that the sales [ speed ] will stay in current level for this year, which of course is a bit better than a year ago. Extremely big importance is that how well the sales in St. Petersburg is proceeding.

R
Robin Nyberg
Financial Analyst

Okay. And then you have this new segment called Partnership Properties. You didn't book any sales or earnings from that as of yet. When should we expect you to start booking, for example, sales from that -- in that segment? And what kind of level could we expect?

K
Kari Kauniskangas

There will be first figures coming also already this year. Just an example, this [ YCE Housing ] fund. The revenues and profits are recognized when the projects are completed and the apartments sold. And then first of those projects started under this fund will be completed this year. So I think there will be profits and revenues coming starting from this year.

R
Robin Nyberg
Financial Analyst

All right. And then maybe one more regarding the net debt. It increased somewhat from the end of last year and did you say that you expect positive cash flow now during the year so that it should trend down from this EUR 800 million seen in Q1?

K
Kari Kauniskangas

Yes. It's obvious that during the first half of the year, due to seasonality of Paving, due to payment of dividend, usually also plot investments are done more during the first half of the year than second half of the year. There will be negative cash flow at the first half of the year. And then at the same time, during the second half of the year, paving season is strongly proceeding, and we have also those large office projects to be sold where we expect quite strong cash flow. So the planning principle for YIT is, as we have announced already last summer, that we are looking for positive cash flow after dividend payout.

Operator

[Operator Instructions] And we'll go next to Anssi Kiviniemi with SEB Group.

A
Anssi Kiviniemi
Analyst

It's Anssi from SEB. Overall, you highlighted that there has been projects review and there is some dozen of projects you have been doing write-downs. Could you a little bit elaborate on what has been the effect in Q1 result? So that we could get a little bit better feeling of the underlying performance that you have in the segments that you make the write-downs.

K
Kari Kauniskangas

If you look difference between Q1 last year and then this year in adjusted operating profit, then you can estimate also the impact of those project changes.

A
Anssi Kiviniemi
Analyst

So operationally, you've been on a similar level than last year?

K
Kari Kauniskangas

[ Around. ]

A
Anssi Kiviniemi
Analyst

Okay. Great. Then question on housing completions. Now you indicated there's going to be 5,000 to 5,500 completions in Housing Finland and CEE, and then also around 3,000 in Housing Russia. That's indication that sales will come down in housing business in 2018. Is this correct?

K
Kari Kauniskangas

It's not indication on that. It's the only indication on completion of the apartment. It's not the sales estimate.

A
Anssi Kiviniemi
Analyst

Okay. But those go hand-in-hand very well in IFRS accounting rights?

K
Kari Kauniskangas

No.

A
Anssi Kiviniemi
Analyst

Could you elaborate on that a little bit more?

K
Kari Kauniskangas

Of course, all apartments will be sold. It will be sold in a certain time, but the sales and the completions are not maybe connected with the same year. So big part of the apartments which will be completed this year can be sold already during the previous years.

A
Anssi Kiviniemi
Analyst

Okay. Great. Then a question on synergies and perhaps on the net financials. What is the magnitude on net financial synergies that you are expecting? And when should we see those coming in?

K
Kari Kauniskangas

We will -- let's say, we will for sure tell the figure when we know that. We have an opportunity to refinance EUR 250 million [ bonds ] during this and next year. And also we have paid back already this EUR 35 million hybrid bond. So when this refinancing will be done, then we see the final impact.

A
Anssi Kiviniemi
Analyst

Okay. Then my last question relating to the potential strikes in Finland. We have seen the announcement, we have seen the days, and we have seen the potential impact. As we know it now, how -- is there going to be a large impact from the announced measures? Are we talking about single million euros in -- on operating profit? Or have you tried to estimate what is the magnitude of the impact for your operations?

K
Kari Kauniskangas

To be honest, we have had no time to consider what is the impact. We really hope that we are able to negotiate or [ RT ] is able to negotiate the agreement with the employees organization within coming 2 weeks. So far, we have been able to survive quite well on those strikes, which have been in some companies, in the construction material industry.

Operator

And at this time, there are no further questions. I'll turn the call back to Hanna.

H
Hanna Jaakkola
Vice President of Investor Relations

Thank you. I have a couple of questions coming from online. [ Let's see. ] On the IFRS housing revenues, regarding Finland and CEE, IFRS, you state adjusting operating profit was boosted by completions, yet figures -- revenue figures show minus 6% year-on-year. Could you please elaborate? Last year's revenue was?

K
Kari Kauniskangas

Yes. So last year in Q1, we had plot sales in -- which impacted in revenue, not profit level. And also there was [ bundle ] sales deals, almost 200 units last year and during the first quarter. Now we had only some 30 -- 38 apartments in that area.

H
Hanna Jaakkola
Vice President of Investor Relations

And then, what shall we make of the Tripla development? When will the revenues recognized in profit and loss statement?

K
Kari Kauniskangas

Yes. So we are now recognizing profit and revenue from Tripla Mall, 61.25% of the construction revenue and profit. And the rest will be recognized when that project is completed by end of next year. Secondly, we are now started the construction of offices as well. And from offices, we are not recognizing revenue and profit at all at the moment, because we have not yet sold those projects. Also there is hotel construction ongoing and that has been fully sold already, so we are recognizing both revenue and profit fully from that project, according to percentage of completion.

H
Hanna Jaakkola
Vice President of Investor Relations

Then, how about the weather impacting Infrastructure projects and Paving in Q1?

K
Kari Kauniskangas

In Q1 this year, there was a winter during the whole quarter. So it doesn't have impact. Season started at the beginning of April, practically, in all countries. Also it's good to remember that we closed 2 asphalt plants in Southern Sweden. Last year, the winter was not as heavy. So the works in Denmark and Southern Sweden was started already in March.

H
Hanna Jaakkola
Vice President of Investor Relations

And then the last one. With the new IFRS accounting, what can you guide us on completions of resi developments? Is there a seasonal pattern we should know -- take a note?

K
Kari Kauniskangas

Unfortunately, Norway, especially in Housing Finland and CEE. In Russia, it looks like that the main part of the completion seems to be in the last quarter. And in Housing Finland and CEE, the revenue and the completions are quite [ evenly distributed ] throughout the year. But unfortunately, there are differences between countries. So in Finland, it's not evenly distributed. And in Finland, the value of the apartments are higher than in Baltics and in CEE. So that may have an impact.

H
Hanna Jaakkola
Vice President of Investor Relations

Good. Thank you. No further questions. And if you have any questions, please don't hesitate contacting me after this. Thank you.

K
Kari Kauniskangas

Thank you.

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