YIT Oyj (YTY1V)’s chief executive officer said growth at Finland’s biggest residential developer will rise on Russian housing and as the company increases maintenance income in German-speaking Europe by making acquisitions.
“We have immense opportunities in Russia,” CEO Juhani Pitkaekoski said in an interview at the company’s headquarters in Helsinki. “A growing middle class brings large demand, specifically in the apartment types that we’re focusing on.”
Increasing the volume of business will improve efficiency and potential profitability in Russia, Pitkaekoski said. Prospects for improving the quality of housing in Russia mean the company has a target for growth “significantly” exceeding 10 percent in the region, he said.
“The need exists because the existing housing stock is old and not very comfortable or energy-efficient,” he said. “A lot is dependent on the price of oil.”
YIT reiterated long-term targets today, including revenue growth of more than 10 percent annually. For this year, the company has forecast revenue level with 2011. Last year, YIT had sales of 4.38 billion euros ($5.69 billion), including 292.2 million euros from Russia and 629.5 million euros from Germany, according to data compiled by Bloomberg.
The company will “probably” increase its revenue guidance during the third quarter, Sauli Vilen, an analyst at equity- research company Inderes Oy, said in a note on Sept. 18. “Domestic and Russian housing trade has been good despite uncertainty and building services demand has been steady.”
The company will hold a capital markets day in Aachen, Germany, on Sept. 25.
“In central European building services, acquisitions are inevitable; organic growth there is too slow for our targets,” Pitkaekoski said. “There’s no chance of entering Switzerland without acquisitions. In Austria, we are scanning targets but are able to grow organically.”
YIT’s building services unit includes the design and installation of heating, plumbing, cooling and safety systems.
Germany’s relatively new housing stock creates a good opportunity to increase the share of maintenance, even as some larger projects have been postponed pending investment decisions by customers, Pitkaekoski said.
“The maintenance business is interesting as the share of technical building systems has doubled, maybe even tripled, from 20 years ago,” he said. “The more technology there is, the more interesting it is to us.”
The company has taken measures to prepare for a dip in housing demand and is better prepared than before the euro-zone crisis began, Pitkaekoski said.
“Our project sizes are smaller than before the crisis, we have about 350 million euros” of committed credit lines “and our cash reserves are stronger,” he said. “So far, the recessions have been short and our business is long term.”
The company’s roots go back to 1912, when a Swedish engineering business entered the Russian market by establishing a subsidiary in the Grand Duchy of Finland, then part of the Russian empire, according to YIT’s website.
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