Good morning, and welcome to YIT's third quarter earnings webcast. My name is Samu Heikkilä, and I'm YIT's Investor Relations Manager. Our third-quarter results and highlights will be presented by our CEO, Markku Moilanen, and CFO, Tuomas Mäkipeska . After the presentation, we will be taking questions from the conference call line. At this point, I would like to hand over to our CEO, Markku. Please go ahead.
Thank you, Samu. Good morning, and welcome on my behalf as well. I'm this morning particularly pleased to tell about our third quarter results. We had improved performance, clearly improved performance compared to the same period last year. Our profitability improved, and our adjusted operating profit almost doubled. The profit margin increased significantly as well, despite the challenging business environment that we are in the construction sector. It is a result of a relentless strategy execution. The key part of our strategy is the transformation in business premises and infrastructure segments. That continued successfully, and we gained efficiencies from enhanced project management. However, it should be noted that these gains have been partly offset, especially by the increased material costs.
We have also achieved substantial productivity gains during this period and throughout the whole year. The cumulative cost savings year to date from the new operating model has resulted in over EUR 20 million savings. All in all, a very solid performance during this quarter. If we then look at the numbers a bit more closely. Firstly, we were able to increase our revenue, which is a good achievement in a challenging business environment. The revenue increased in all segments. Looking at the profitability, as I mentioned already earlier, we almost doubled our profitability.
More importantly, during this period, our adjusted EBIT margin, which is one of the KPIs of our strategy, improved to 3.7% during Q3. If we look at the year-to-date numbers compared to the previous year, it increased to 4.1% compared to 2.8% during the same period the previous year. If we have a look at the different segments, we had stable underlying performance across all segments, and that's, of course, important for us. In housing, we had stable results even if the market was clearly challenging. We had softer consumer demand and a weaker apartment sales mix. Despite that, we had good results.
The transformation progressed both in business premises and in infrastructure. If you look at the business premises, it should be noted that the comparable period in 2021 was supported by a plot sale, so the underlying performance was clearly improving according to the plans. The same applies to infrastructure which had positive results as well. Finally, we had good results in property development, and it should be noted that the comparison period was burdened by one project write-down. Even there, the underlying performance was improving. During challenging times, it's important that all of our segments are performing according to the plans. We have been executing our strategy throughout the year. It is clear that, like we have communicated earlier, that even...
One could say just during these challenging times, we have the right strategy. The three key components or pillars in our strategy are focus, productivity, and ESG. Starting from focus, there our key goal is to grow in the long run in housing. Again, in order to grow in housing, we continued plot investments in selected attractive urban plots. That is to secure the future earnings for the company. In business premises and infrastructure, focus is about selectiveness and focusing on our core competencies where we are competitive. That was clearly yielding good results during the period. Our order book remained strong even if the business environment is challenging. The business premises order book was strengthened from reliable clients.
For example, the first phase of construction at Seinäjoki Station, for eQ, in Oulu, the new Nokia R&D campus. The renovation of the property at Aleksanterinkatu 13. Earlier this week we announced an agreement, on construction and maintenance of the new Gesterby school center. In Infra, in turn, the development phase of the seawater heat recovery project with Helen and Acciona started during the quarter and was entered to the order book. Looking at the productivity, like I mentioned earlier, the cumulative cost savings from the new operating model amounted to over EUR 20 million at the end of Q3. We have not only executed our strategy in terms of productivity, but due to the challenging environment, we have taken extra actions on productivity.
When it comes to project management, which is a key part of the transformation in business premises and infra, we clearly had efficiency gains from project management, i.e., the write-downs, adjustments, and projects were significantly lower than during the previous years. However, that was partly offset by the market and especially the increasing material costs as well. Last but definitely not least, we took important steps in ESG in the environmental area. We made a decision that we will use low-carbon hollow-core slabs in apartment buildings in the Helsinki metropolitan area and Uusimaa, and then gradually expanding the usage to all Finland. If we are looking at individual constructions, individual houses, hollow-core slabs are the individual products or product category at the highest emission impact.
This is a really important step towards kind of a low-carbon footprint in our production as well. This action just put this into perspective, to switch to these low-carbon hollow-core slabs in Helsinki metropolitan area and Uusimaa will reduce carbon dioxide emissions by approximately 4 million kg per year. That amount corresponds to the average annual emissions of approximately 560 Finns or 680 car journeys around the world. We are really taking important steps during the challenging market environment to build the future for the company, but for the future generations as well. Moving forward, we continued to invest to the future of the company.
For us, that meant that we invested in our land bank, and the most significant acquisitions were according to our strategy to the CEE countries of Poland and Czech Republic. Two hundred enabling us to build 2,100 housing units in Warsaw, Kraków and Gdańsk, and then 150 housing units in Prague as well. Our land bank enables our current land bank enables construction of approximately 34,000 new homes, enabling us to grow in housing in the coming years. If we look at our strategic targets, we are well on our way to increase our productivity and profitability.
There we have the strategic goal to reach more than 6% EBIT margin by the end of 2025. The last 12 months, our result was 4.1% compared to the 3.2% in 2021. Clear progress in that area. Our gearing was according to the plan, short-term increasing, driven by the self-developed projects in housing and property development and the investments in plots and increase the number of unsold completed apartments in housing as well. However, the long-term target of below 50% remains to be the same. Finally, we are still planning to have a stable growth in our dividends.
Let's have a look at the numbers a bit more closely. I'll hand over to our CFO, Tuomas Mäkipeska. Tuomas, the floor is yours.
Thank you, Markku, and good morning, on my behalf as well. Q3 for us was another strong quarter. Our profitability strengthened and balance sheet remained strong. Let's see the financial highlights of the quarter. Here you can see the key performance indicators for the quarter. Our order book grew to above EUR 4 billion. Our adjusted EBIT improved again, both in absolute and relative terms, and our net debt increased, but remained on a moderate level, especially when excluding the IFRS 16 and housing company loans. Let's have a look at each of these a bit more in detail. Our order book increased, as mentioned, and actually the increase was significant from last year's figures, but also slightly improved from the last quarter. This is again a good evidence of our competitiveness in the market.
The growth came from the business premises and the property development segments, whereas in housing segment it was slightly decreased. Markku actually mentioned the main projects in business premises and in Infra that were recorded in the order book during the quarter. We think the healthy order book really safeguards our volumes going forward in the unstable market conditions. Also, if we have a look at the revenue development, so the revenue increased actually in all of the segments, especially in housing, due to the higher number of apartment completions and in business premises driven by several project completions. We are of course happy to achieve growth like this in a challenging business environment, as Markku mentioned.
If we have a look at the profitability and the adjusted EBIT, we were able to improve our profitability significantly. Here you can see that in the big picture, the adjusted EBIT improvement, compared to the last year, was driven by the property development segment. In total, the underlying performance was actually stable in all of the segments. All of the segments also gained benefits from the fixed cost savings. Markku already mentioned that, we have now gained in total, year to date fixed cost efficiencies, above EUR 20 million. This is driven by our more efficient operating model, as communicated earlier as well.
It's good to note that there was a project write-down in the comparison period in property development as mentioned, and also a plot sale in business premises during the Q3 last year. When excluding those kind of one-offs from the comparison period, we can argue that the underlying performance improved in all of the segments. In business premises and infrastructure, the turnaround has progressed well, and the margin deviations were decreased a lot from the previous years. That's kind of a evidence of the strategy execution going forward in these segments. Moving on to the cash flow and capital employed development. The cash flow and capital employed reflect mainly our growth investments according to our strategy, as has been planned and communicated ahead.
The main impacts in the cash flow and consequently in the capital employed in Q3 was impacted by the investments in plots, self-developed projects in housing and property development, as well as the increase in the number of unsold completed apartments in housing. We of course continue the selectiveness in the projects and risk management procedures to manage capital employed level. On the other hand, our balance sheet continues to allow us to invest in future growth. Let's have a look at the net debt, and especially the structure of the net debt. The net debt increased during the quarter due to the cash flow development I just described before.
It is very important to note that our net debt structure of YIT kind of leads to a low financial risk profile, which is illustrated on the left-hand side. You can see in the stacked bar the components of the gross debt and the IFRS 16 lease liabilities and the housing company loans. When excluding those, the net debt would approximately be EUR 200 million. That is very important to understand that this is really the kind of adjusted net debt illustrating the risk profile of the company. Also, the maturity structure of the debt is healthy. Currently, we don't have any refinancing needs. We are, of course, preparing for the future refinancing rounds well in advance.
All in all, our balance sheet remains strong, and it allows us to execute our strategy going forward. As mentioned, the increase in the net debt is related to the growth investments to plots and construction volumes, and it is also visible in the gearing development here. It's also very good to note that the interest cover ratio continued to improve significantly, and our equity ratio remained on a healthy level. We see our balance sheet as a platform for growth and navigating through the unstable market environment. To summarize, the well-progressing transformations in Business Premises and Infra and improving performance drove our earnings growth, and we are well-equipped to continue executing our strategy. Thank you. Now over to you, Markku.
Thank you, Tuomas. Looking forward, we keep our guidance that we expect our profitability to improve in 2022, despite of the challenging market. Let's have a look at the market then. It's clear that the market outlook remains subdued in short- term. Starting from the housing market, where it is clearly weak currently in all of the geographies that we are acting. Consumer demand is soft, and the apartment sales times has been longer than normal, driven by the increased interest rates and inflation. On the other hand, the investor market, even if that has come down from the great years, there's clear interest still in the investor market.
We expect the market to continue weak during the coming quarter as well. The real estate market has been reasonably good, and that can be seen in our increased order book as well. However, the overall situation in the market leads us to see that even that market is going to weaken moving forward. Looking at then YIT's position, I would like to remind the good order book that we have. We even if the market would be weakening, we had a solid workload moving forward. Finally, the infrastructure market is quite normal and actually quite normal in Finland and good in Sweden. I would say that the Finnish market is almost greenish.
There are interesting projects both from public sector, but then there are large industrial investments coming in Finland, which need kind of heavy infrastructure work as well. That market looks positive for us moving forward. I've mentioned couple of times the building costs, and they have increased during the whole year and the period as well. As can be seen from this picture, the year-on-year cost on materials increased 10.3%, labor 1.3%, and services 2.8%. On the other hand, we clearly see that the cost inflation in materials, there are clear signs of stabilizing on that one. Yes, the increasing energy costs continue to put pressure on prices, but the energy is not a major part of the material prices.
We're clearly moving forward, expect the material prices to stabilize and even come down in some categories. Looking then forward on housing completions, which has an important impact on our revenue and earnings in each quarter. Like we have communicated earlier, we expect the number of consumer apartment completions to decrease during this year. Again, some of you might remember that the root cause for that was the lower level of startups at the beginning of the COVID pandemic. Looking at this year, Q4 is the quarter where we have the highest number of completions.
Like we have communicated, we had a very strong sales mix during Q1 and Q2, and during Q3 and the coming quarter, the sales mix is weaker, even if the volumes are higher. Looking then forward to next year, the similar pattern continues that the first two quarters, we expect the completions to be at a low level. However, then the Q3 is having exceptionally high number of completions that we see this year during Q4. That has an impact on our earnings. All in all, like I said, we expect our adjusted operating profit to be higher than in 2021, when it was EUR 85 million.
The areas that will impact the earnings and the profits are the completions in housing, like I mentioned earlier, in business premises and in infrastructure. It is the turnaround and the performance. Like we have shown now during Q3, we expect the performance to improve in business premises and gradually in infrastructure as well, even if it's impacted by certain longer low margin projects as well. Finally, in property development, we have several promising projects in the pipeline coming as well. All in all, to summarize where we are, we have stable improving results during Q3, as a result of a firm execution of our strategy. We see that is a key cornerstone moving forward as well.
We will focus firmly on executing our strategy to secure our earnings, meaning focusing on our core competencies, doing actions on productivity and then developing investing on ESG. However, looking forward, all indicators show that we are heading towards a downturn. That means that we will pursue further opportunities to increase our efficiencies as well. We are disciplined our cost management and do what is necessary to secure our earnings during the downturn period and of course lay a foundation towards the future. Like we have done investments during Q3, our investments are geared towards future growth. Investments in plots, startups, in ESG, like we have done during Q3.
Finally, it should be noted that during these challenging times, our diversified business model, while we are not depending solely on one segment where in the short term the market would go down, we are supported by other segments with a better market situation. We clearly see that the diversified business model and the successful transformation gives us a balance in this challenging market. Thank you very much. That was what we were going to tell you about our results during Q3. Now I'll hand over back to Samu, and I think it's time for questions.
Yes, indeed. Thank you, Markku, and thank you, Tuomas. Operator, we are now ready for the questions.
Thank you, sir. Ladies and gentlemen, to ask a question, please signal by pressing star one on your telephone keypad. Again, please press star one to ask a question. Our first question comes from Anssi Raussi from SEB. Please go ahead.
Thank you, good morning everyone. I have a few questions, and, as usual, I go one by one. The first one is about your balance sheet, and I know that you said that it's still strong, but it got weaker in Q3. Any need to be worried or what? Can you rule out the need to strengthen the balance sheet, as we know that the market outlook is quite bad? Also you mentioned that your balance sheet allows you to execute strategy going forward, but are you planning to continue investments at the same level as in Q3? That's the first one. Thanks.
Yes. I'll take this one. Thank you for the good question, Anssi. In Q3, our operating cash flow after investments was -EUR 149 million. As already mentioned in the presentation, it was impacted by, of course, the investments in plots referring to future growth, but also the self-developed projects in housing and property development, as well as the increase in the number of unsold completed apartments in housing. As we have already communicated before, we expect to tie up more capital as the year progresses due to the increased number of apartments under construction. Also, as Markku mentioned, we are planning to invest in future growth as well.
In a big picture, so we continue to execute our strategy, but of course, during these times and the challenging business environment, so we are careful with the decisions to invest in the plots and starting up the housing projects. That is in the big picture, the situation.
Okay. Thank you. The next one is about your sold units. The number of sold units was clearly the weakest in many years on a quarterly basis. Anything to take into account here or is it just reflecting the current market situation? I think the number was especially weak in CEE countries at least.
Thank you, Anssi. You are right, and that is a result of the softening consumer demand and especially in CEE, as we see it. On the other hand, like I told looking forward in the outlooks, we expect in a short- term the consumer demand to remain on a low level. That is the situation. On the other hand, the investor interest is there. All in all, it is natural that we see some increase in the inventory due to the prevailing market situation. That's the reason for the numbers.
Okay. That's clear. About your wind power pipeline. What kind of plans you have at this point in terms of monetizing the pipeline? Any timeline or estimate? When could we see some transactions or what are your plans?
Yeah. Like thank you. That is really one area that we are investing. We have been investing on capabilities, on activities, on that area because we see the wind power and renewable energy on a large scale, like solar energy, as an interesting opportunity for us, and not least it is an important ESG action from our side as well. We have communicated that we have 3,000 MW in the preliminary study phase. During that phase we will actually open this in the coming quarters, but shortly. During the preliminary study phase, the work focuses on preliminary profitability calculations, land leasing and suitability analysis. Then the next phase is the permitting phase where we have 550 MW additionally.
That begins when the master planning proposal is accepted by the municipality. Of course, when we move forward in the pipeline, the realization probability of the project increases as they move to the permitting phase. But this is at a high level to say that we have the total pipeline that we are working with, our projects and then the permitting phase, which are of course closer to the realization. We'll keep you posted and report how this pipeline develops over the quarters, moving forward.
Okay. Great. Thank you. That's all from me.
Thank you. There are currently no further questions in the queue. Pardon. We have a pop-up question from Svante Krokfors from Nordea. Please go ahead. Your line is open.
Thank you. Good morning. Svante from Nordea. Couple of questions. Could you elaborate a bit on reservation rates in housing and how you look at that currently?
Well, I can start with this. We are, as earlier mentioned, not disclosing any reservation rates in general. But of course, referring to what Markku mentioned about the market situation. The kind of reservation rates are kind of increasing at a lower pace than in the normal situation. That's of course good to note and reflects the market situation also in our decision-making. We are more careful with the startups and the reservation rates since the market is how it is. This is referring back to my answer as well, tying capital.
We are careful with the startups and looking closely at the reservation rates when making decisions.
Thank you. A question to Markku regarding you mentioned that institutional investor demand for apartments is still good. Can you give some color on what kind of investors have shown interest? I'm thinking about what you have done in previous years creating joint ventures. If you have increasing number of unsold apartments, do you see possibilities for this also going forward?
Well, we are not disclosing the details, but there are several type of institutional investors and several type of solutions and models like you actually alluded to. We are open and having dialogues with several kind of solutions for them.
Okay. Thank you. That's all from me.
As a reminder, to ask a question, please signal star one. As there are no further questions in the queue, I'd like to hand the call back over to our host. We have another follow-up question from Anssi Raussi from SEB. Please go ahead.
Yes. Thanks. One more from me. About your low-carbon hollow-core slabs and timeline regarding these, can you give us any estimates like when you're going to start to use these in your buildings or anything?
Yeah. Thank you. Thank you, Anssi. Yes, we have already used them. We have pilot projects where we have used them. From now on in all forthcoming projects in Helsinki metropolitan area and Uusimaa, we will do that. Like I said, then gradually in the rest of Finland. Of course, the Helsinki metropolitan area and Uusimaa is there where we have the highest volumes. The question is more practical to get them available to the rest of the country. The commitment is clearly there. From now on in all new buildings.
Okay. Clear. Thanks.
As there are no further questions in the queue, I would like to hand the call back over to our speakers, to our hosts for any additional or closing remarks.
Thank you for the questions. YIT's fourth quarter and full year 2022 results will be published on the February 10th. Thank you, and have a great day.