All right, let's get started. Good morning, and welcome to YIT's Q3 2022 pre-silent call ahead of our silent period starting at the end of this work week. My name is Samu Heikkilä, and I am YIT's Investor Relations Manager. I am here with our CFO, Tuomas Mäkipeska. We will first hear a short intro from Tuomas, and then we will have time for questions. Please note that the call will be recorded, and the recording will be published on our website this afternoon. At this point, I will hand over to Tuomas. Go ahead.
Thank you, Samu, and good morning on my behalf as well. As Samu mentioned, I will give you an introduction to the market and business situation, and I will cover a couple of topics. First of all, the demand and the market situation in housing business, and of course, the apartment startup situation as well. Then I will give you an overview, of course, of the other segments, business premises, infrastructure, and property development as well. At the end, we will cover a bit of the situation in our strategy execution. Starting with the housing business situation and the market environment. As we all know already, the operating environment in housing business has been a bit of a challenging, as we already mentioned in Q2. The demand for apartments has come down from, of course, the last year's exceptionally high levels.
The main reasons behind that are, of course, the rising interest rates and the mortgage rates for consumers, but also the high inflations that are then causing kind of uncertainties in the near term and also diminishing the consumer confidence. However, the outlook for housing businesses varies by market, as we already in Q2 mentioned. In Finland, basically, the demand has been more impacted by the uncertainty. In CEE countries, still today, the demand has been more favorable for us or healthier, so to say. Of course, it is not the normal situation either in the CEE countries, but still in a big picture, the market looks better in that region. Couple of course, kind of a note here as well.
Even in CEE countries, for example, in Poland and Czech Republic, that are out of the Eurozone, the interest rates have been rising more rapidly than in Eurozone, and that, of course, has a negative impact on the consumer demand as well. But we have been evaluating the market constantly, of course, and we have been a bit more careful with the startups concerning the reservation rates before starting a project. That is something that we have been practicing, of course, already from the Q2. Even though the market outlook now looks a bit of a challenging in the short term. We, of course, don't want to slow down our startups too much since the lead time from starting till completing an apartment is on average 18 months. Now, after 18 months, the market situation could be a lot better.
We are very carefully, of course, looking at that we are not kind of slowing down too much, and losing then the opportunity to accelerate when the demand then recovers. We are completing a good number of apartments in second half of the year. Even though that we had a low number of completed unsold apartments in our, so to say, inventory at the end of Q2. Now that the completions are increasing, we could see a bit higher inventory levels in Q3 and Q4. But we have a strong balance sheet, and we have ability to kind of complete the project that we have started, and we are not closing down any project at this stage of the business. One thing to also remember that we communicated, in Q2, was the sales mix of housing in the second half of the year.
We communicated that the sales mix, in general, will be weaker than it was in the first half of the year. That will also have an impact on the housing results on second half of the year. But that's basically about the apartment startup situation. Now, moving forward to the other segments, business premises, infra, and property development. First of all, the inflation rates, and concerning, of course, the construction material and labor cost increase, that has, of course, given us headwinds in infra and business premises businesses. The biggest impact comes to the business premises segment. We've been now working with the increase in inflation now for one and a half year.
Basically, the same story continues, that we have been able to push the higher costs pretty well to our clients, and then, of course, also negotiating our purchasing agreements and so on. The situation is basically similar as it has been in the previous quarter as well. But for example, in infrastructure, the more common way to price the projects is that it includes the indexes, which of course then safeguards us against the construction cost increases. Basically, the infra business is not that heavily impacted by the inflation than business premises is. In infra business, we have already communicated that we have certain legacy projects, and of course, as we go on and complete some of them, and majority of these projects increases. This will have continuously a less impact on our profits.
But it's good to remind that infra projects, in general, they are long and big projects. We will have this kind of a negative impact on our profits going forward, but it's all the time coming down. That's good to remind regarding the infra business as well. But despite the challenges in the operating environment for business premises and infrastructure, the transformation, which is in line with our strategy, has progressed well. Our productivity has increased due to the productivity gains in the projects. We have been able to decrease the margin deviation compared to the targeted one. The deviations have come down significantly from the previous years, and that's kind of a proof point of our strategy execution as well.
In property development, good to mention maybe that the wind power development is something that we are, of course, focusing according our strategy, and we have a good and solid pipeline of wind power projects in our property development business. This kind of gives us then opportunities for increasing profits and revenues as well, going forward in the future. Then if you look at the strategy execution in general, of course, this near-term market instability and exceptional situation, this has an impact on our strategy execution as well. But as we have communicated, we think that even though the market is pretty exceptional, we have a right strategy. We have a strategy which focuses on our core competencies and focuses on the regions where we see very high growth potential in the long term.
We have been investing to plots and started up projects in these regions, and we already now see that the demand on these attractive locations are very much on a higher level than on average in the market. This also kind of gives us safeguards when going forward, even if the market would not pick up that rapidly. Our order book is on a strong level, and of course, this safeguards our volumes in the near term. This is also kind of an illustration of our competitive advantage in the market. We have been able to keep up a good order book, even though the challenging situation in the industry.
As mentioned, we will continue the investments according to our strategy, but of course, we are a bit more careful than we were half a year ago and make kind of a- based on strict criteria. We make the investments more carefully, but we continue to do them even in this kind of a market situation. Our strong balance sheet, of course, allows us to do so, but we are not willing to take any major risks going forward. This is something that we are balancing at the moment, playing the long-term strategic game for growth, and then, of course, maintaining the risk levels in the near term on a reasonable level. But that's basically it. A short introduction to the situation. We are now ready to take I'm sure you have some questions, so we are happy to answer them now.
Thanks, Tuomas. Indeed. If you have a question, please use the raise hand function. It seems that we have a first question from Svante. Go ahead.
Yes. Thank you, Tuomas and Samu. Perhaps the first question regarding your plots. You have made some cleaning up there. Are you happy with the situation now? Will you continue to invest there at the same pace as earlier, or what is your reasoning there?
Yes. In a big picture, we are happy with our land bank, so to say. We have been investing to the plots, as mentioned, to the attractive locations in a big picture. We are happy with the land bank. We will continue to invest in the plots in very attractive locations, as already I mentioned, because we see that the demand for apartments keeps up on a reasonable level even though the market situation weakens. In that sense, yes. But we have, of course, slowed down the pace of the investments a bit because of the near-term challenges. This is exactly what I meant, balancing the near-term risk management and playing, again, the long-term growth strategy.
Thanks. Then on housing side also, how have you seen the investor demand developing there? It is roughly 30% of your housing business, I guess, investor side and obviously important for you, but also a way to, if there is a drop in consumer demand, a way to at least you have built joint venture to solve that problem. How do you look at the development there? Is it so that the funds still have a lot of cash that they need to deploy, or how should we look at it?
Yes, that is a good question. Regarding the investor side, I think as we already mentioned in Q2, the same kind of a situation has continued. The demand situation there is more stable than it is in the consumer side. That is clear. The demand has been actually quite good up until now, and we have, of course, continuous discussions ongoing. We see that the market will be more stable on that side. But, of course, we know that, for example, if the war escalates or a geopolitical situation gets even worse, of course, the investor market would then get a hit as well. But in these circumstances, it has been keeping up better than the consumer side.
Thanks. Then third question regarding your cost savings, which you managed to achieve EUR 14 million year- to- date in Q2. I guess that was both from central functions and also from the divisions. But is there more to come on that side?
Yes. We had EUR 14 million savings compared to last year in Q2, and we have been continuing according our strategy where we target higher productivity. One big element there is our operating model and also cost efficiency regarding the fixed costs. We have been continuing to find cost efficiency or do cost efficiency measures, and we will keep up with that, of course, for the long-term competitiveness, but also safeguarding the near-term profits.
Thanks. Then the last question on Mall of Tripla. It is a relatively big part of your balance sheet. How do you look at, A, the operational performance there and, B, the investor market in shopping centers?
Yes. We can comment on a general level this one. The Mall of Tripla operationally goes actually quite well. The visitor amounts are on a very high level and altogether, the business performance of the mall is on a good level at the moment. Also, if we look at the investor side there, the pressure on yields has been, of course, increasing as well, but not that much in the commercial side and logistics side. Then again, of course, looking at the pressure on rising yields is higher in an office building type of real estate, but not that much in commercial and logistics side.
Thanks. Also, on Mall of Tripla, last question. Could you remind us about your official exit plan for Tripla?
Well, we don't have an official exit plan, but as we have communicated already in the CMD last year, in our plans, the exit would probably happen on 2024. There is no change in that. But we don't have any official plan, and that was our view then, and that is intact.
Okay, thank you. That's all from me.
Thanks, Svante. Next we have a question from Anssi.
Yes. Thank you, guys. I have a couple of questions. I start with Kruunusillat. According to some news, there were some problems with the foundation works of Kruunusillat. Have you seen or are you estimating to see any impacts? If so, what kind? Any significant news from there?
Well, first of all, we are not commenting on specifically any projects. On a general level, I could argue that actually the Kruunusillat project is progressing quite well. We do not have any big financial risks related to that project. Of course, the market situation that I described earlier, that has also an impact on infra projects. But we do not have any bigger challenges in Kruunusillat project.
Okay, good to hear. The second question is about your wind power pipeline. What is the size of the pipeline if we talk about megawatts? Can you comment that? Are you planning to strengthen your pipeline with acquisitions? If I continue on this topic, should we expect any significant development profits in the coming quarters?
Well, first of all, the wind power in general, that is in the core of our strategy, and we have been investing to that. If we look at the current pipeline, which is also part of our earnings release, we have the Murtomäki 2 and Taraskallio projects going on. Planning and zoning phase is where we are with them. The total capacity with them is a bit less than 140 MW, and that is the current situation of the pipeline. But this is, of course, long-term. All the projects are taking a long time. Now in the coming quarters, we are not expecting any bigger returns from the wind power, but this is more to the coming years. We will be investing to the new projects in wind power going forward.
But your investments are more into organic side, or are you planning to make any acquisitions? For example, some early-stage pipelines.
Well, we are looking at our options in the market, of course. But so far, the approach has been organic. The market is in interesting situation, and we are looking at it, but we don't have any current plans to do any bigger moves there in our.
Okay. Thank you.
Thanks, Anssi. Next, a question from Mika.
Yeah. Hi. Question concerning your sales rates in the housing projects, which will be completed in H2 this year. Could you comment on that one?
Well, in general, what I covered in the introduction. We have a good number of completions in second half of the year. The situation, of course, what I described already. This is continuously dependent on the demand situation, and we have the completions, and we have been increasing our sales campaigns to boost sales going forward in this more challenging situation. We might see an increase in our inventory levels in the second half of the year, but that's basically what we can tell you. Also, I remind you again about the sales mix of the second half. Compared to the first half, that will be a bit weaker.
Good. Thanks.
Thanks, Mika. Do we have any further questions?
If no, just a comment still from my side is that in Q3, we will, of course, then elaborate on the market situation a bit more. Of course, you know that the situation has been changing all the time, and it hasn't been changing to the better so far. In a month from now, you'll get a new update in the Q3.
Yes. Thanks, everyone, for participating. Thank you, Tuomas. We will talk to you soon after our silent period ends. Thank you.
Thank you.