All right, so let's get started. Good morning, all, and welcome to YIT's Q1 Pre-Silent call. We are represented today by CFO Ilkka Salonen and myself. I'm Tommi Järvenpää, the Head of IR. We will first go through a short summary about the quarter, and then we'll take questions from the participants. I would like to remind you that this call is being recorded, and the recording will be published on the company's website after the call. At this point, I would hand over to Ilkka, so please go ahead.
Thank you, Tommi, and welcome everyone for the Pre-Silent call. I will give a short update what comes to Q1 compared to the message what we gave in the beginning of February. If we start with the corona situation, in Finland, we can say that there has been more corona cases in our sites during Q1, especially in January and until mid-February. Actually, the situation was somehow weaker than it was last spring. However, after the mid-February, the situation has normalized, and today it's quite stable. We have done a lot of actions over there, and we have to do actions every day because the sites are places to employ where you may get the COVID disease easier than in a number of other places. So we have taken that very seriously. A couple of our sites have been temporarily shut down just for a few days.
So no major impacts for the financial point of view. In the big picture, what comes to the operations, they are rolling as expected. In the investor side, we can say that it's somehow diversified, meaning that what comes to the residential investors, it has been at least in a good level, meaning that the activity has been good and also the decision-making capability has been very good. In the commercial and office side, it has been slower, meaning that, yes, the activity has been over there. The willingness to look at the investment opportunities has returned, but the decision-making is slower on that side than before the COVID. If you look at the segments, starting with the Housing Finland, activity has continued to be in a good level, as we indicated in February, actually in all our operation areas.
If you look at this year pattern for what comes to the completions, it's exactly the same than last year and the year before, meaning that it is heavily overweight to the last quarter. If you look at in the operations side, our target is to have more startups in 2021 compared to 2020, as we mentioned in the beginning of February. Housing Russia goes like as planned. Activity has continued to be in a good level as we expected in February. However, due to seasonality, this is usually lower than the last quarter in the years. In Russia, the site has also been able to run without any disturbances due to COVID. In business premises side, the activities, as I mentioned, among customers and investors, it has more or less normalized. Decision-making is lower in the private side.
And of course, one reason is that it is still open that how the office premises will be renovated at the time when the corona exit is starting. Tendering in the public sector has been good and active. There are a lot of tenderings being, for example, in the hospital side, in schools, kindergartens. Just to remind that from our order book in business premises in the end of last year was actually 78% was for the public sector. So at this stage, the public sector is an important part of the business premises activities. In partnership properties side, activities among investors have mostly returned, and as I mentioned, the decision-making is still taking longer than before corona. The Tripla. Yes, the tighter restrictions during the last month, it has had an impact for the number of visitors, but not any drastic in Tripla either.
And of course, their expectations are already for the COVID exit after time. In infra project side, if we look at the, as we mentioned in February what comes to the market outlook that it takes for a while before the governments stimulate programs in Finland is really starting to get on. That is correct. There has been very few in the tendering process and actually the, probably the first, a little bit bigger project. This is related for the Hailuoto bridge, which should come to the tendering process later this year. And of course, the planning and design phase takes time. As we mentioned in Q4 when it comes to, not so much to the market, but to the company itself, that in some projects we had some project management challenges.
And as we mentioned that we are expecting those ones to have an impact for the first half this year. Those are still relevant. Good to remind also that, if you look at the seasonality in the infra project works, it's usually the Q1 is the weakest quarter in years. The big success in infra project side during Q1 was that we were able to sign the Lestijärvi Wind Power Project. And over there, the closing is expected to happen in latest in 2022. Of course, we are targeting that it would happen already in 2021, but it's not only in our hand, so depends on how the closing activities are going. Is it in 2020 or 2021? Those were the short updates what comes to the segments. Last week, we had large refinancing transactions, and we were very successful on those ones.
Actually, three tranches, EUR 100 million senior bond, EUR 100 million for five years and one for three years, and then EUR 100 million hybrid for five years. All of those ones are green and I'm very happy about that one that we were able to raise the bonds under our green framework. It was seen in the, if you look at the books that really we get the 10 new investors abroad who were just due to the green bond features. So that had an impact for our sourcing of the funding. The last but not least is, of course, that if you look at for the going for the Q2, our new CEO, Markku Moilanen, will start actually tomorrow in his position as the CEO in YIT.
That was my short summary when it comes to the market as well as to the segments and the highlights from the companies. Now we are ready for Q&A.
All right. Thanks, Ilkka. Let's now take questions from the participants. As always, please raise your hand when you have a question. When asking, please also state your name and the company as well. First let's take question from Anssi.
Thanks. It's Anssi Kiviniemi from SEB. Couple of questions from my side. First of all, on the Housing Finland business, you ambition to increase the volumes on that side. What should we expect in terms of increased startups? If we just look at the pattern from historical perspective, towards the previous peak, there is 50% activity increase potential. What should we expect from the startups in 2021?
Thanks, Anssi. Of course, we are in the first quarter, and it's partly driven by the demand for apartments, but it's good to remember that last year was an exceptional one. We actually hold on investments for 1.5 months. It means that last year was exceptionally low due to that reason. We haven't given any exact figure how much we are planning to increase, but there will be meaningful increase if the market stays as it has been for quite many quarters already. At the moment, there is no sign that the market would, let's say, stop. Of course, the next milestone for you is our Q1 figures, which will be released in three, four weeks.
Okay, thanks. The second question is related to the financing package. Given that it's green financing, is there certain limitations on where you can use the money and how you can use the money and when you can use the money?
Yes. The framework includes different kind of targets. The biggest one is, of course, our, let's say, traditional construction. It means that those housing projects are actually the biggest source because there is also big part of our capital tied for those ones. There are also areas like the projects what we do for the public transportation. Also, for example, water treatment projects in Blominmäki as well as in Stockholm. The number of different sources. But the biggest one is definitely the construction side.
Okay, thanks. The last question still related to the financing. I mean, bonds and hybrid. I can understand the bonds, it's quite straightforward, but what's the rationale behind the hybrid? Is this something that the banks prefer, or are you just getting ready to tie more capital in the large projects? How should we read the hybrid? Because it's not the most usual financing measure for YIT.
No, it's not. First of all, it wasn't any demand from the bank side. It was just from internal thinking. If you look at one of the key strategic target what we have had since the merger has been to get the gearing down under 50%. That is one way to speed up that target. Also, we want to continue and follow our strategy and to really implement that one. That definitely safeguards in this kind of situation where we are COVID around. It is still over there, it's good to remind. If you look at for last year, our own equity declined, as you can see. It was driven by a couple of factors. One was due to the Russian ruble, and last year, we also paid dividends also for the paving deal.
By making the hybrid, actually, we are able to keep the capacity at the same level than a year before. At the same time, able to really go towards less than 50% in gearing. That is the rationale behind the hybrid. Of course, if you look at the pricing of the hybrid, we were quite satisfied for the level what we get over there.
Okay. That is clear. That is all from me. Thank you.
Thank you.
Thanks, Anssi. Any other questions? Mika?
Yeah. Hi, this is Mika Karppinen from Handelsbanken. Concerning the cost inflation, input costs have been heavily on the rise. How do you see the sort of impact from that side to your operations going forward? What kind of clauses you have, or when the sort of these higher prices could start affecting your business, what kind of lag there is?
Of course, in our business, there are different kind of sourcing. Some of those ones, for example, in the subcontracting work in a number of cases, they are fixed. It's when we start the project. Over there, of course, the raw material side is the area where you can see fluctuation during the project. There are one item which has had a negative impact is the steel during the last quarter of the two, but it has stabilized during the last one month. That is one which is having impact. But in a general level, what comes to the inflation and expectation for that one, still, let's say last spring, last summer, it was expected that the volumes are going down in the construction industry in Finland, and the inflation would be quite close to zero or even negative in some areas.
At the moment, not too much changes over there. But yes, in some raw material areas, you have seen increases in the prices.
Okay, good. Thank you.
All right. Thanks, Mika. Who wants to go next? Pauli.
Hi, this is Pauli Lohi from Nordea. I would have a couple of questions. First of all, could you give us some extra flavor on infra cost overruns? Are those related to legacy projects from Lemminkäinen? What is the magnitude compared to cost overruns seen in business premises over the last two years?
Yeah. If you look at the overruns, there are couple of projects, not all of the projects, couple of the projects. You cannot say that they are from Lemminkäinen's. Most of the projects actually, which were before the merger has been already concluded. What comes to the magnitude, of course, if you look at the project deviations in business premises side and, for example, Tripla where we had a big overrun, the size of the project was also quite big one. There are different size of projects in infra project side. Based on those ones, you can make an adjustment that what is the size. It is not the same type of big project or probably big project problem than what we saw in business premises. But the root causes over there are pretty similar, meaning what comes to the project management capabilities.
That is the reason why we have a big program going on at the moment group-wide to really take away about the single deviations. Which means harmonization following the rules and the same coding in all sites.
Okay, thanks. Another question about, could you give us a short update on Maria 01? When is the building expected to start, and what is your ownership about this project?
It is still in the design side. There is not city plan ready yet, so it still takes time. We are in the development company as an owner. The amount of money which is over there is still quite limited. It is progressing pretty much related for the city plan work and the timetable when we start the construction work over there is still open.
Is it too optimistic to expect material contribution for next year for revenue?
It depends on how the planning and design phase is going on. In order to get there, we should be pretty much ready in Q2 this year that it really would have impact for next year. I mean, in the construction side. It is challenging, but it is not impossible.
Okay, thanks, Ilkka. No further questions from me.
Thanks, Pauli. Next question from Matias.
Hi, everybody. I have a question concerning on the residential construction capacity in Finland. Where are you now in terms of capacity utilization? How much room do you have to increase the capacity or where do you plan to take out these new startups?
If you look at the startups in Finland, of course, the three areas are the growing areas, the Tampere, Turku, and Helsinki. Those are for sure overrated. There are also startups in smaller cities in growth areas like Oulu, Kuopio, Vaasa area. What comes to the utilization ratio, usually you can increase your capacity. Let's say that the construction side, usually 20%+ per annual growth for a longer period of time is still manageable, but after that it's not any more manageable. However, if you look at last year, it was somehow lower the activity level. We have capacity to increase our startups and works during this year. That's not a problem.
When I look at the historical numbers, you have had some 5,000 apartments under construction. Usually in 2018 it was 6,000, and now you are now closer 4,400. What is the capacity that you have available now? Could you clarify on that, please?
Yeah. It is more than the existing one, but it is less than that big one. Easily you can have utilization rates or the construction some hundreds of apartments more than what we have at the existing time. And of course, you are also able to use subcontracting more. So at the moment, let us put it on that way, that when we are looking our startups and when we have looked at the startup increase, we haven't faced for the capacity question. It is more related for the demand side and the plot side.
Okay. Thank you, Ilkka.
Yeah.
Thanks, Matias. Any further questions from anyone? All right. It seems that there is no further questions. So thank you everyone for participating, and as a reminder, our first quarter results will be published on April 30th. And at this point, have a great Easter.
Thank you for everyone. Happy Easter time. Thanks.
Thank you.
Thank you.
Thank you.
Happy Easter.
Thank you.
Thank you.