YIT?s Interim Report, January 1 - Septem

Thu, Oct 30, 2003 07:00 CET

STOCK EXCHANGE RELEASE   Oct. 30, 2003  8:00
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YITs Interim Report, January 1 - September 30, 2003: Acquisition of the Building Systems business turns YIT into the leading company offering building system services in the Nordic countries

Net sales up 14 per cent

The YIT Groups net sales in the January-September period were 14 per cent higher than in the corresponding period of the previous year, rising to EUR 1,435.7 million (Jan.-Sept./2002: EUR 1,258.1 million). The figures for the acquired Building Systems business for the period from August 29 to September 30, 2003, have not been consolidated into the YIT Group in the third quarter; they will be included in the 2003 financial statements.

The Groups international activities accounted for 20 per cent of total net sales (22%). The share of net sales accounted for by the maintenance and servicing business was 23 per cent (23%).

Profit before extraordinary items: EUR 75 million

Operating profit for the review period rose to EUR 85.8 million (EUR 65.0 million). The operating profit margin was 6.0 (5.2%).
Operating profit includes about EUR 30 million in capital gains from the sale of Makroflex in June. Operating profit was reduced by the sum of EUR 5.7 million recorded as a loss by YIT on the basis of a ruling by the Helsinki District Court in February. The ruling concerned the refurbishing of SOKs former head office building. YIT has appealed the decision.

Profit before extraordinary items and taxes was EUR 75.4 million (EUR 55.9 million). Profit after taxes was EUR 50.2 million (EUR 27.1 million). The residual taxes levied by the Tax Office for Major Corporations in March 2002, EUR 10.9 million, cut into the result for the comparison period. YIT appealed the tax decision and the Tax Correction Board of the Tax Office for Major Corporations approved the appeal in December. The matter is still being reviewed in the Administrative Court, and thus the residual taxes repaid to YIT in January 2003 by the Finnish Tax Administration have not been accounted for in the 2002 financial result or the result for the review period.

Earnings per share amounted to EUR 1.72 (EUR 0.94; exclusive of residual taxes: EUR 1.32). The acquisition of Building Systems is expected to have a positive effect on earnings per share from 2004 onwards. YITs strategic target level is to pay dividends of 30- 50% of earnings per share after taxes and minority interest.

Equity per share rose to EUR 13.46 (EUR 12.00). Return on investment for the 12-month period ending at the close of the report period was 18.5 per cent (18.2%). The strategic target level for return on investment is 18 per cent.

Order backlog at a record level

The Groups uninvoiced backlog of orders was 66 per cent higher at the end of the period than a year earlier, having risen to EUR 1,416.5 million (EUR 853.6 million). The acquired Building Systems business accounted for EUR 266.3 million of the order backlog. The Groups backlog for international orders rose by a third to EUR 291.9 million (EUR 220.1 million). Due to their nature, part of the Groups maintenance and servicing operations are not included in the order backlog.

Financial position remains good

Good cash flow from operations and capital gains from the sale of Makroflex and YIT shares reduced the impact of the Building Systems acquisition on the Groups financial position, which remained good.

YIT financed the Building Systems acquisition with debt capital.
As a consequence of the acquisition, the companys equity ratio fell to 33.2 per cent (38.0%). YITs objective is to restore the equity ratio to the strategic target level of 40 per cent by 2006 at the latest.

Total assets in the consolidated balance sheet amounted to EUR 1,323.9 million (EUR 1,000.4 million) at the end of the review period. The purchase price paid for the acquired Building Systems business is included in tangible and intangible assets. The loans taken out to fund the acquisition are included in current and non- current liabilities. Other factors contributing to the growth of the balance sheet were the purchases of plots carried out during the period and the strong growth of developer contracting in residential construction.

Building Systems acquisition

YIT purchased from ABB, by an agreement signed on July 4, 2003, its Building Systems operations offering building systems, property and industrial services in Finland, Sweden, Norway, Denmark, the Baltic countries and Russia. The acquired business had net sales in 2002 of about EUR 1,130 million and approximately 9,100 employees. YITs net sales, calculated using the figures for 2002, rose to about EUR 2,890 million after the deal and the number of employees to over 22,000.

The Finnish Competition Authority approved the Finnish end of the deal on July 18, 2003, and the Swedish Competition Authority approved it on July 23, 2003. The Lithuanian Competition Authority approved the deal on August 28, 2003. The acquisition was consummated on August 29, 2003, when the transaction price of EUR 169.2 million was paid and the business functions were transferred to YIT. The transaction price will be finalized by the end of the year, when the audited balance sheet calculations concerning the situation at the end of August have been completed.

The acquisition is in line with YITs strategy. The companys main strategy is to grow profitably. Building systems comprise a major strategic growth area in all of the Nordic countries. The business functions of YIT and the acquired Building Systems complement each other, as does the expertise of their employees. Overlapping operations are minimal. After the deal, the Group can offer customers improved and more comprehensive services during the entire life cycle of properties.

The dependence of YITs net sales and earnings on the ups and downs of the business cycle has been purposefully reduced by expanding maintenance and servicing operations within the companys different business segments. Following the acquisition, the share of maintenance operations within consolidated net sales is estimated to rise to about 30 per cent. Operations in different countries also reduce cyclical dependence.

Following the acquisition, YITs organizational structure changed.
The Groups operations were divided into four business segments: Building Systems, Construction Services, Services for Industry and Data Network Services. Building Systems was formed from the acquired Building Systems business, into which YIT Building Systems division in Finland and YIT Calor AB in Sweden were integrated. Also to be placed within it at the turn of the year are YIT Rapido Property Management Services Ltd and YIT Primatel Ltds property networks business. Building Systems is YITs largest business segment in terms of net sales and number of employees. The net sales of the business segment, calculated using the figures for 2002, amount to about EUR 1,520 million. In September 2003, it had 11,970 employees. In terms of net sales, YIT is the largest Nordic company offering building system services whose network of business locations covers all of the Nordic countries. YIT has a total of about 500 business locations in the Nordic countries, the Baltic countries and Russia.

The integration process has progressed in line with plans in the different countries. First of all, the disturbance-free continuation of basic functions after the merger of business functions was ensured. Intensive personnel orientation began in September and will continue during the rest of the year. Measures to identify and harness synergy benefits were initiated immediately in the first stage of the integration process.

At the beginning of October, an action programme was started up to pull the acquired Building Systems business into the black in Sweden as well from 2004 onwards. The main aspects of the action programme are the reduction of fixed costs and downscaling operations to match demand in loss-making areas.

Market situation remains stable

The trend in YITs net sales is supported by the continuing brisk demand for residences and premises for commercial services in Finlands growth centres. The growth in residential production and renovation in Finland compensates for the decline in office and industrial construction in the construction and building system markets (heating, water, air-conditioning, electricity and automation contracting and maintenance). According to the business cycle reports published by the construction cycle group of the Ministry of Finance and the Confederation of Finnish Construction Industries RT in October, Finlands construction market will remain stable both during the present year and the next.
Construction will decline slightly this year and swing into slow growth next year. In September, the Research Institute of the Finnish Economy ETLA estimated that construction investments in Finland will contract by 1.6 per cent this year and grow by 1.4 per cent next year. Investments in residential construction and civil engineering will grow, while other types of building construction will decline. ETLA predicts that construction output will grow by 2.6 per cent on average each year from 2002 to 2007, that is, at a faster rate than in the previous five-year period.
The growth in civil engineering outpaces that of building construction.

According to the forecast made by ETLA in September, investments in machinery and equipment will decline by 5 per cent this year.
Fixed investments in the national economy will decline by 2.2 per cent in Finland in 2003, but will begin to grow slightly by 0.3 per cent in 2004. During the next five years, investments will increase by an average of 2.7 per cent annually.

The market for industrial, property and infrastructure maintenance will expand as the outsourcing trend progresses. The total market for telecom network construction and maintenance will not expand during the present or the next year, but growth is expected in the outsourcing of operators field functions in the future.

At the beginning of October, the Swedish Construction Federation BI predicted that construction investments in Sweden will decline by two per cent both this and next year. Production of small houses will grow and that of blocks of flats will decline, as in Finland. During the past year, construction in the Stockholm area has declined significantly, while it has increased in greater Gothenburg and Malmö. Trends have been stable in the rest of the country and the production of small houses in particular has risen. In August, the Swedish National Institute of Economic Research KI estimated that fixed investments in Sweden will decline by 1.4 per cent during the present year and grow by 3.1 and 7 per cent during the next two years.

In its report published in September, the Federation of Norwegian Construction Industries (BNL) estimated that the building construction volume will decline by 3 per cent this year. Next year, the volume will remain unchanged, beginning to grow by 2 per cent in 2005. Residential production will decline from last years figure of 22,980 residences to 21,000 residences this year and to 20,000 residences next year, and rise to 21,000 residences in 2005. Other types of building construction will fall from last years level of 3.25 million square metres to 3 million square metres in 2004 and 2005. Residential renovation will grow at a rate of 2 per cent during the next two years, while other building repair works will grow at a rate of 3 per cent. This year, renovation will remain at last years level. According to Statistics Norway (SSB), investments in continental Norway will contract by 2.9 and 1.9 per cent this year and the next, but will see growth of 7 per cent in 2005. The largest current offshore investment is taking place at the Snöhvit gas field.

Denmarks economy is growing moderately. The engines of growth are private consumption and domestic demand. Growth in exports is also forecast to strengthen during the next two years. According to Nordea, 2003 will be the weakest year during this slump. In September, Nordea estimated that GDP will grow by 1.1 per cent this year and by 2.2 and 2.5 per cent during the subsequent two years. It is believed that the confidence of consumers will hold firm. A slight turn for the better in the international economy is anticipated towards the end of the present year and it is expected that this will support economic growth next year. Fixed investments will contract by 1.6 per cent this year and see growth of 2.3 and 3.9 per cent in 2004 - 2005. Dansk Byggeri, the Danish Construction Association, assesses the outlook for the present and the next year as stable. Construction will decline by one per cent during both years. This year, residential production will grow by over 2,000 residences to 21,400 residences. On the other hand, office and industrial facility construction will decline by 7-8 per cent. Renovation will remain stable. Activity is centred around Copenhagen and other large cities.

In the Baltic countries and Russia, growth in investments and GDP significantly outpaces growth in the Nordic countries. Demand for market-financed residences in particular has strengthened in St Petersburg, Tallinn and Vilnius.

The outlook for YIT Building Systems business functions is based on assessments of the trends in the construction and property services market and the order backlog for industrial investments and shipyards not only in Finland and Sweden, but also in Norway and Denmark.

In 2002, the GDP of all the Nordic countries grew by a total of 1.7 per cent. This year, growth will slow down to 1.3 per cent on average. Euroconstruct expects that annual growth in 2004 and 2005 will be brisker, 2.5 per cent. This year, construction will remain at the same level as in 2002. Euroconstruct estimates that annual growth in construction in 2004 and 2005 will be about 1 - 1.5 per cent on average. During the next two years, the fastest growth will be seen in Sweden, while growth will be moderate in Finland and Denmark. Construction will decrease in Norway. Residential construction will increase, but other types of building construction will decline. There will be growth in repair works and civil engineering. The demand for building systems as part of construction works will increase in 2004 and 2005 in both residential construction and repairs, and decline in the case of other kinds of buildings.

The trend in the value of facility management is stable. Growth is generated by new user services. The outsourcing trend is continuing in property services.

Demand for the investment services offered by YIT Building Systems and YIT Industry is overshadowed by the slight order backlog for industrial investments and the marine industry in all of the Nordic countries, which is the result of slow economic growth and low industrial capacity utilization ratios. The construction of Finlands fifth nuclear power plant, the construction of the extension to Fortums refinery in Porvoo, Finland, the construction of the Snöhvit gas field in Norway and other projects will call for a significant volume of construction, building system, industrial piping and electrical works during the next few years. The outlook for industrial maintenance is good.

Growth in the maintenance business imparts stability to the annual trend in YIT Building Systems net sales. On the basis of the figures for 2002, maintenance accounted for about 40 per cent of YIT Building Systems net sales.
Outlook for 2003

The strong order backlog and the integration of the new Building Systems business into the Group will significantly increase net sales in the last quarter. The result for the rest of the year will be weakened by the integration costs of Building Systems and the costs of downscaling measures in Sweden. Full-year pre-tax earnings are estimated to improve on last years figure. The new business is expected to have a positive effect on earnings per share from 2004 onwards. YITs equity ratio declined due to the deal. The aim is to return the equity ratio to its strategic target level of 40 per cent by 2006 at the latest.

Publication on October 30, 2003

An event for investment analysts and portfolio managers will be held at 10:00 on Thursday, October 30, at YITs head office. The address is Panuntie 11, 00620 Helsinki.

Interim Reports will not be printed; rather, they will be published as stock exchange releases and on the companys site at www.yit.fi. Copies of Interim Reports can be ordered from YIT Corporation, Corporate Communications, P.O. Box 36, FIN-00621 Helsinki, Finland, tel. +358 20 433 2467, or fax +358 20 433 3746.

YIT CORPORATION

Reino Hanhinen Group CEO For additional information, contact: Group CEO Reino Hanhinen, tel. +358 20 433 2454, reino.hanhinen@yit.fi Executive Vice President Esko Mäkelä, tel. +358 20 433 2258, esko.makela@yit.fi Juhani Pitkäkoski, President, YIT Building Systems Oy, tel. +358 20 433 3738, juhani.pitkakoski@yit.fi Veikko Myllyperkiö, Vice President, Corporate Communications, tel.
+358 20 433 2297, veikko.myllyperkio@yit.fi Petra Thorén, Manager, Investor Relations, tel. +358 20 433 2635, petra.thoren@yit.fi

ANNEXES Interim Report, January 1 - September 30, 2003 Consolidated income statement, balance sheet, cash flow statement, key figures and contingent liabilities as well as net sales, operating profit and order backlog by division and the Groups quarterly trends.

Distribution: Helsinki Exchanges, principal media, www.yit.fi

YIT CORPORATIONS INTERIM REPORT, JANUARY 1 - SEPTEMBER 30, 2003

YIT becomes the Nordic market leader in building systems

The acquisition is in line with YITs strategy. The companys main strategy is to grow profitably. In building systems and services for industry, growth has been sought in the Nordic market.
Building systems comprise a significant growth area in all of the Nordic countries. The share of construction costs and both the repair and maintenance works of the property stock accounted for by building systems is still on the rise. The amount of automation and telecommunications technology in building systems equipment and systems is increasing. After the acquisition, YIT is the largest Nordic company - in terms of net sales - offering building system services whose network of business locations covers all of the Nordic countries. YIT has a total of about 500 business locations in the Nordic countries, the Baltic countries and Russia.

The business functions of YIT and the acquired Building Systems complement each other, as does the expertise of their employees.
Overlapping operations are minimal. In Finland and Sweden, YITs expertise in plumbing and heating technology in building systems is rounded out by Building Systems expertise in electricity and ventilation. Entirely new markets will open up for YIT in Norway and Denmark. After the deal, the Group can offer customers improved and more comprehensive services during the entire life cycle of properties.

YIT estimates that the acquisition will yield annual synergy benefits of about EUR 10 million from 2004 onwards. The synergy benefits will come primarily in the areas of purchasing, administration and information technology as well as through technology and business model transfers between existing and new units. Measures to identify and harness synergy benefits were started up immediately in the first stage of the integration process.

The integration costs are estimated to amount to about EUR 6 million in 2003 and 2004. The main items making up the integration costs are information technology, changing the external identity and training for the personnel.

The integration process has progressed in line with plans in the different countries. At the beginning of October, an action programme was started up to pull the Building Systems business into the black in Sweden as well from 2004 onwards. The main aspects of the action programme are the reduction of fixed costs and downscaling operations to match demand in loss-making areas.
This year, the costs of downscaling measures will be about EUR 10 million. They aim to achieve cost-savings totalling about EUR 20 million per year and will come into full effect in 2005.

Group structure changes following the acquisition

Following the acquisition, YITs Group structure changed. The Groups operations were divided into four business segments: Building Systems, Construction Services, Services for Industry and Data Network Services.

Building Systems was formed from the acquired Building Systems business, into which YIT Building Systems division in Finland and YIT Calor AB in Sweden were integrated. Also to be placed within it at the turn of the year are YIT Rapido Property Management Services Ltd and YIT Primatel Ltds property networks business.
Building Systems is the Groups largest business segment in terms of net sales and number of employees. The net sales of the business segment, calculated using the figures for 2002, amount to about EUR 1,520 million. In September, it had 11,970 employees.

YIT Construction Ltd is responsible for construction services.
Capital investment and maintenance services for industry are offered by YIT Industria Ltd and YIT Service Ltd. Data network services are provided by YIT Primatel Ltd.

In terms of net sales, YIT is the market leader in all its business areas in Finland. In Sweden, YIT is the market leader in industrial piping. In the case of building systems, YIT is the leading company in the Nordic countries.

Net sales see stable growth

The YIT Groups net sales for the January-September period rose to EUR 1,435.7 million (Jan.-Sept./2002: EUR 1,258.1 million), up 14 per cent on the previous year. Most of this growth is organic. The net sales of the acquired Business Systems in the period from August 29 to September 30, 2003, amounted to about EUR 80 million.
No conclusions about net sales in the last part of the year can be made on the basis of one months figures.

The figures for the acquired Building Systems business for the period from August 29 to September 30, 2003, have not been consolidated into the YIT Group in the third quarter because the audited balance sheet calculations from the end of August related to the transfer of business operations have not been completed yet. The figures of the acquired Building Systems business will be incorporated in the 2003 financial statements, when reporting will also be performed in line with the new division of business segments. Such segmental reporting will also be used later in the manner defined in International Accounting Standards (IAS).

In third-quarter reporting, the tables of the Interim Report are presented in accordance with the former Group structure, in which operations were divided into three subgroups: YIT Construction, YIT Installation and YIT Primatel. YIT Primatel has been part of the YIT Group since June 1, 2002.

Net sales by subgroup (EUR million)

1-9/2003 1-9/2002 Change YIT Construction 961.4 795.6 21% YIT Installation 395.7 434.8 -9% YIT Primatel 93.0 49.3 89% Other items -14.4 -21.6 -33% YIT Group, total 1,435.7 1,258.1 14%

The share of net sales accounted for by maintenance and servicing rose to EUR 324.5 million (EUR 286.2 million), representing 23 per cent (23%) of total net sales. The share accounted for by the Groups international activities was EUR 291.5 million (EUR 274.3 million), or 20 per cent (22%) of total net sales.

Profit before extraordinary items: EUR 75 million

Operating profit for the review period rose to EUR 85.8 million (EUR 65.0 million). The operating profit margin was 6.0 (5.2%).
Operating profit includes about EUR 30 million in capital gains from the sale of Makroflex. In line with its strategy, YIT divested itself of the industrial production of sealants and thermal insulation materials and in June sold its Makroflex company and brand. Operating profit was reduced by the sum of EUR 5.7 million recorded as a loss by YIT on the basis of a ruling by the Helsinki District Court in February. The ruling concerned the conversion and additional works involved in the refurbishing of SOKs former head office building, which was seen to completion in 1999. YIT has appealed the decision.

Operating profit by subgroup (EUR million)

1-9/2003 1-9/2002 Change YIT Construction 78.9 49.5 59% YIT Installation 7.3 15.9 -54% YIT Primatel 6.2 5.6 11% Other items -6.6 -6.0 10% YIT Group, total 85.8 65.0 32%

Profit before extraordinary items and taxes was EUR 75.4 million (EUR 55.9 million). Profit after taxes was EUR 50.2 million (EUR 27.1 million). The residual taxes levied by the Tax Office for Major Corporations in March 2002, EUR 10.9 million, cut into the result for the comparison period. YIT appealed the decision and the Tax Correction Board of the Tax Office for Major Corporations approved the appeal in December. The matter is still being reviewed in the Administrative Court, and thus the residual taxes repaid to YIT in January 2003 by the Finnish Tax Administration have not been accounted for in the 2002 financial result or the result for the review period.

The acquisition is estimated to have a positive effect on earnings per share

YIT financed the Building Systems acquisition with debt capital.
As a consequence of the acquisition, the companys equity ratio fell to 33.2 per cent (38.0%). The equity ratio will still decline towards the end of the year, when the balance sheet of the acquired Building Systems will be incorporated into the consolidated balance sheet. YITs objective is to restore the equity ratio to the strategic target level of 40 per cent by 2006 at the latest.

Order backlog rises to EUR 1.4 billion

Order backlog according to the new segmental division (EUR million)

9/2003 9/2002 Change Building Systems 419.9 122.4 243% Construction Services 868.7 613.6 42% Services for Industry 62.6 80.3 -22% Data Network Services 65.3 37.3 75% YIT Group, total 1,416.5 853.6 66%

The Groups financial position remains good

Good cash flow from operations during the period and capital gains from the sale of Makroflex and YIT shares reduced the impact of the Building Systems acquisition on the Groups financial position, which remained good. After the end of the review period, the bulk of the short-term loan drawn for the payment of the cash transaction price was converted into a long-term loan by means of two EUR 50 million bonds.

Interest-bearing liabilities amounted to EUR 281.8 million (EUR 162.4 million) at the end of the period and net debt to EUR 246.9 million (EUR 140.0 million). Net financial expenses were EUR 10.4 million (EUR 9.1 million), or 0.7 per cent (0.7%) of net sales. At the end of the review period, liquid assets amounted to EUR 34.9 million (EUR 22.4 million).

The construction-stage contract receivables sold to financing companies totalled EUR 180.5 million (EUR 114.0 million) at the end of the period. The interest paid on them to the financing companies, EUR 3.7 million (EUR 3.6 million), is included in net financial expenses.

The proportion of fixed-interest loans in the Groups entire loan portfolio was 56 per cent (73%). Loans raised directly on the capital and money markets amounted to 34 per cent (61%).

Total assets in the consolidated balance sheet amounted to EUR 1,323.9 million (EUR 1,000.4 million) at the end of the review period. The purchase price paid for the acquired Building Systems business is included in tangible and intangible assets. Other factors contributing to the growth of the balance sheet were the purchases of plots carried out during the period and the strong growth of developer contracting in residential construction.

Capital expenditures and acquisitions

Gross capital expenditures on non-current assets included in the balance sheet totalled EUR 187.6 million (EUR 57.4 million) in the January-September period, representing 13.1 per cent (4.6%) of net sales. Investments in construction equipment amounted to EUR 5.4 million (EUR 6.0 million) and investments in information technology to EUR 3.2 million (EUR 4.2 million). Other production investments came in at EUR 0.5 million (EUR 0.8 million). Other investments, including the goodwill on consolidation of acquired companies, amounted to EUR 178.5 million (EUR 46.4 million). The sum includes the purchase prices of the acquired Building Systems business functions.

The acquisition of the Building Systems business functions was carried out as assets purchases in Finland, Norway, Denmark, Estonia and Latvia. The shares outstanding of the local companies in Sweden, Russia and Lithuania were acquired in their entirety.
The purchase of business operations generated about EUR 180 million in deductible goodwill that will be amortized over a period of 10 years, with the exception of Denmark, where a seven- year amortization period will be used.

Number of personnel rises by over 70 per cent compared with the previous year

During the review period, the Group employed 13,846 (11,743) people on average. The number of personnel was 22,144 (12,960) at the end of the period, an increase of over 70 per cent in the space of a year. Most of the growth was due to the Building Systems acquisition. Forty-five per cent (22%) of the Groups employees now work outside of Finland.

Personnel by business segment, Sept. 30, 2003 Share of the Groups Number employees Building Systems 11,970 54% Construction Services 5,259 24% Services for Industry 3,202 14% Data Network Services 1,441 7% Corporate Services 272 1% YIT Group, total 22,144 100%

Personnel by country, Sept. 30, 2003 Share of the Groups Number employees

Finland 12,220 55% Sweden 4,395 20% Norway 2,730 12% Baltic countries 1,203 6% Denmark 976 4% Russia 620 3% YIT Group, total 22,144 100%

Significant growth in share prices and turnover

YIT Corporations share capital was EUR 59,492,670 at the beginning of the review period and the number of shares outstanding was 29,746,335. On the basis of shares subscribed for with share options from 1998, the share capital was increased by a total of EUR 5,200 on May 8, 2003, by a total of EUR 115,502 on June 26, 2003, and by a total of EUR 622,320 on August 21, 2003.
At the end of the period, the share capital was EUR 60,235,692 and the number of shares was 30,117,846.

The average share price during the review period was EUR 18.53 (EUR 16.46), with a high of EUR 22.75 (EUR 19.65) and a low of EUR 14.01 (EUR 13.20). The closing rate was EUR 22.00 (EUR 15.39).
During the review period, the trend in YITs share price has outclassed general share price trends on Helsinki Exchanges. YITs closing rate has risen by 31 per cent (EUR 16.79 at the end of 2002). During the same period, the HEX portfolio index rose by 4.95 per cent and the all-share index has declined by 2.92 per cent.

YITs share turnover has increased significantly compared with the previous year. Share turnover during the period amounted to EUR 187.6 million (EUR 119.9 million), with 10,122,933 (7,281,606) shares being traded. Market capitalization at the end of the period was 48 per cent higher than a year earlier, having risen to EUR 662.6 million (EUR 447.4 million).

During the review period, 288,080 Series A share options from 1998 were traded at an average price of EUR 7.48 and 541,930 Series B share options were traded at an average price of EUR 6.65 per share. A total of 101,430 shares were subscribed for on the basis of Series A share options and 270,081 shares on the basis of Series B share options.

At the end of the period, the Board of Directors did not have valid share issue authorizations or authorizations to issue convertible bonds or bonds with warrants.

YIT sells its own shares as part of the financial arrangements of the Building Systems acquisition

At the beginning of 2003, YIT Corporation held a total of 567,500 of its own shares, representing 1.9 per cent of the companys shares outstanding and the votes conferred by them. The shares had been acquired on Helsinki Exchanges at an average price of EUR 12.64 per share on the basis of decisions passed by Annual General Meetings in previous years. The total nominal value of the shares was EUR 1,135,000.

On the basis of the authorization granted by the Annual General Meeting held on March 13, 2003, YITs Board of Directors resolved, on August 29, 2003, to dispose of a maximum of 567,500 YIT shares owned by the company as part of the financial arrangements of the acquisition of Building Systems. All 567,500 shares were sold on September 5, 2003, on Helsinki Exchanges at a price of EUR 22.00 per share. The total value of the sale was EUR 12,485,000. During the report period, no shares in the parent company were owned by subsidiaries.

Number of shareholders rising

The number of registered shareholders was 3,271 (2,969) at the beginning of the period and 3,997 (3,040) at the end. During the third quarter, the number of shareholders rose by 457. Of them, 354 were private investors.

According to the nominee registers, 22.1 per cent of the shares (15.0%) were owned by international investors at the beginning of the period and 20.1 per cent (21.2%) at the end. Other foreign ownership at the end of the review period amounted to 3.6 per cent (2.7%); thus, a total of 23.7 per cent (23.9%) of the companys shares outstanding were owned by international investors.

On August 21, 2003, Pohjola Group plc announced that the holding of its Group in YIT had declined to under 5 per cent.

Market situation remains stable in YITs main fields of business

Finland

In its business cycle report published in September 2003, the Research Institute of the Finnish Economy ETLA predicts that Finlands GDP will grow by 1.4 per cent in 2003, while growth in 2002 was 2.2 per cent. ETLA predicts GDP growth of 2.4 per cent for 2004. The two-year incomes policy agreement concerning wages, salaries and collective agreements as well as the growth in disposable income have upheld the confidence of households in the stable development of their personal finances. Thanks to the growth in the disposable income of households, private consumption will increase by 1.4 and 1.0 per cent this year and the next.
Investments by the national economy will grow by 0.4 per cent this year and by 2.2 per cent next year. Growth in exports will remain at 0.9 per cent this year, accelerating to 2.5 per cent during 2004.

ETLA estimates that Finlands GDP will grow by an average of 2.8 per cent annually until 2006, while industrial output will increase by 3.3 per cent per year. Production by the private service sectors will grow by 3.5 per cent, but the growth of the public sector will remain at about 1.2 per cent per year.
Construction will increase by 2.6 per cent on average per year until 2006.

The trend in YITs net sales is supported by the continuing brisk demand for residences and premises for commercial services in Finlands growth centres. The growth in residential production and renovation in Finland compensates for the decline in office and industrial construction in the construction and building system markets (heating, water, air-conditioning, electricity and automation contracting and maintenance). According to the business cycle reports published by the construction cycle group of the Ministry of Finance and the Confederation of Finnish Construction Industries RT in October, construction will decline slightly this year and swing into slow growth next year. According to the business cycle report published in March, Finlands construction market will remain stable both during the present year and the next. The Research Institute of the Finnish Economy ETLA estimates that construction investments in Finland will contract by 1.6 per cent this year and grow by 1.4 per cent next year. According to ETLA, investments in machinery and equipment in Finland will decline by about 5 per cent in 2003 and by approximately 3 per cent in 2004.

The number of vacant industrial and commercial buildings is currently significantly below the normal levels in the growth centres of Finland. On the other hand, the vacancy rate of office buildings has exceeded five per cent in numerous growth centres.
Office building start-ups were slashed in the second half of 2001, and thus the supply will already return to normal at the end of this year. The increase in consumption and services is still causing a need for the construction of additional public and commercial service buildings. Construction permits for public buildings are on the decline, however, due to the tight finances of municipalities.

The years-long population shift is maintaining demand for residences in Finlands growth centres. 277,000 people moved from one municipality to another in 2002. They represent over five per cent of Finlands population. According to the preliminary information released by Statistics Finland, 213,700 people moved from one municipality to another during the January-September period of the present year. The strongest population growth due to an influx of people was seen in the provinces of Pirkanmaa, Uusimaa and Kanta-Häme. Most of the people who move are young, and thus the populations of these areas will also rise due to greater birth rates. As the housing stock is already in full use, additional construction is required.

Sales of residences remained brisk in 2003. The market is well poised to see further demand for residences. Demand is supported by the relatively stable and low interest rate levels in the EMU area and the increase in the disposable income of households. Last year, the construction of a total of 28,200 residences was started up in Finland. According to RTs predictions, the number of start- ups will rise to 30,000 residential units this year and to 31,000 next year.

The Ministry of Finance has forecast that civil engineering production will rise by 2.5 per cent both this year and the next.
Civil engineering investments are still on the rise. The

infrastructure investments required by the Vuosaari Harbour, the Turku motorway, the Kehä III ring road, the Lahti branch line and the new nuclear power plant will increase construction output for many years to come. The construction of Finlands fifth nuclear power plant will call for a significant volume of construction, building system, industrial piping and electrical works. In addition to the reactor building, the project will involve the construction of a turbine plant. The expertise and capacity of the Nordic YIT Building Systems are suitable for the construction and installation of the power plants process piping and tanks as well as its electrification. In the Nordic countries, YIT is the market leader in the design, production, installation and maintenance of high-pressure piping systems for power plants. In addition to the ordinary building systems required in the properties, ventilation, cooling, fire alarm and fire extinguisher systems for various equipment premises will be installed in the project.

From YITs standpoint, the market potential of the nuclear power plant is about EUR 700-800 million and it rests largely on piping deliveries and HVAC, electrical and automation systems as well as construction works.

ETLA predicts that investments in machinery and equipment will contract by 5 per cent this year and by 3 per cent next year.
During the next five-year period, the amount of machinery and equipment investments will grow by 2 per cent annually. Nuclear power plant installation works towards the end of the period will increase investments substantially. According to an investment survey by the Finnish Confederation of Industry and Employers TT, capital investments by Finnish industry fell by 18.1 per cent last year and will contract by 7.0 per cent this year.

The market for industrial, property and infrastructure maintenance will expand as the outsourcing trend progresses. The total market for telecom network construction and maintenance will not yet see growth during the present or the next year, but growth is expected in the outsourcing of operators field functions.

Outlook for the new Building Systems business

According to Euroconstructs report published in June, the value of the Nordic construction market amounted to EUR 75 billion, or 7.5 per cent of the entire Western European construction market.
The figure also includes the market for building systems in new construction and repair works. In spite of differences in population and wealth, the construction markets of the Nordic countries were almost equally large in 2002. The market for repair works and maintenance was valued at EUR 29 billion. The value of new residential construction was EUR 12.2 billion, that of other building construction works was EUR 16.1 billion and that of civil engineering was EUR 17.5 billion.

The demand for building systems will increase in 2004 and 2005 in residential construction and repair works, and decline in the case of other kinds of buildings. The trend in the value of facility management is stable. Growth is generated by new user services.
The outsourcing trend is continuing in property services.

Growth in the maintenance business imparts stability to the annual trend in YIT Building Systems net sales. On the basis of the figures for 2002, maintenance accounted for 39 per cent of YIT Building Systems net sales.

Sweden

According to the report published by the Swedish National Institute of Economic Research KI in August, Swedens GDP growth will amount to 1.3 per cent this year and to 2.5 per cent and 2.7 per cent in the subsequent two years. Exports of goods and services will already see growth of 3.8 per cent this year and increase by 6.5 and 7.1 per cent in 2004 and 2005. It is anticipated that household consumption will pick up in the autumn such that growth will be 2 per cent this year and 3.3 and 2.8 per cent in the next two years.

The market potential of YITs Swedish business functions is based largely on the trend in building construction, facility maintenance and investments by industry. In October, the Swedish Construction Federation BI predicted that construction investments in Sweden will decline by two per cent both this year and the next. Euroconstruct on the other hand predicted in June that Swedish residential construction will decline by 0.2 per cent this year and grow by 3.2 and 2 per cent during the next two years. The growth in building repair works compensates for the effect of declining new construction on the building system market. In June, the Swedish National Institute of Economic Research KI estimated that fixed investments in Sweden will decline by 1.4 per cent during the present year and grow by 3.1 and 7 per cent during the next two years.

Norway

In June, Statistics Norway (SSB) estimated that GDP growth would be 0.4 per cent this year and 2.5 and 1.9 per cent in 2004 and 2005. The recent decline in interest rates is stimulating the growth of the economy. According to SSB, investments in mainland Norway will decline by 2.9 and 1.9 per cent during the present and the next year, but will swing to growth of 7 per cent in 2005. The largest current offshore investment is ongoing at the Snöhvit gas field.

Denmark

Dansk Byggeri, the Danish Construction Association, assesses the outlook for the present and the next year as stable. Construction will decline by one per cent during both years. This year, residential production will grow by over 2,000 residences to 21,400 residences. On the other hand, office and industrial facility construction will decline by 7-8 per cent. Renovation will remain stable. Activity is centred around Copenhagen and other large cities.

Baltic countries and Russia

YIT Constructions strategy for going international is based on the operations of local subsidiaries in the Baltic countries and Russia. In these countries, growth in GDP and construction outpaces the Nordic countries by several percentage points. The Baltic countries preparations for EU membership, scheduled for the beginning of May 2004, are already stimulating investments. In addition to infrastructure and business premise construction, demand for market-financed residences has become stronger in St Petersburg, Tallinn and Vilnius. YITs order backlog has grown rapidly in the region thanks to projects based on international funding and the start-up of residential production.

The total GDP of the Baltic countries amounted to about EUR 30 billion in 2002, up 6 per cent. In June, Euroconstruct estimated that average annual growth will remain at 5 - 7 per cent in 2004 and 2005. Construction output was valued at about EUR 3.5 billion.

Estonias GDP grew by 6.0 per cent last year and totalled EUR 6.5 billion. In September, Nordea estimated that growth during the present year will reach 4.8 per cent and continue at a rate of 5-6 per cent during the next two years. VTT estimates that the construction market in 2002 was valued at about EUR 1.35 billion.
According to the Estonian statistics agency, about 1,100 residences were completed last year, and other types of building construction grew by around 30 per cent.

Latvias GDP grew by 6.1 per cent last year and totalled EUR 8.9 billion. Nordea estimated that growth will amount to 6.5 per cent this year and to 6 per cent during the next two years. The value of construction grew by over 10 per cent to about EUR 1 billion.
Euroconstruct predicts that the same growth rate will continue during the next two years. According to the Latvian statistics agency, residential production grew by only 0.5 per cent last year. The number of completed residences thus remained under one thousand.

Lithuanias GDP grew by 6.7 per cent last year and totalled EUR 14.2 billion. GDP growth is estimated to continue at a rate of 6.2 per cent this year, 6.8 per cent in 2004 and 6 per cent in 2005.
VTT estimates that the value of construction in 2002 was about EUR 1.3 billion. According to the Lithuanian statistics agency, close to 4,200 residences were completed, or 700 more than in 2001.

Russias GDP grew by 4.3 per cent last year, according to Nordea.
This years growth estimate is 5.7 per cent while growth of 5 and 4.5 per cent is forecast for the next two years. Investments are growing at a faster rate than GDP, at a rate of about 6-8 per cent. Political stability and the high price of oil have supported the development of the national economy. The greater affluence of the middle class has increased demand for residences in the metropolises. YITs construction operations in Russia focus on the St Petersburg area.

Strategy focuses on cash flow and cost- effectiveness

YITs main strategy remains profitable growth. Particular focus areas in the strategy for the near future are cash flow and cost- effectiveness. The growth target after the acquisition of Building Systems is 5-10 per cent annually. YIT aims to achieve growth outpacing that of the market and a steadier flow of income by pragmatically extending its service chain over the entire life cycle of investment projects, from design and implementation to maintenance, upkeep and operating services.

The market for industrial, property and infrastructure maintenance will expand as the outsourcing trend progresses. The structure of the YIT Groups business areas enables the company to offer capital investment and maintenance services - of various scales and content - to industrial, energy, property and telecom sector customers. The Groups strategic expansion areas are the Nordic market for building systems, industrial investments and maintenance, facility management and data network services as well as the construction markets of the Baltic countries and Russia.
YIT has implemented its strategy consistently. Major recent steps in this are the acquisition of Calor AB in 2001, the integration of YIT Primatel into the Group at the beginning of June 2002 and the acquisition of the Nordic Building Systems business this year.

Earnings trends of the business segments

YIT Building Systems

The Building Systems business segment was created when YIT Calor AB in Sweden and YITs Building Systems division in Finland were integrated into the acquired Building Systems business. The business segment is divided into Finnish, Swedish, Norwegian and Danish functions. Finnish functions also include Baltic and Russian functions.

The net sales of the acquired Business Systems in the period from August 29 to September 30, 2003, amounted to about EUR 80 million.
No conclusions about net sales in the last part of the year can be made on the basis of one months figures. The figures for the acquired Building Systems business for the period from August 29 to September 30, 2003, have not been consolidated into the YIT Group in the third quarter because the audited balance sheet calculations from the end of August related to the transfer of business operations have not been completed yet. The figures will be reported on in the 2003 financial statements. Due to the integration costs and the costs of overhauling operations in Sweden, the business segments result for the period from August 29 to December 31, 2003, is estimated to be in the red.

In the tables, the third-quarter figures of the business operations of YIT Calor AB and YIT Building Systems division are included in the figures of YIT Installation. The order backlog of the new business segment was EUR 419.9 million at the end of September. Of this amount, the order backlog of the acquired Building Systems business accounted for EUR 266.3 million.

YIT Building Systems offers its customers a range of property technology installation and maintenance services, services for industry and data network services. YIT Building Systems provides end-to-end building systems services and systems and maintenance services for the entire life cycle of properties. Its property services include property servicing and upkeep and facility management services. Services for industry mainly comprise electrical, ventilation and automation installations and related services. In data networks, YIT Building Systems offers the same services in the other Nordic countries as YIT Primatel provides in Finland. About 40 per cent of Building Systems net sales come from maintenance-type services.

The customers of building system services are builders, professional property owners, the public sector as well as trade and industry. Both property owners, the public sector and industry are further outsourcing their services, opening up new opportunities for YIT. At the same time, long-term partnerships are becoming more common. In addition, Public Private Partnerships are more prevalent in public administration. In that area, YIT is tightening up intra-Group cooperation and disseminating development models in all of the Nordic and Baltic countries.

Integration has commenced in line with plans

The integration process has started in line with plans in the different countries. First of all, it was ensured that basic functions would continue without disturbances when the business functions were transferred on August 29, 2003. Integration teams in each country are responsible for the measures required due to the merger in their own responsibility areas (such as customers, marketing, suppliers, IT, finance, personnel administration, business premises and communications). The aim is for the integration to have been completed for the most part in the first half of next year.

One of the major subareas of the integration is the orientation and commitment of personnel. All Building Systems employees will participate in a one-day event where YITs shared code of values, issues related to the development of operations and expertise and personnel matters will be discussed. For example, in Finland a YIT Days roadshow consisting of 21 personnel events around the country began in the second half of September.

Measures to identify and harness synergy benefits were started up immediately in the first stage of the integration process.
Significant savings have already been achieved in some of the support services thanks to higher volumes. The search for synergy opportunities in procurements has been started up and negotiations with suppliers are beginning.

The local managers of the different business segments have met up to look into possible business synergies. The units seek to find opportunities for regional cooperation and create the best practices. At the same time, a study of opportunities for establishing shared regional business premises will be started up.

Measures to improve the profitability of Building Systems Sweden are started up

Building Systems market has weakened in Sweden and demand has declined in numerous regions. For this reason, the operations of many of Building Systems loss-making areas have to be downscaled to match demand. The reduction of fixed costs mainly pertains to salaried employees, the rental costs of business premises and IT and administrative systems.

The action programme will affect a total of about 400 people. The costs of downscaling operations - estimated to amount to EUR 10 million - will mainly be incurred this year. The measures aim to achieve cost-savings totalling about EUR 20 million per year. The measures will begin to have an influence starting next year, coming into full effect in 2005. The objective is to return operations to a profitable rate of growth. This action programme does not pertain to YITs Swedish subsidiary YIT Calor AB.

Construction Services

The structure of the Construction Services business segment corresponds to that of the former YIT Construction subgroup. The net sales of Construction Services in the January-September period grew by 21 per cent compared with the previous year to EUR 961.4 million (EUR 795.6 million). International operations accounted for EUR 137.1 million (EUR 114.4 million) of net sales. Operating profit rose by 59 per cent to EUR 78.9 million (EUR 49.5 million).
Operating profit includes about EUR 30 million in capital gains from the sale of Makroflex and is reduced by EUR 5.7 million in losses booked as a result of the claim concerning the refurbishing of SOKs former head office property.

The order backlog was 42 per cent higher than in the previous year, having risen to EUR 868.7 million (EUR 613.6 million).
International operations accounted for 23 per cent of the order backlog, that is, EUR 197.0 million (EUR 143.1 million).

The net sales of Building Construction were a third higher than in the previous year, hitting EUR 603.9 million (EUR 451.0 million).
Building Construction is responsible for the Groups residential construction in Finland. Outside the Greater Helsinki area, its field of business also includes other types of building construction. About 85 per cent of its net sales were generated by residential construction. Its operating profit of EUR 43.3 million (EUR 36.8 million) was up 18 per cent on the previous years figure. The order backlog was one-third higher at the end of the period than in the previous year, having risen to EUR 365.4 million (EUR 273.8 million).

Sales of residences remained brisk in the Greater Helsinki area and the other growth centres. Apart from the population shift, the factors contributing to the brisk demand for non-rental housing were the record-low interest rates, the greater income levels of households and consumers belief in the positive development of their finances.

Production was increasingly focused on market-financed non-rental housing. The construction of a total of 2,509 (1-9/2002: 2,006) residences was started up during the review period, of which 2,227 (1,212) were market-financed. YIT intends to increase the number of market-financed residential start-ups to about 2,800 residential units this year; last year, start-ups numbered about 2,200. 2,309 (2,488) residences were completed during the review period, of which 1,444 (964) were market-financed. At the end of the period, a total of 3,534 (2,746) residences were under construction, of which 2,977 (1,734) were market-financed. There were 119 unsold completed residences.

YIT is directing its efforts into the design and construction of new high-quality residential areas. During the review period, the City of Naantali and YIT began the design and zoning of the new Kuparinranta quarter that will be built to the east of the Naantali city centre. About 500 residential units will be built on this 70 hectare area. The first residences are scheduled to be completed in 2005.

In August, Hista Maatalousyhtymä and YIT signed an agreement concerning the development of the Hista Manor in Espoo and the 500 hectare area surrounding it. A new urban construction model is being utilized in the planning of the residential area that will be built in the area.

Net sales of Property Services amounted to EUR 135.5 million (EUR 147.0 million), down 8 per cent on the previous year. Operating profit was EUR 4.7 million (EUR 9.7 million). EUR 5.7 million in losses have been booked in the result on the basis of a ruling made in February by the Helsinki District Court in the case concerning the refurbishing of SOKs former head office property.
YIT has appealed the decision. At the end of the period, the order backlog was slightly over one-third larger than in the previous year, having risen to EUR 192.8 million (EUR 138.7 million).

Property Services offers its customers workplace solutions and investment properties as well as business facility, renovation and property management services in the Greater Helsinki area, Uusimaa and South Häme. It offers facility management and maintenance services in all of Finland.

In September, YIT, Laurea Polytechnic and Nordisk Renting Oy signed a set of agreements under which YIT will build new premises for Laurea in Tikkurila, Vantaa. Nordisk Renting is acting as an investor in the project and will rent out the premises it owns to Laurea for 30 years. The total value of the project is EUR 32 million.

In September, YIT Rapido Property Management Services Ltd and Kunta-asunnot Oy signed an agreement whereby YIT will attend to the financial administration services of the properties owned by Kunta-asunnot as from the beginning of next year. The agreement covers over 6,000 residences located in various parts of Finland.

Infraservices net sales, EUR 85.6 million (EUR 84.4 million), were slightly higher than in the previous year. Operating profit was EUR 1.9 million (EUR 3.4 million), falling short of the previous years figure. The order backlog at the end of the period was substantially higher than in the previous year, having risen to EUR 113.5 million (EUR 58.0 million).

Infraservices provides infrastructure construction and maintenance services. Numerous new large infrastructural construction projects were landed during the review period. Infraservices order backlog rose to a record level thanks to works such as the longest bridge of the Kerava-Lahti direct line in Kytömaa, Kerava, a large-scale piling contract in Mäntsälä, the excavation works at the shunting yard of the Vuosaari Harbour, the extension of the Mussalo container terminal for Kotkan Satama Oy and the excavation works related to the Kilpilahti oil refinery investments for Fortum Corporation.

In the case of maintenance, YIT landed the end-to-end infrastructure maintenance agreement from the municipality of Oulunsalo for the second time, this time for four years. The Rajakylä-Pateniemi-Herukka area of the City of Oulu and the Pihlajamäki-Viikki area of the City of Helsinki are new maintenance contracts that YIT won in tenders.

The market for infrastructure construction and maintenance will most likely remain at its present, relatively brisk level thanks to large infrastructure projects and the further opening up of the market for infrastructure servicing and upkeep.

The net sales of YIT Constructions International Operations grew by 20 per cent compared with the previous year, rising to EUR 137.1 million (EUR 114.4 million). Operating profit amounted to EUR 31.9 million (EUR 3.2 million). Operating profit includes about EUR 30 million in capital gains from the sale of Makroflex.

At the end of the period, the order backlog was significantly higher than in the previous year, having risen to EUR 197.0 million (EUR 143.1 million).

Numerous ongoing projects, project start-ups, and market-financed residential construction in the Baltic countries and Russia contributed to growth. 850 market-financed residences were under construction during the review period.

International Operations provides construction and maintenance services in the Baltic countries and Russia. Water and environmental technology projects are carried out in Northern and Eastern Europe and in certain countries in the Middle and Far East.

Services for Industry

The new Services for Industry business segment comprises YIT Industria Ltd, which offers investment services, YIT Service Ltd, which offers maintenance services, and Oy Botnia Mill Service Ab, an associated company specializing in maintenance services for the paper industry. In the tables of the Interim Report, the business figures of these companies are included under YIT Installation.

Net sales during the review period amounted to EUR 153.8 million (EUR 181.2 million). The share of net sales accounted for by the maintenance and servicing business was 55 per cent (53%). The share of net sales accounted for by international operations rose to 14 per cent (12%). Net sales contracted by 15 per cent compared with the previous year primarily due to a decline in investments by industry. Demand is expected to decline further in industry during the rest of the year.

At the end of September, the backlog of works was EUR 62.6 million, of which EUR 5.3 million were international works.

Net sales of Capital Investment Services for Industry amounted to EUR 100.2 million (EUR 126.1 million), of which repair and replacement investments accounted for 30 per cent (37%). The backlog of works declined in the third quarter, being EUR 25.1 million (EUR 45.6 million) at the end of the period. The reason behind the contraction in net sales and the order backlog was the substantial decline in large investment projects in the metal and wood processing industries, the weak demand for power plant construction and the slump in demand in the marine industry.

Mainly maintenance and replacement projects were carried out during the review period. Among the largest projects that were seen to completion were the replacement of the main steam piping of Borås Energi ABs power plant, the soda recovery boiler conversion works and mechanical engineering deliveries for UPMs plants in Kaukaa, the external piping of Stendals soda recovery boiler, and the internal circulation piping and external boiler piping supplied to Foster Wheeler Energi Oy in Narva. The domestic deliveries that were completed included piping for Avesta Polarit Stainless Oys cold-rolling mill and casting bay.

The outlook for demand varied by business area. Demand in the process industry is declining, and will remain at a relatively low level in the first half of next year, but would appear to pick up again towards the end of the year, when several reasonably large projects will be started up. Demand in the power industry has been at a low level both in Finland and Scandinavia for a long time, apart from brief peaks in demand. It appears that demand will remain at a low level until the fifth nuclear plant project is started up. Demand is sliding rapidly in the marine industry, with growth expected in the latter half of next year.

Among the most significant works landed in the third quarter are the high-pressure piping for Wisapower Oys new power plant as well as external high-pressure piping and soda recovery boiler process piping for Andritz Oy as part of the same project. Soda recovery boiler conversion works will be carried out for Kappa Kraftliner AB in Piteå and SCA Packaking Obbola AB. As part of the replacement of PM3, piping will be delivered to Stora Enso. One of the major tank projects that is being started up is the pulp tower ordered by Iggesund Paperboard for Workington in the UK.

Net sales of Industrial Maintenance amounted to EUR 76.4 million (EUR 77.3 million). The order backlog at the end of the period was EUR 59.2 million (EUR 54.8 million). The division offers maintenance services for industrial production plants, from individual works to comprehensive process operation.

The summer season was busy, as in previous years. The most significant shutdown works in the summer were performed at Oy Metsä-Botnia ABs plants in Joutseno and Kemi. Outsourcing of maintenance functions has continued in industry.

The operations of the associated company Oy Botnia Mill Service Ab have progressed favourably. Its net sales and order backlog have grown thanks to new delivery agreements.

Data Network Services

YIT Primatel, which offers data network services, plans and provides consultation on data transfer solutions, builds and maintains telecom networks and supplies telecom connections and services for operators customers. YIT Primatels net sales in the January-September period amounted to EUR 93.0 million (June- Sept./2002: EUR 49.3 million). Slightly under 60 per cent of its net sales are based on long-term customer agreements and slightly over 40 per cent on project production. Operating profit amounted to EUR 6.2 million (EUR 5.6 million). Due to the seasonal variations typical of the business, trends in net sales and operating profit were considerably better in the third quarter than in the first half of the year.

At the end of the period, the order backlog was EUR 65.3 million (EUR 37.3 million). Operators had not outsourced their construction and maintenance works to the expected degree. On the other hand, they have expanded their operations into new geographical areas, opening up new opportunities for cooperation.

In connection with the integration of the Building Systems business functions, YIT Primatels property network business will be merged into the Building Systems business segment. The aim is to offer customers larger total deliveries and achieve synergy benefits. In mobile networks, customers are provided end-to-end deliveries in association with Building Systems, especially in the case of projects concerning telecommunications assembly spaces.

Uncertainty is continuing in the telecommunications business.
Telecom network investments are still at a low level. More significant growth in the near future is foreseen in the demand for wireless local networks. The number of broadband networks continues to rise.

Events after the end of the review period

On October 1, 2003, YIT issued two EUR 50 million bonds. The maturity of the variable-rate bond is four years. Its issue price was 100 and its yield amounted to the three-month Euribor + 0.65 per cent. The maturity of the fixed-rate bond is six years. Its issue price was 101.03 and its yield amounted to 4.55 per cent.

On October 3, 2003, YIT announced it had started up an action programme to improve the profitability of Building Systems Sweden.

The Tapiola Group announced on October 8, 2003, that Tapiola General Mutual Insurance Companys holding in YIT had declined under 5 per cent.

Outlook for 2003

Helsinki, October 29, 2003

The Board of Directors CONSOLIDATED FINANCIAL STATEMENTS, SEPTEMBER 30, 2003 (Unaudited)

INCOME STATEMENT (EUR million) January 1 - September 30

Jan- Jan- Change, Jan-Dec/ Sep/2003 Sep/2002 % 2002 Net sales 1,435.7 1,258.1 14 1,763.0 - of which international activities 291.5 274.3 6 386.9 Operating income and expenses -1,328.2 -1,172.0 13 -1,643.5 Depreciation and write- downs -12.3 -12.4 -1 -16.9 Amortization of goodwill -9.4 -8.7 8 -12.8 Operating profit 85.8 65.0 32 89.8 % of net sales 6.0% 5.2% .. 5.1% Financial income and expenses, net -10.4 -9.1 14 -12.2 Profit before extraordinary items 75.4 55.9 35 77.6 % of net sales 5.3% 4.4% .. 4.4% Extraordinary income 0 0 .. 0 Extraordinary expenses 0 0 .. 0 Profit before taxes 75.4 55.9 35 77.6 % of net sales 5.3% 4.4% .. 4.4% Profit for the report period 50.2 27.1 85 43.0 % of net sales 3.5% 2.2% .. 2.4%

Projects have been booked in the income statement on the basis of the degree of completion or the degree of sale, whichever is lower. Income taxes constitute a proportion, calculated from the report period on a pro rata basis, of the estimated full-year taxes.

The residual taxes levied by the Tax Office for Major Corporations in March 2002, EUR 10.9 million, cut into the result for the comparison period. YIT appealed the tax decision and the Tax Correction Board of the Tax Office for Major Corporations approved the appeal in December. The matter is still being reviewed in the Administrative Court, and thus the residual taxes repaid to YIT in January 2003 by the Finnish Tax Administration have not been accounted for in the 2002 financial result or the result for the review period.

YIT purchased from ABB, by an agreement signed on July 4, 2003, its Building Systems operations in Finland, Sweden, Norway, Denmark, the Baltic countries and Russia. The acquisition was consummated on August 29, 2003, when the transaction price of EUR 169.2 million was paid and the business functions were transferred to YIT. The transaction price will be finalized by the end of 2003, when the audited balance sheet calculations concerning the situation at the end of August have been completed.

The figures for the acquired Building Systems business for the period from August 29 to September 30, 2003, have not been consolidated into the YIT Group in the third quarter. They will be incorporated in the 2003 financial statements, when reporting will also be performed in line with the new division of business segments. Such segmental reporting will also be used later in the manner defined in International Accounting Standards (IAS).

INCOME STATEMENT Q3/2003 compared with the previous quarter (EUR million)

Jul- Apr- Change, Sep/2003 Jun/2003 % Net sales 503.6 500.6 1 - of which international activities 109.9 97.1 13 Operating income and expenses -467.9 -442.6 6 Depreciation and write- downs -4.0 -4.2 -5 Amortization of goodwill -3.8 -2.8 36 Operating profit 27.9 51.0 -45 % of net sales 5.5% 10.2% .. Financial income and expenses, net -4.0 -2.8 43 Profit before extraordinary items 23.9 48.2 -50 % of net sales 4.7% 9.6% .. Extraordinary income 0 0 .. Extraordinary expenses 0 0 .. Profit before taxes 23.9 48.2 -50 % of net sales 4.7% 9.6% .. Profit for the report period 14.7 33.9 -57 % of net sales 2.9% 6.8% .. BALANCE SHEET (EUR million) Sep/2003 Sep/2002 Change, Dec/2002 ASSETS % Intangible assets 148.3 8.5 1,645 9.7 Goodwill on consolidation 66.2 74.7 -11 71.8 Tangible assets 57.9 72.7 -20 61.9 Investments - Own shares 0 7.2 .. 7.2 - Other investments 35.3 6.6 435 7.1 Inventories 395.4 306.1 29 338.1 Receivables 585.9 502.2 17 503.5 Marketable securities 9.4 3.6 161 10.7 Cash and cash equivalents 25.5 18.8 36 28.2 Total assets 1,323.9 1,000.4 32 1,038.2 LIABILITIES Share capital 60.2 59.3 2 59.5 Other shareholders equity 345.1 296.6 16 313.7 Minority interests 2.4 2.8 -14 2.9 Provisions for liabilities and charges 8.8 11.5 -23 14.2 Non-current liabilities 113.5 134.9 -16 138.2 Current liabilities 793.9 495.3 60 509.7 Total shareholders equity and liabilities 1,323.9 1,000.4 32 1,038.2

The purchase price paid for the acquired Building Systems business is included in tangible and intangible assets. The loans taken out to fund the acquisition are included in current and non-current liabilities.

CONSOLIDATED CASH FLOW STATEMENT (EUR million)

Jan-Sep/ Jan-Sep/ Change, Jan-Dec/ 2003 2002 % 2002 Cash flow from operating activities Profit before extraordinary items 75.4 55.9 35 77.6 Adjustments, total -1.5 27.6 -105 42.3 Cash flow before change in net working capital 73.9 83.5 -11 119.9 Change in net working capital -12.6 -1.6 688 7.0 Cash flow from operations before financial items and taxes 61.3 81.9 -25 126.9 Interest paid -12.1 -11.2 8 -13.9 Dividends received 0.3 0.1 200 0.1 Interest received 1.0 1.0 0 1.4 Taxes paid -20.4 -27.0 -24 -37.9 Net cash from operating activities 30.1 44.8 -33 76.6 Cash flow from investing activities Capital expenditure on tangible and intangible assets -159.4 -58.0 175 -60.3 Proceeds from sale of tangible and intangible assets 34.7 5.6 520 12.4 Investments in other assets -28.7 -0.1 28,600 -0.3 Proceeds/losses from sale of investments 0.3 0 .. -0.4 Net cash used in investing activities -153.1 -52.5 192 -48.6 Cash flow from financing activities Rights issue 4.5 2.9 55 4.3 Disposal of own shares 12.4 -0.7 .. -0.7 Change in loan receivables -5.2 0.8 .. 0.8 Change in short-term debt 126.9 25.5 398 -0.3 Borrowing of long-term debt 15.5 0.4 3,775 10.4 Repayment of long-term debt -8.9 -11.3 -21 -16.1 Dividends paid -26.3 -24.5 7 -24.5 Net cash used in financing activities 118.9 -6.9 .. -26.1 Change in liquid assets -4.1 -14.6 -72 1.9 Liquid assets at beginning of period 38.9 37.0 5 37.0 Liquid assets at end of period 34.8 22.4 55 38.9

KEY FIGURES Sep/2003 Sep/2002 Change, Dec/2002 % Earnings per share ,EUR 1) 1.72 0.94 83 1.49 Earnings per share ,EUR, diluted 1.68 1.47 Earnings per share, EUR, excluding residual tax 1.32 30 1.86 Equity per share, EUR 13.46 12.00 12 12.54 Average share price during the period, EUR 18.53 16.46 13 16.40 Share price at end of period, EUR 22.00 15.39 43 16.79 Market capitalization at end of period, EUR million 662.6 447.4 48 489.9 Weighted average share-issue adjusted number of shares outstanding, thousands 29,288 28,927 1 28,970 Weighted average share-issue adjusted number of shares outstanding, thousands, diluted 29,839 29,257 Share-issue adjusted number of shares outstanding at end of period, thousands 30,118 29,067 4 29,179 Net interest-bearing debt at end of period, EUR million 246.9 140.0 76 104.1 Return on investment 2) 18.5% 18.2% .. 17.8% Equity ratio 33.2% 38.0% .. 38.2% Gearing ratio 60.6% 39.8% .. 28.2% Gross capital expenditures on non-current assets, EUR million 187.6 57.4 227 60.6 - % of net sales 13.1% 4.6% .. 3.4% Order backlog at end of period, EUR million 3) 1,416.5 853.6 66 938.8 - of which orders from abroad 291.9 220.1 33 255.0 Average personnel 13,846 11,743 18 11,990

1) The residual tax weakens the comparability of this key indicator in particular.
2) Calculated for the period from October 1, 2002 - September 30, 2003, using the balance sheet figures for September 30, 2002, and September 30, 2003.
3) Portion of binding orders not recognized as income.

CONTINGENT LIABILITIES Sep/2003 Sep/2002 Change, Dec/2002 (EUR mill.) %

Mortgages given as security for loans - For own commitments 29.8 32.8 -9 32.8 Pledges given for loans - For own commitments 0 7.3 .. 0 Other collateral given for own commitments - Corporate mortgages 0 0 .. 0.7 - Securities pledged 0.2 0.2 0 0.3 Leasing obligations 19.6 17.0 15 18.3 Other commitments - Repurchase commitments 4) 129.7 100.0 30 91.3 - Other contingent liabilities 0.5 0.7 -29 0.6 Guarantees - On behalf of associated companies 0.9 0.6 50 0.6 - On behalf of others 17.3 6.5 166 7.2 Mortgages given by companies held in inventories; for commitments of Group companies and for own commitments 2.1 0 .. 0 Liability under derivative contracts 5) - Foreign currency forward contracts -- Value of underlying assets 75.7 17.6 330 16.6 -- Fair value 74.4 18.0 313 17.2

4) Repurchase commitments for contract receivables sold to financing companies.
5) Derivative contracts have been taken out mainly to hedge foreign currency loans and foreign currency cash flows from projects.

NET SALES BY DIVISION (EUR million)

The structure of the YIT Group changed after the acquisition of Building Systems on August 29, 2003. The Groups business operations are divided into four business segments: Building Systems, Construction Services, Services for Industry and Data Network Services. Because the organization of the business segments is partially incomplete, the following tables present the figures in terms of the pre-acquisition Group structure. Reporting in the 2003 financial statements will be performed in accordance with the new Group structure.

NET SALES BY Jan-Sep/ Jan-Sep/ Change, Oct/2002- Jan-Dec/ DIVISION (EUR 2003 2002 % Sep/2003 2002 million) Building Construction 603.9 451.0 34 772.3 619.4 Property Services 135.5 147.0 -8 195.3 206.8 Infraservices 85.6 84.4 1 120.0 118.8 International Operations 137.1 114.4 20 191.1 168.4 Other items (YIT Construction) -0.7 -1.2 -42 -1.1 -1.6 YIT Construction, total 961.4 795.6 21 1,277.6 1,111.8 YIT Installation 395.7 434.8 -9 542.6 581.7 YIT Primatel 6) 93.0 49.3 89 139.5 95.8 Other items (YIT Group) -14.4 -21.6 -33 -19.1 -26.3 YIT Group, total 1,435.7 1,258.1 14 1,940.6 1,763.0

OPERATING PROFIT BY DIVISION (EUR million)

Jan-Sep/ Jan-Sep/ Change, Oct/2002- Jan-Dec/ 2003 2002 % Sep/2003 2002 Building Construction 43.3 36.8 18 55.8 49.3 Property Services 4.7 9.7 -52 8.1 13.1 Infraservices 1.9 3.2 -41 2.8 4.1 International Operations 31.9 3.2 897 34.9 6.2 Other items (YIT Construction) -2.9 -3.4 -15 -1.9 -2.4 YIT Construction, total 78.9 49.5 59 99.7 70.3 YIT Installation 7.3 15.9 -54 12.5 21.1 YIT Primatel 6) 6.2 5.6 11 6.6 6.0 Other items (YIT Group) -6.6 -6.0 10 -8.2 -7.6 YIT Group, total 85.8 65.0 32 110.6 89.8

ORDER BACKLOG BY DIVISION AT END OF PERIOD (EUR million)

Sep/2003 Sep/2002 Change, Dec/2002 % Building Construction 365.4 273.8 33 292.6 Property Services 192.8 138.7 39 117.6 Infraservices 113.5 58.0 96 50.5 International Operations 197.0 143.1 38 158.6 YIT Construction, total 868.7 613.6 42 619.3 YIT Installation 482.5 202.7 138 225.5 YIT Primatel 6) 65.3 37.3 75 94.0 YIT Group, total 1,416.5 853.6 66 938.8

QUARTERLY FIGURES, Q1/2002 - Q3/2003 (EUR million)

NET SALES Q1/ Q2/ Q3/ Q4/ Q1/ Q2/ Q3/ 2002 2002 2002 2002 2003 2003 2003 Building Construction 154.4 164.4 132.2 168.4 187.2 208.0 208.7 Property Services 41.5 65.4 40.1 59.8 37.5 51.0 47.0 Infraservices 17.6 31.1 35.7 34.4 21.7 30.7 33.2 International Operations 36.3 39.4 38.7 54.0 34.4 54.3 48.4 Other items (YIT Construction) -0.4 -0.4 -0.3 -0.4 -0.2 -0.2 -0.3 YIT Construction, total 249.4 299.9 246.4 316.2 280.6 343.8 337.0 YIT Installation 144.9 150.7 139.2 146.9 129.2 131.1 135.4 YIT Primatel 6) 12.5 36.8 46.5 25.5 30.9 36.6 Other items (YIT Group) -7.9 -9.0 -4.8 -4.7 -3.8 -5.2 -5.4 YIT Group, total 386.4 454.1 417.6 504.9 431.5 500.6 503.6 OPERATING PROFIT Q1/ Q2/ Q3/ Q4/ Q1/ Q2/ Q3/ 2002 2002 2002 2002 2003 2003 2003 Building Construction 12.1 12.5 12.2 12.5 13.7 14.9 14.7 Property Services 1.5 5.9 2.3 3.4 -2.1 2.7 4.1 Infraservices 0.1 1.4 1.7 0.9 0.0 0.9 1.0 International Operations 1.0 1.7 0.5 3.0 -0.5 30.5 1.9 Other items (YIT Construction) -2.1 -1.7 0.4 1.0 -1.6 -1.2 -0.1 YIT Construction, total 12.6 19.8 17.1 20.8 9.5 47.8 21.6 YIT Installation 4.2 5.0 6.7 5.2 1.8 3.7 1.8 YIT Primatel 6) 2.0 3.6 0.4 -1.7 2.4 5.5 Other items (YIT Group) -2.0 -2.4 -1.6 -1.6 -2.7 -2.9 -1.0 YIT Group, total 14.8 24.4 25.8 24.8 6.9 51.0 27.9 ORDER BACKLOG Q1/ Q2/ Q3/ Q4/ Q1/ Q2/ Q3/ 2002 2002 2002 2002 2003 2003 2003 Building Construction 256.2 283.5 273.8 292.6 329.1 389.2 365.4 Property Services 141.0 129.0 138.7 117.6 138.4 172.2 192.8 Infraservices 71.2 67.8 58.0 50.5 56.8 51.3 113.5 International Operations 78.7 124.3 143.1 158.6 175.0 172.2 197.0 YIT Construction, total 547.1 604.6 613.6 619.3 699.3 784.9 868.7 YIT Installation 216.4 221.7 202.7 225.5 214.5 216.9 482.5 YIT Primatel 6) 53.6 37.3 94.0 94.5 90.0 65.3 YIT Group, total 763.5 879.9 853.6 938.8 1008.3 1091.8 1416.5

6) On June 1, 2002, into the YIT Group.

YIT?s Interim Report, January 1 - Septem

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