UPDATE 2-YIT to spin off building services to stem profits lag

Tue Feb 5, 2013 6:07am EST

Related Topics

* Unit dragging group profits down, Q4 weaker than expected

* Recession-hit customers cut back on maintenance spending

* Shares jump 5.5 percent (Adds size of spin-off, analyst's comment and share reaction)

HELSINKI, Feb 5 (Reuters) - Finland's biggest construction company YIT said it would spin off its building services unit, responsible for weaker-than-expected fourth quarter group profits, sending its shares up more than 5 percent.

The unit's operating margin was 2.4 percent last year, while construction margins were 10.4 percent, boosted by strong sales in Russia. Building services face tough competition as Europe's recession-hit customers cut back on maintenance spending.

Building services, which represented 60 percent of the group's 4.68 billion euros ($6.35 billion) sales in 2012, will split from the construction business, be named Caverion and list on Helsinki's Nasdaq OMX bourse, YIT said.

YIT shares rose 5.5 percent to 17.13 euros by 1057 GMT.

"It makes sense. YIT's construction business has reached a good profitability level, they don't need the building services any more to finance the Russian growth," said analyst Sauli Vilén from Inderes equity research.

"The building services will have a good chance to cut costs and restructure itself as a separate company," he said.

YIT had expanded its building services business through acquisitions over the past decade and operate in 13 European countries, with most sales in Nordic countries. Caverion was the name of a German company it bought in 2010 for 73 million euros.

YIT said its total fourth-quarter 2012 operating profit for segments, which includes earnings from works in progress, fell 11 percent from a year earlier to 67.5 million euros. Analysts on average expected 74.5 million euros, a Reuters poll showed. ($1 = 0.7376 euros) (Reporting by Jussi Rosendahl and Ritsuko Ando; Editing by Louise Ireland and Ken Wills)

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