Source: Inderes

Translation: Original published in Finnish on 8/5/2026 at 9:31 am EEST.

Toivo reported stronger revenue figures than we expected this morning, and project initiations rose to a good level of 60 MEUR, but the company's earnings level fell short of our estimates. The weaker-than-expected result was due to a small but significant negative fair value change, a substantial minority interest, and slightly weaker operating profitability than we expected. The company reiterated its guidance as expected. According to our preliminary assessment, our current year earnings estimates are subject to slight downward pressure due to the Q2 miss, but the strong project pipeline provides clear support for near-term development. The company's earnings call can be followed via this link starting at 11:00 am EEST.

A busy quarter for completions and project initiations

The company's revenue more than doubled in the second quarter to 24.5 MEUR, significantly exceeding our expectations. Strong growth was supported by projects progressing more rapidly than we expected. During the review period, a total of 128 apartments and two social infrastructure properties were completed. In H1, construction and development revenue was split roughly in half between project management contracting and property sales. We estimate that property sales were heavily weighted towards Q2. Of the completed projects, Grand in Helsinki's Keskuspuisto was a joint project with Nordevo. The project was fully recognized in Toivo's revenue, but in our assessment, the significant minority interest of 0.39 MEUR in the result was related to this. In addition to volumes, the company's project pipeline delivered a good amount of output, enabling new project starts worth roughly 60 MEUR during the quarter. Particularly significant is Toivo's own new development, Gemma, in Kalasatama, Helsinki, where 32 out of 34 apartments were immediately reserved. Overall, we believe the company's strong track record in initiating projects across all its segments (owner-occupied housing, investor-owned housing, and social infrastructure properties), even in the current market conditions, demonstrates its strong competitiveness.

Profitability fell short of expectations

However, the strong revenue did not fully translate into the bottom line, as the EBIT of 1.8 MEUR fell short of our expectations (2.7 MEUR). Most of the EBIT miss was due to a negative fair value change, which was 0.7 MEUR higher than we expected. Project profitability also fell short of our expectations, even though several owner-occupied housing projects were completed during the quarter. However, it is worth noting that Toivo's earnings vary significantly quarter-to-quarter depending on the timing of revenue recognition. Inventories (work-in-progress and completed dwellings for sale) grew significantly to 39.8 MEUR (Q2'25: 22.1 MEUR), so the company will have many owner-occupied dwelling projects for sale in the coming quarters/next year. The company did not directly explain the reasons for the weakening profitability in its report, but in our view, this is likely due to the project mix emphasizing lower-margin project management contracting or other project-specific factors. Minority interest in earnings was significantly higher than we expected, consuming approximately one-third of the profit (a joint project with Nordevo). As a result, EPS remained at the comparison period's level of EUR ~0.01, clearly falling short of our expectations.

There is some downward pressure on our earnings forecasts, but strong project initiations support the near-term outlook

As expected, Toivo reiterated its guidance for the current year, according to which the company "estimates revenue to be 65–85 MEUR" and "EBIT to be 6–11 MEUR for the financial year January 1–December 31, 2026." Before the Q2 report, our full-year revenue and earnings estimates were in the mid-range of the guidance. The lower-than-expected earnings level creates, according to our preliminary assessment, some downward pressure on our earnings forecasts for the rest of the year. The extensive project launches announced in Q2 provide the company with a good foundation for short-term revenue development, but this is strongly weighted towards 2027. In our assessment, our 2027 forecast, which anticipates revenue and earnings growth, remains valid. However, the impact of minority interests requires further analysis, as their effect on the income statement is project-specific.