Construction, Estonia, Good for Business, Real Estate

The company during the reporting period earned a profit in the building construction segment, but the margins weakened significantly compared to the same period last year, the company told the stock exchange. The segment's margin decrease is partly attributable to the loss of the Swedish subsidiary, which incurred some costs in the final stage of its first building construction contract which could not be foreseen on entering the new market. Although the performance of the company's infrastructure segment improved, its gross margin rising from -5.3% for the comparative period to 0.1% for the reporting period, Nordecon cannot consider it satisfactory.

In the first half of 2017, Nordecon earned approximately 7% of its revenue outside Estonia, the figure remaining stable compared with the same period last year. In terms of foreign markets, the strongest revenue contributor was Sweden where the company completed two apartment buildings and continued the design and construction of a third, an 8-floor apartment building in Stockholm. The share of Nordecon's Ukrainian revenues decreased year on year because the company's business volumes in the Ukrainian market decreased somewhat: in the first half-year Nordecon worked mainly on one large building construction project.  

Although revenue increased in both the buildings and the infrastructure segment, the main growth driver was the buildings segment, where growth was underpinned by a rise in contracts secured from the private sector. Of the sales revenue earned in the first half of 2017, 81% or 84.6 million euros was earned from the buildings segment, while the sum was at 58.3 million euros the year before. The infrastructure segment accounted for 19% or 17.9 million euros of the sales revenue, 2% less than the year before.

In the buildings segment, the strongest revenue contributors were the apartment buildings and the public buildings sub-segments where the group earned most of its revenue as a general contractor. In Estonia, a substantial share of Nordecon's apartment building projects is located in Tallinn. The key factor which has influenced the results of the public buildings sub-segment is growth in the state's investment in national defense. The revenues of the commercial buildings sub-segment grew considerably compared with the first half of 2016.