Baltic, Construction, EU – Baltic States, Financial Services, Funds, Real Estate

"We have to admit that the outlook for construction companies in the near future is still tempered by continued unstable conditions on the construction market and in the economy as a whole. Many state investments into infrastructure are only in the preparatory phase pending EU funding," CEO of the company Andres Trink said in the company's annual report.

According to Trink, investments into business real estate have been supported in the last couple of years by low interest rates and strong internal demand, yet the small scale of the Baltic economies, middling economic growth and the low level of investments into better productivity all curtail demand for new commercial and office space.

"The growth potential for residential construction in the near future is undercut by the increased supply on the apartment market, above all in Vilnius and Tallinn. The construction market still features extremely high price competition, and rapid consolidation of the market is not anticipated. In such a situation, it is imperative to adapt rapidly, listen to customers, field the best possible team, act in an effective manner and innovate.

The current EU budgetary period measures, through which funds will be allocated, start to open gradually – expectations that procurements will become more active in 2015 did not materialize. "As new projects require thorough preparation, we estimate that the number of new public procurements will start gradually growing from the second half of 2016. We therefore forecast EU funded public works procurements to be launched from 2017 onwards," it is written in the report.

Due to the decrease of public sector orders it is a group priority for all three Baltic countries to cooperate with private customers. "The total number of projects launched and planned by private sector clients has grown somewhat in 2015, yet we do not anticipate continued growth but rather a stabilization in the volume of private orders. It is important for the state to resume its orders so as to avoid huge fluctuations on the construction market," the group said.

The revenue of Merko Ehitus in 2015 decreased by 0.5% to 251 million euros and net profit by 19.5% to 10 million euros. Net margin decreased by 0.9%age points to 4%. As on Dec. 31, 2015 the company's secured order book stood at 246.9 million euros, while a year before its totaled 179.1 million euros. The management board proposes to distribute to shareholders 9 million euros or 51 cents per share in dividends from retained earnings in 2016. This is equivalent to a 90% dividend rate for 2015.