Baltic, Construction, Estonia, Legislation, Real Estate

International Internet Magazine. Baltic States news & analytics Friday, 29.03.2024, 02:38

Profit of Merko Ehitus fell by 86% in Q1

BC, Tallinn, 05.05.2016.Print version
Net profit of the listed Estonian construction company AS Merko Ehitus in the first quarter of the year 2016 fell 86.2% year-on-year to 100,000 euros which was mainly a result of government orders being down and the slower than planned launch of construction of several large-scale projects.

The company's first quarter revenue increased by 2.7% on year to 46.8 million euros, while gross profit declined 14% to 3.1 million euros, the company told the stock exchange.

 

"Due to the recent developments on the Baltic construction market, the management of the group is not satisfied with the results of the first quarter. Civil engineering construction volumes are in a slump, which has affected profitability, and the volume of government orders in general is down. While at the end of 2014 government contracts made up close to half of the Merko portfolio, today the figure is only 20%," CEO Andres Trink said in a press release.

 

"The first quarter results were also impacted by the slower than planned launch of construction of several large-scale projects, due to changes in project design solutions and delays in getting approvals," he added.

 

Of the period's revenue 40.7% was generated in the Estonian construction service segment, while 17% was made in the Latvian and Lithuanian construction service segment and 42.3% in the real estate segment. Compared to the same period last year the share of the Latvian and Lithuanian construction service segment has decreased by nearly a half.

 

According to Trink, the company's goal is still to strengthen the group's positions on the general contracting and residential real estate market in Latvia and Lithuania where, similarly to Estonia, there are currently few public sector orders and the realization of private sector commercial real estate projects takes a long time.

 

"Merko has continued investing into real estate development as planned and the apartment sales results are satisfactory in all three Baltic capitals. The management hopes that similarly to Vilnius and Tallinn, the Riga apartment market will also become active, as there has recently clearly been an undersupply of new apartments in the biggest city in the Baltics," Trink said.

 

"For the first time, sales revenue in the real estate segment made up over 40% of the group's total revenue, which includes the sale of strategically non-core immovable properties for the group. In apartment development, the group will continue investing into quality product development and construction," he said.

 

In the first quarter Merko sold 101 apartments with a total price of 11.4 million euros, compared to the 62 apartments sold in the first three months of 2015. In the first quarter Merko launched construction of the second Paepargi high-rise in Tallinn and the last apartment building in the Kaupmehe project in Tartu. "The group will continue investing into residential real estate projects and similarly to last year, plans to start construction of more than 500 new apartments in 2016," Trink said.

 

In the quarter 2016, the group's companies entered into new contracts totalling 22.4 million euros, including the Bauhaus department store in Rocca al Mare and Tallink tennis center.

 

As at Mar. 31, 2016, the group had a secured order book balance of 243.5 million euros. Major projects in progress in Tallinn for Merko in first quarter included the construction of Hilton Tallinn Park Hotel, the design and construction of Maakri Quarter, Opiku Building, T1 shopping center and the design and construction of a tram line that will serve the airport.  

 

In Latvia and Lithuania, the largest projects in progress are the Riga Airport passenger terminal, the Kauno/Algirdo residential and commercial quarter, and the Narbuto 5 office building.






Search site