Construction, Estonia, Real Estate

International Internet Magazine. Baltic States news & analytics Thursday, 24.09.2020, 04:44

Estonia: Merko's FY revenue drops by 1/5 to EUR 327 mln

BC, Tallinn, 13.02.2020.Print version
The annual revenue of listed Estonian construction group Merko Ehitus in 2019 dropped by one-fifth year on year to 327 mln euros and net profit attributable to equity holders of the parent declined to 16.3 mln euros from 19.3 mln euros in 2018, the group informed LETA/BNS.

The management board's proposal for shareholders is to pay out a dividend of 60 cents a share.


"The decline in annual sales revenue by about one fifth was expected because of the extra¬ordinarily high comparison base of 2018, which included the construction of some very large shopping centers in Tallinn and Riga. The group's smaller secured order book also reflects the situation on the market: fewer commercial real estate sites are being built because competition is stiffer, construction prices have risen and financing conditions have become more complicated," AS Merko Ehitus CEO Andres Trink said.


By way of comparison, in 2018, the group's revenue and profit both increased 31.6% on year to respectively 418 mln and 19.3 mln euros.


Merko Ehitus posted revenue of 99 mln euros and a net profit of 9.3 mln euros for the fourth quarter of 2019, representing a gain by nearly one-third over the same period a year ago. The revenue generated by the real estate development business area in the final quarter of the year more than doubled compared to 2018 and made up approximately 47 % of the group's total revenue.


The CEO said that the fourth quarter was strong as expected for Merko. He said professional work by the teams of the group companies and timely completion of apartment development projects contributed to the result. The forecasts of group's management were surpassed somewhat as some apartment development projects were completed earlier than planned and sales were faster thanks to greater interest from buyers.


The full-year net profit figure was impacted by significantly higher income tax expenses compared to 2018 due to the payment of dividends. The group's profit before taxes for the 12 months was 20.3 mln euros, representing an increase by 2.8 % over the previous year.


The proportion of the real estate development business area has continued to increase, and in the final quarter of the year it made up close to 47 % of the group's total revenue. The real estate development business area's sales revenue was 46.5 mln euros in the fourth quarter, totaling 70.1 mln euros for the 12 months. During the quarter, Merko sold a total of 276 apartments, compared with 482 during the entire year, whereas the respective figures for commercial areas sold were 13 and 24.

"The apartment market in Tallinn, Riga and Vilnius is stable and our focus continues to be on large development areas where we can establish an integral residential environment and launch and build development projects stage by stage based on demand," Trink said.


During 2019, the group invested 87.4 mln euros into new and ongoing development projects and started construction of a total of 368 new apartments in the Baltics. The largest projects were the Uus-Veerenni, Lahekalda and Pikaliiva residential projects in Tallinn, the Gailezers and Viesturdarzs developments in Riga, and the Vilneles slenis and Rinktines Urban developments in Vilnius.


The largest projects in progress in the final quarter of the year in Estonia were the construction of Terminal D parking building at the Tallinn passenger port, Turi Basic School, the student home for Rakvere Vocational School and a commercial building at 186 Parnu Road, as well as the reconstruction of the Aaspere-Haljala road section. In Latvia, the largest projects in progress were the construction of the Pinki school building and dormitory, Lidl's logistics centre, Alfa shopping center, and Laima chocolate factory, as well as the reconstruction of the Riga Technical University Civil Engineering Faculty building. In Lithuania, the larger projects were the construction of Neringa Hotel, Quadrum office building, and a private school in Vilnius.


AS Merko Ehitus group consists of AS Merko Ehitus Eesti in Estonia, SIA Merks in Latvia, UAB Merko Statyba in Lithuania and Peritus Entreprenor AS in Norway. Besides providing construction service as a main contractor, the group's other major area of activity is apartment development. As at the end of 2019, the group employed 694 people.


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