Baltic, Construction, Real Estate

Building volumes for the five months through December will decline from a year earlier, compared with a 10% increase in the first half, as orders from private companies drop and competition increases, Chief Executive Officer Tiit Roben said LETA/Bloomberg.

The Baltic economies were among the European Union's fastest growing after the countries joined the European Union in 2004. They are now among the slowest after the lending and construction booms fizzled. Latvia's economy shrank 4.2% in the third quarter, the biggest contraction since at least 1994, according to preliminary data. Estonia's economy contracted 1.1% in the second quarter.

"A bigger contraction of the market will take place in 2009-2010 as there are fewer new projects and orders," Roben said in an e-mailed response to questions today. He said most projects started in 2007 to 2008 will be completed.

Second-quarter profit at Merko, based in Tallinn, Estonia, dropped 12% to 135.3 million krooni ($11 million) as construction demand in Estonia and Latvia cooled, the company said Aug. 29. It split into two companies in August to protect shareholders and employees while it is being investigated for bribery allegations.

Roben, who replaced previous CEO Tonu Toomik in August when Merko was split up, said his company's finances haven't been affected by the worsening availability of credit.

"Merko Ehitus is a well-capitalized company and we've been developing rather conservatively by avoiding extra risks", Roben said.

Consolidation of the Baltic building industry is 'unavoidable', Roben, 42, said. Merko expects to at least double its market share of 6% in five years, he added.