Merko Ehitus increases revenue and profit in Q1
In Q1 of 2017, Merko Ehitus posted revenue of EUR 58.1 million and a net profit of EUR 1 million. Revenue grew both in Estonia and in other home markets, apartment sales picked up as well. In the first quarter, Merko sold 141 apartments compared to 101 in the same period last year.
“Our first quarter revenue generally met our expectations, yet profitability is still under pressure due to the thin margin on construction contracts. In order to improve profitability, we need to come up with greater internal efficiency. Construction prices in the market have been driven so far down that no one has any margin for error. The volume of new construction contracts concluded in Q1 can be considered an average figure and includes the first significant contract in Norway. In early April, we were able to add to our portfolio a EUR 100 million contract for building the Akropole Centre in Riga,” said the chairman of the management board of AS Merko Ehitus, Andres Trink, in comments on the company’s Q1 results.
“With regard to market demand, we can note that the construction volumes of new commercial buildings in Tallinn and Vilnius are stabilising, and the past growth rate is also becoming calmer in residential construction. Road and infrastructure procurements are on the way in Estonia; in Lithuania we expect more public sector building procurements, which there have been surprisingly few so far. In Latvia, we see room for new commercial buildings and apartment development, but the economic growth rate remains a question. In any case, it will be an interesting and exciting year on the construction market and we plan to pitch in when it comes to important developments,” added Trink.
“In the apartment development sector, we will continue implementing our strategy – we plan to invest about EUR 45 million into real estate development this year and start construction of around 650 new apartments. In the first quarter, we added to our development projects portfolio a development area on Rūpniecības street in immediate proximity to the city centre of Riga that will accommodate construction of nearly 350 apartments,” said Trink.
In Q1, Merko sold 141 apartments with a total value of EUR 16 million (not including VAT); compared to the 101 apartments sold in the first three months of 2016. In Q1, Merko launched four apartment development projects in the Baltic capital cities: the Staapli 3 building in Noblessner in Tallinn, with 105 apartments, and two buildings in Paepargi with 66 apartments. In Riga, the first phase of the Gailezers development with 96 apartments was started, and in Vilnius, the Rinktines Urban project with 141 apartments, hotel and an underground parking garage serving the whole development area.
The group’s Q1 2017 revenue was EUR 58.1 million, EBITDA was EUR 1.9 million, profit before taxes was EUR 1.1 million and net profit was EUR 1.0 million. In comparison, the group’s revenue in Q1 2016 was EUR 46.8 million, EBITDA was EUR 1.2 million, profit before taxes was EUR 0.3 million and net profit was EUR 0.1 million. In Q1 2017, the group signed new construction contracts in the total amount of EUR 58.6 million, including the tower B of the Öpiku Maja office building, the Staapli 3 apartment building in the Noblessner development in Tallinn, the Šaltiniu Namai apartment building complex in Vilnius and Blakstad Hospital in Norway.
As of 31 March 2017, the group’s secured order book amounted to EUR 287.7 million, compared to EUR 243 million in the same period in the previous year. Major projects in progress for Merko in Q1 included, in Tallinn, the construction of T1 shopping centre, Maakri Kvartal, Öpiku Maja office building’s tower B, and the tram line that will serve the airport. In Latvia, the biggest projects in progress are the Ventspils music school and concert hall; in Lithuania, Radisson Blu Hotel Lietuva, the Philip Morris plant and a hotel and residential building complex in the Rinktines Urban development project.