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Merko Ehitus Q2 net profit grows 60% compared to last year

07.08.2014

Merko Ehitus reported revenue of EUR 64.8 million in the second quarter and EUR 113.7 million for the first six months of 2014. The share of revenue earned outside Estonia in those six months grew, reaching close to 31%. The lower construction volumes in the engineering and road construction segment have been compensated by projects in general construction and real estate development. The revenue in the real estate development segment increased by 77% compared to the first six months of 2013, and made up 18% of the group’s revenue. Merko Ehitus had a net profit of EUR 3.6 million in the second quarter and EUR 4.4 million in the first six months of 2014.

“Considering the weak state of the construction market from the perspective of prime contractors, we can be satisfied with the results in the quarter. We’re glad to have been able to increase the proportion of revenue earned outside Estonia to more than 30%. The drop in revenue in the engineering and road construction segment is, as expected, due to the lower amount of public procurement contracts, which we have been able to compensate by the increase in the share of general construction and real estate development segments and increasing order volumes in Latvia and Lithuania,” said Chairman of the Management Board of AS Merko Ehitus, Andres Trink.

However, Trink said, the low volume of new contracts was a concern, especially in Estonia. “On one hand, it is an expected trend, but on the other hand, we should take into account that the drop in new orders could affect construction volumes in 2015. Hopefully this will be of a temporary nature. To some extent, the drop in the volume of contracts reflects the situation on the construction market, where prime contractors are getting few orders and very aggressive price offers are being made – a trend we have resisted joining. We are continuing to seek ways of improving efficiency by monitoring our expenses more actively and consolidating the activities of our subsidiaries. Our goal is to achieve the best end results and quality for our customers, to put more effort into occupational safety and to act in a responsible fashion with our employees, partners and subcontractors. We also deem it necessary for the construction sector as a whole to make efforts in order to improve tax collection,” said Trink.

“We continue to hold a good position in the new apartment market in all three Baltic countries, where we are continuing investing in new development projects. This year, we have planned an investment of around EUR 45-50 million into previously launched projects that are now in progress, as well as into new development projects to be launched this year,” added Trink.

The revenue posted by the group for the first half-year of 2014 was EUR 113.7 million, which is at the same level as in the same period of last year. Revenue in the second quarter was EUR 64.8 million (2013: EUR 65.9 million). The share of the six-month revenue earned outside Estonia has grown to 30.7% (2013: 18.4%). Net profit for the first six months of 2014 was EUR 4.4 million (2013: EUR 4.0 million) and the respective figure for the second quarter was EUR 3.6 million (2013: EUR 2.3 million). The six-month gross profit margin was 8.9%, which Merko has been able to maintain at the same level as a year ago (2013: 8.6%).

Merko companies signed new contracts in amount of EUR 21.7 million in the second quarter, and EUR 70.3 million in the first six months. As of 30 June 2014, the group had a secured order book balance of EUR 191.6 million. The portfolio of contracts does not include residential construction projects the group itself is developing or work related to developing its real estate investments.

In the first six months of this year, 198 apartments were sold, with a total amount of EUR 18.6 million; the corresponding figure for the second quarter was 99 apartments worth EUR 9.6 million (not including value-added tax). Both the six-month and the second-quarter sales revenue in the real estate development segment have grown compared to last year – 77.0% and 100.3%, respectively. In six months, the share of revenue from the real estate development segment has increased by 77.1% and makes up 18.2% of the group’s total revenue.

AS Merko Ehitus (http://group.merko.ee) consists of Estonia’s leading construction company AS Merko Ehitus Eesti, the Latvian-market-oriented SIA Merks, UAB Merko Statyba that is operating on the Lithuanian market and the real estate development business unit along with real estate holding companies. As of the end of 2013, the group employed 860 people and the company’s 2013 revenue was EUR 262.7 million.