Merko Ehitus revenue and profit growth continue in Q3
Merko Ehitus’s revenue in the third quarter was EUR 84.1 million and nine-month revenue EUR 197.8 million, representing an increase of 19% and 11%, respectively, compared with the same period in the previous year. The company’s net profit in the third quarter was EUR 3.9 million and the corresponding nine-month result amounted to EUR 7.9 million, representing an increase of 49% and 148%, respectively, compared with the same period in the previous year. In the third quarter, the company entered into construction contracts worth EUR 109.8 million, of which nearly half were with private customers and a noteworthy share was from Latvia.
“The consolidated results of Merko companies in the third quarter somewhat exceeded our expectations, above all with regard to gross margin, which continued to be positively impacted by the road construction, engineering and real estate development sector. At the same time, margin declined in the general construction sector, where competition and price pressure are the greatest,” said the chairman of the AS Merko Ehitus management board, Andres Trink. The company’s gross profit margin in the third quarter was 9% and the nine-month margin was 8.8%, representing an increase compared with the same period in the previous year (7.9% and 6%, respectively).
“Based on the fact that we are estimating a decline in new construction orders in the subsequent quarters and that pressure on profitability will increase further, it will be difficult to keep margins at existing levels next year. As we have forecasted in the past as well, the construction market must be prepared for a decrease in the number of sites being constructed with EU structural assistance, above all with regard to external networks and environmental construction. The volatility of orders, which increases each year, requires construction companies to adapt very quickly. As a result, we are keeping our cost base more and more in the focus and making sure that as construction sites decrease and profitability goes down, we are able to react rapidly and flexibly on the cost side,” Andres Trink added.
“It is very positive that we were able to strengthen the construction contracts portfolio by over EUR 100 million in the third quarter. Nearly half of the new contracts involved private customers and an important share came from our Latvian subsidiary, which has increased its share in the group’s revenue,” said Andres Trink.
Merko Ehitus signed EUR 109.8 million worth of new construction agreements in the third quarter (not including development of its own projects). The largest contracts of the third quarter involve the construction of the OEG/Hilton hotel and entertainment centre in Tallinn and a multifunctional centre in Liepaja – Lielais Dzintars, Polipaks NT production and logistics centre construction and finishing work on the Gipša Fabrika apartment project in Latvia. As at 30 September 2013, the group’s secured order book balance was EUR 218.1 million – the same level as last year (as at 30 September 2012: EUR 199.5 million).
Sale of apartments continued at the expected pace in Tallinn, Riga and Vilnius. The company plans to launch new development projects in all the Baltic capitals during the next 12 months. In the first nine months of 2013, Merko Ehitus has sold 165 apartments for a total cost of EUR 17.3 million compared to figures of 119 apartments and EUR 12.8 million for last year. In the third quarter, we launched construction of a 125-unit apartment building in the Skanstes district of Riga.