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Resolutions of the annual general meeting of AS Merko Ehitus

29.04.2015

The general meeting of shareholders of AS Merko Ehitus, held on April 29 2015, decided to approve the annual report of the year 2014, pay the shareholders as dividends EUR 0.41 per share, reduce the share capital by EUR 0.23 per share, and appoint AS PricewaterhouseCoopers the auditor of AS Merko Ehitus for the financial years of 2015 through 2017. Although Merko Ehitus managed to grow its profit in the complicated market situation in 2014, the lower order volumes, price competition paring profit margins and increased contractual risks will exert pressure on the results for 2015 and 2016.

Given the unsettled conditions, the Management Board of AS Merko Ehitus is quite satisfied with the results for 2014 – especially improved profitability, growth in sales in Latvia and Lithuania and apartment sales in Estonia. Yet the volume of new construction contracts on the Baltic market has gradually declined since 2014, particularly in the field of civil engineering, due to the decrease in European Union funded projects. In addition, slow economic growth and low investor confidence is dampening private sector initiative in commercial real estate development; often developers have a shortage of equity. This results in a longer construction project preparation times and has a negative impact on the volume of contracts for office, retail, production and other commercial buildings.

“The construction market’s growth prospects depend largely on how rapidly new public procurements can be launched. We forecast a moderate rebound in this area starting in 2016. Because of the drop in state contract volumes, our priorities in all three Baltic states are pursuing good cooperation with private customers, offering them high-quality, optimum construction solutions, an efficient construction process, and the certainty that projects will be completed on schedule. In 2015, we see growth opportunities in Lithuania, and expect procurement volumes to stay on par in the field of electrical construction, as these contracts depend on investments made by the transmission system operator and distribution grid companies,” said AS Merko Ehitus Chairman of Management Board Andres Trink.

According to Andres Trink, after the last three years of fast growth, the Baltic apartment market is showing signs of stabilisation. “Demand remains high for good living environments and high-quality residential construction, and we continue to deliver to our customers in this regard. The apartment market is also supported by low interest rates, relatively stable construction prices and growth in the population’s personal savings. As a result, the residential construction remains in our focus, and this year we plan to invest 45-50 million euros into development projects in the Baltic states,” added Andres Trink.

According to Andres Trink, the lower order volumes, the pressure of price competition on profit margins and increased contractual risks will be reflected in the results for 2015 and 2016. “As demand on the Baltic construction market will continue to be muted for the next few years, construction companies will find cost-effectiveness and flexibility to be increasingly important in responding to changes in the market situation.”