Merko Ehitus revenue and net profit in both Q2 and first half-year higher than last year

09.08.2018

Merko Ehitus posted higher revenue and net profit figures for Q2 and first six months compared to last year. Revenue in Q2 was EUR 103.3 million and in first half-year EUR 183.7 million; Q2 net profit was EUR 5.6 million and 6-month net profit EUR 6.7 million. The group earned over half of its 6-month sales revenue outside Estonia.

”The growth of revenue, which continued in Q2, was expected, based on the volume of construction contracts concluded in the last few years. The volumes of construction works grew the most in Latvia. In both the first and second quarter, the group companies’ volume of work performed outside Estonia exceeded the amount performed in Estonia,” said chairman of the AS Merko Ehitus management board Andres Trink. “Due to a rise in the construction input prices and tight competition on the general contracting market, it is not a goal unto itself to grow construction volumes. We are focusing on the quality of construction services and improving profitability. In the second quarter, the group’s profitability increased above all thanks to improved profitability of construction service, and the growth of net profitability was supported by the fact that income tax expenses were lower by EUR 0.9 million compared to last year.”

“The volume of our new construction contracts in the first half-year was lower than the volume of works performed, and the secured construction order book shrank. As many commercial real estate projects have been launched in the Baltics in recent years and construction has become more expensive, customers have become more cautious about new business projects. We still have not had particular success in public procurements and it is very hard to forecast the volume of new contracts here as the preparation of projects spans a very long period, often construction tenders exceed the financial means of the customer, as a result of which procurements are cancelled or postponed. This will definitely affect the volumes of construction services offered to our customers in 2019,” added Andres Trink.

“In the second quarter, no major changes took place on the apartment market in the Baltic states’ capitals: new development projects continue to be launched in quite a large volume in Tallinn and Vilnius. Also, in Riga the apartment market is showing signs of becoming more active, but more so in a cheaper price segment. Apartment development continues to be our central business area, in which we invest,” commented Andres Trink on the group’s real estate development area.

In the first six months of 2018, Merko Ehitus sold 168 apartments with a total price of EUR 16.3 million (excluding VAT), including 117 apartments in Q2 with a total price of EUR 12.0 million (excluding VAT). This year, Merko has launched construction of six development projects with a total of 349 apartments and invested EUR 13.6 million into development projects launched this year and already in progress.

In Q2 of 2018, Merko Ehitus posted revenue of EUR 103.3 million (Q2 2017: EUR 70.7 million), and a six-month revenue of EUR 183.7 million (H1 2017: EUR 128.8 million, growth of 42.6%). The share of revenue from outside Estonia for six months was 52.6% (H1 2017: 30.9%). In Q2 of 2018, Merko Ehitus posted a net profit of EUR 5.6 million (Q2 2017: EUR 2.2 million), and a six-month figure of EUR 6.7 million (H1 2017: EUR 3.2 million, growth of 107.7%). Q2 EBITDA for the group was EUR 6.4 million, and H1 EBITDA was EUR 8.2 million. Q2 profit before taxes was EUR 5.8 million and profit before taxes for H1 was EUR 7.1 million. In the first six months of 2018, the group entered into a total of EUR 67.5 million in new contracts, including construction works on Hundipea port, Tsirguliina substation and phase II of the Tallink office building. As of 30 June 2018, the Merko Ehitus Group’s secured order book amounted to EUR 247 million.

Among major projects in progress in Q2 in Estonia were the construction of T1 Mall of Tallinn shopping centre, Maakri Kvartal, Öpiku Maja’s building B, Tallink office building, residence of the Embassy of the People’s Republic of China, expansion of Wendre production facility, Viimsi State Gymnasium, apartment building at Toom-Kuninga 21, phase I of Tartu mnt 80 office building and central square in Kuressaare, as well as renovation work on Tsirguliina 330 kV substation, cleanup of residual pollution at Maadevahe and Priimetsa asphalt-concrete plant and renovation and dredging at Hundipea port. The largest projects under construction in Q2 in Latvia were Akropole multifunctional centre, Alfa shopping centre and Z-Towers complex in Riga and Ventspils Music School and Concert Hall. In Vilnius, the largest projects were the expansion of Radisson Blu Hotel Lietuva, Hotel Neringa and apartment building complex in the altiniu Namai quarter; and, in Klaipeda, the reconstruction and expansion of Philip Morris plant.