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First-quarter results of MERKO: turnover from work contracts increased by 34%

In the first half of 2022, the turnover of Merko statyba UAB reached EUR 13 million and was 34% bigger than in the same period last year (EUR 8.6 million).

The main contract projects currently under the implementation by the company: construction of the industrial building of Continental Automotive Lithuania UAB in Kaunas is nearly completed; the construction of the garage of Tokvila UAB in Vilnius, five wind power farms in Šilalė, Kelmė, Naujoji Akmenė, and Mažeikiai is in progress. Residential development projects of MERKO account for 36% of the above-mentioned turnover.

‘The impulse to these results was given last year, when the building sector had a clear recovery after the first wave of the pandemic, we signed a big number of contract agreements. Contractors chose us for the professionalism and reliability of MERKO, while our gained previous experience helps us in finding the optimum solutions in the present situation’, said Saulius Putrimas, MERKO Head for Lithuania.

 Almost all fist-stage apartments have been sold in Vilnelės skverai complex

The good performance results were strongly affected also by the RE projects developed by MERKO – multi-family residential complex Vilnelės skverai that is rising in Vilnius, between the Old Town, Užupis and Belmontas, in the territory of the conversion project called the Park of Architecture initiated by the city municipality the popularity of which is rapidly growing. The construction of the first-stage apartments is nearly finished, the third-stage blocks are rapidly rising.

In the first quarter of 2022, MERKO signed 33 preliminary apartment purchase-sale agreements, while compared to the same period last year, 66 agreements of this type were signed.  According to Mr. Putrimas, the decreased supply was the reason of such change – this time, the Company could offer only this number of newly-built apartments.

‘The year 2021 was marked with great intensity in the real estate market, the rise in demand determined successful sales. There are ten blocks of 380 apartments in the estate, 90% of which has already been sold. The construction of the first-stage blocks will be completed on the first days of summer, so soon the new owners will be able to move in’, said MERKO Head.

 Recently, we started selling apartments in two more blocks under construction in the Vilnelės skverai estate, another 70 apartments have been put on the market.

Decision regarding contract agreements – risk must be shared by both signing sides

However, according to MERKO Head, the situation on the market is still complicated. The construction sector still recovering after the pandemic was shattered by the war outbreak in Ukraine. In a very short period of time, prices of nearly all building materials drastically increased, supply chains continued breaking up even stronger.

‘Companies that stocked up on building materials for development projects in progress were slightly less stressed in this situation, however, mainly it is only a part of materials that will not be sufficient to complete the building works. The situation is still hardly predictable, there is a shortage of materials on the market or the stock is running low. Signing new agreements with clients is complicated, as the prices of their implementation are unpredictable’, Mr. Putrimas commented on the situation.

According to him, two ways-out from the present situation are possible. If the price is fixed in the agreement, the company signing the agreement must stock up on almost all materials or agree on them with partners, subcontractors, and others, so that the later rise in prices would not affect the project estimate. If specific materials cannot be bought in advance or technical design is not finalised, the risk of the rise in price of building materials must be shared with the client.

‘Therefore, when signing new agreements, building the portfolio of orders for the next year, we openly say to clients that both sides must share the risk, contractor alone cannot be held responsible of the entire unpredictable situation’, said MERKO Head.