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Head for MERKO Lithuania: ‘I would describe the year 2022 as the year of many contradictions’

In 2022, the turnover of Merko statyba UAB from general contract agreements reached EUR 70 million and was 6% bigger than in the same period last year (EUR 66 million).

‘The financial year of 2022 was good for MERKO Lithuania, and it was determined by the successful activity not only last year, but also in 2020-2021. Construction business is very stagnant, the average term of construction is one, often even two years, while revenues and profit from real estate sale are recorded upon completion of construction and signing notarial agreements, regarding which preliminary agreements are concluded while construction is still in progress’,  the situation was commented by Saulius Putrimas, Head of MERKO Lithuania,  admitting the number of challenges faced by the construction and RE sectors last year, and therefore the year has to be described as highly contradictory.

In early 2022, all the markets were shaken by the war started by Russia in Ukraine, and its consequences: investments were postponed for several months, same as signing new construction contracts, and later investment decisions were once again corrected and postponed by a drastic jump in the prices of building materials.

‘High inflation rate, an increase of interest rates by the central banks, a shock of energy prices, impaired affordability of housing – they all affected decisions of investors and housing buyers, increased the cost of already signed construction contracts’,  said the Head of MERKO Lithuania. 

Construction of wind power plants accounted for half of the turnover

As it was already mention, the turnover of Merko statyba UAB was EUR 70 million in 2022, and incomes from the construction of wind power farms accounted for half of that amount. According to Mr. Putrimas, the decision made a few years ago to focus more attention on renewable energy projects is paying back.

‘These projects not only increase the turnover, but also give satisfaction realising that we make our actual contribution to assurance of the energy independence of Lithuania, development of sustainable and renewable energy system’, explained Mr. Putrimas.

This year, the company’s team worked on five projects of wind power farms in the districts of Telšiai, Šilalė, Akmenė, Mažeikiai, and Kelmė. In some projects, our task was limited to foundation construction, in others – full-scope construction of wind power farms (BoP scope), when apart from foundations, all necessary infrastructure for mounting wind turbines is prepared, such as, drainage system, roads, power grids, preparation of necessary documentation.

Residential development accounted for 32 per cent of the turnover of Merko statyba UAB in 2022. Other contract projects completed by Merko statyba UAB in 2022 included: construction of the industrial building of Continental Automotive Lithuania UAB in Kaunas District; the construction of the garage of Tokvila UAB in Vilnius.

Construction of the houses of the project Vilnelės skverai is still in progress

In 2022, MERKO signed 110 preliminary apartment purchase-sale agreements, in 2021 – 267 agreements of the above-mentioned type were signed, all apartments in the project Vilnelės skverai are sold. According to Mr. Putrimas, the situation was determined by the reasons mentioned earlier: the war started by Russia in Ukraine, inflation, rise in interest rates, shock of electricity prices. For comparison:  in 2021, nearly 7 thousand apartments were sold under preliminary agreements in Vilnius, while in 2022 – slightly more than 2 thousand preliminary agreements were signed.

‘The major challenge was the right management of construction process to ensure fulfilment of the obligations under the preliminary agreements signed back in 2020-2021. The long-standing experience in the building sector enabled successful management of the situation, in 2022, 278 notarial apartment purchase-sale agreements were signed, only one preliminary agreement was cancelled in 2021-2022’, the Head highlighted keeping the promises to the buyers.

In 2022, MERKO invested EUR 38 million into the residential project Vilnelės skverai’, the land plots on Žalgirio street, in Šnipiškės, the project on Žirmūnų street is further planned.

The major challenge of 2023 is diminishing affordability of newly-built apartments

According to Mr. Putrimas, the major challenge of 2023 is deteriorating affordability of housing caused by rapid growth of construction prices and interest rates. Both business and state authorities need to exert all efforts to prevent a modern, energy-efficient new housing from turning into luxury goods.

According to him, future perspectives will depend on determination of investors to make investments on such uncertain market.

‘We will continue providing top quality services of construction of wind power farms – from preparation of documentation to foundation construction; we will take part in infrastructural projects of the defence sector that are of high importance nowadays. Also, we will construct quality housing to offer a modern, comfortable, cost-effective, durable property meeting the expectations of buyers. We will continue working with businesses that create high value added, the leaders of our markets, offering very important, reliable, and stable cooperation in these uncertain times’, summarised Mr. Putrimas.