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Merko Ehitus earns EUR three million net profit in Q1

Revenue for Merko Ehitus in Q1 2022 grew to EUR 68 million, operating profit amounted to EUR 3.7 million and net profit to EUR 3 million. In the first quarter, Merko delivered 126 apartments to buyers and the construction of 1,700 apartments is now under way.

“The situation on the construction market continues to be extremely complicated due to global supply chain problems and a rise in the cost of materials. The rapid price rise of construction inputs last year was accompanied by the war in Ukraine and sanctions imposed on Russia, and a price shock. These are unforeseen circumstances whose impact on performance of construction contracts is yet to become apparent. In today’s situation, it will be very important to find cooperation solutions for all construction parties, including customers,” said the chairman of the AS Merko Ehitus management board, Andres Trink.

“Although the need for new buildings and infrastructure remains, adapting to the rapid growth of construction prices will take time and some of the planned investments will be put on pause. Nor are construction companies prepared to enter into longer-term contracts at a fixed price given the current situation. The development of new supply chains takes time and it is unclear when and at what price levels a certain stabilization could take place,“ added Trink.

In the first quarter of this year, the group’s companies entered into construction contracts worth EUR 171 million, of which the 100-million-euro contract for the construction of the Arter quarter in Tallinn was the biggest. The secured order-book balance grew to EUR 376 million by the end of the quarter, and three-quarters of the portfolio was made up by private sector orders. In Q1, Merko increased its holding in the network construction company AS Connecto Eesti from 35% to 50%.

“On the apartment market, the supply of new apartments has been in a declining trend for some time now, while apartment prices have grown quickly due to the rise in construction prices. The war in Ukraine has amplified these developments even further. Accelerating inflation reduces purchasing power on one hand, but on the other hand it encourages home buying and investment into real estate for those with capital and lending capacity. Our goal is to continue to offer our customers these opportunities,“ said Trink.

In the first quarter, Merko delivered 126 apartments and one commercial unit to buyers. Most of the apartments to be delivered this year will be completed in the H2. As of the end of the quarter, close to 1,700 apartments due to be completed in 2022 and 2023 are under construction in Estonia, Latvia and Lithuania. Of the apartments already finished, only a few are unsold and over half of the ones in progress have already been reserved under preliminary sale contracts. The largest apartment developments were Noblessner, Uus-Veerenni, Odra, Metsatuka and Lahekalda in Tallinn; Erminurme in Tartu; Viesturdārzs and Mežpilsēta in Riga, and Vilneles Skverai in Vilnius.

In Q1 of 2022, the largest sites under construction in Estonia are the third phase of the Mustamäe medical campus of the North-Estonia Medical Centre, the Tallinn School of Music and Ballet, St John’s School and the Arter quarter, and also the construction of infrastructure segments of the Republic of Estonia’s southeast land border. In Latvia, the Orkla wafer and biscuit production plant, GUSTAVS business centre, Elemental Skanste office buildings, NATO facilities in Ādaži and the Kauguri city park and youth house were in progress; and in Lithuania, infrastructure for a number of wind farms, a car service centre in Vilnius and the Continental Automotive production building in Kaunas.

AS Merko Ehitus ( group companies develop real estate and construct buildings and infrastructure. We create a better living environment and build the future. We operate in Estonia, Latvia, Lithuania and Norway. As at the end of 2021, the group employed 670 people, and the group’s revenue for 2021 was EUR 339 million.