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MERKO’s turnover from work contracts increased by 61%

The turnover of Merko statyba UAB from works contracts in 2021 grew by 61% and reached to 66 million euros. In 2020, this number amounted to 41 million euros.

The general market trends contributed to these results – the recovery of the construction sector was felt in 2021, while in 2020, most construction projects were frozen for at least half a year due to the pandemic. These figures were also influenced by MERKO’s experience and reliability, as well as its focus on sustainability and green energy projects.

Focus on green energy projects

“I am very pleased that the strategy chosen a few years ago to specialise and focus on renewable energy projects and invest in energy-saving solutions has paid off. This is already yielding a clearly measurable result, which is especially evident in these times of drastically rising energy prices,” commented Saulius Putrimas, Head of MERKO in Lithuania.

In 2021, MERKO completed 13 million euros investments in the building of the Kaunas County Chief Police Commissariat, the first administrative building in Lithuania with energy efficiency A ++, which receives almost all the energy required for its operation from renewable energy sources.

“Three years ago, by participating in a procurement procedure, we challenged ourselves to build a low-energy building. Today we see that the customer is happy because there is no need to worry about the cost of energy to maintain the buildings. From today’s perspective, we can also clearly see how the contract concluded three years ago, a public-private partnership (PPP) project, has paid off for the customer,” said Putrimas.

Among the construction projects started in 2021, which will be completed this year, we could mention the production building of Continental Automotive Lithuania UAB in Kaunas District, which is being built according to the global sustainability certificate LEED (Leadership in Energy and Environmental Design) GOLD standard. This worldwide system of “green” buildings assesses the harmonious interaction between a building and man, and the environmental aspects. In this project, the LEED sustainability certificate is applied during the design, construction and operation phases of the new building. Great attention is paid to the selection of LEED-compliant materials and the operation of the building’s engineering systems to create a comfortable environment and ensure the quality of the supply air.

“In 2021, we built as many as seven wind farms – some of these projects have already been completed last year, while construction of others is still ongoing. We have assembled a separate team that specialises in working in this segment, allowing us to perform the full range of work – arrange the necessary documentation, prepare the project and obtain permits for its implementation. We also undertake contract work – we install foundations, substations and transformers, and arrange the infrastructure. We see what is happening in the energy sector, so we want to contribute to the growth of the alternative energy sources sector in our country,” added Putrimas.

The focus on sustainability is not a new trend, it was started by MERKO last year. The company has previously built structures conforming to the international standard for sustainable buildings BREEAM(Building Research Establishment Environmental Assessment Method): business centres Narbuto 5 and Quadrum South, hotels ibis Vilnius Centre and Radisson Blu Hotel Lietuva.

In 2021, Merko statyba UAB signed contracts for the value of more than 90 million euros.

The company sold the same number of apartments both in 2020 and 2021

Among the construction projects, the projects implemented by MERKO itself must be emphasised – a residential apartment complex “Vilnelės skverai”, rising in Vilnius surrounded by the Old Town, Užupis and Belmontas. Construction of more than 400 apartments has been started last year.

In 2021, MERKO signed 267 preliminary sale and purchase agreements, and 270 in 2020. Taking into account the demand trends, it is planned to launch at least two new residential projects in Vilnius this year. “Seeing the interest of buyers, we will continue to invest in the territory of the conversion project “Architecture park” initiated by Vilnius City Municipality and will develop the residential district “Vilnelės skverai”, said the head of MERKO in Lithuania.

According to Putrimas, housing projects were one of the few areas where the increase in sales prices offset rising costs, although the trends in housing demand and the purchasing power of the population are yet to be assessed in the future.

“Given the situation in the construction sector, we plan to pay more attention to the costs of the residential projects where we can better control the construction process, and this is the area where we will increase our investments,” said Putrimas.

Rising prices for construction materials are driving up project prices

The head of MERKO in Lithuania draws attention to the challenges that have already been mentioned: rising energy and raw material prices, inflation, disruptions in the supply chain of construction materials, and the worsening geopolitical situation – all this has had and continues to exert an impact on rapidly rising construction costs.

“From today’s perspective, it is clear that everyone, who managed to sign contracts a year ago, won, because in 2021, the country faced an unprecedented rise in construction material prices and labour shortages. As these trends continue, potential clients might need to review their business plans, as much less can be built today for the same amount of money than 2-3 years ago when the budgets were drawn up. Public sector tenders are especially difficult, where a lot of time elapses between the approval of the budget and the start of construction, and as a result, expectations often fall short of market realities,” pointed out Putrimas.

According to Putrimas, the situation in the construction market seems to remain very uncertain. The rapid growth in the prices of individual groups of materials was recorded at the beginning of last year, and at the end of the year there was a sharp rise in energy costs, which directly affects the prices of all materials, while the official statistics show record inflation. It is very risky for contractors to fix construction prices for long periods. The possibility of linking the prices of some basic materials to market prices is being considered.