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Construction volumes’ growth of Merko Ehitus in Q1 of 2018 on par with expectations

Sales revenue of Merko Ehitus in Q1 of 2018 grew to EUR 80.3 million, bolstered by the pre-existing portfolio of construction contracts. The group’s net profit was EUR 1.1 million. In the first quarter, Merko companies signed new construction contracts worth EUR 22 million and the secured order book stood at EUR 292 million.

“Considering the volume of our secured order book and the major projects currently under way, the growth of the group’s sales revenue compared to the same period last year was as expected,” said the chairman of the AS Merko Ehitus management board, Andres Trink. “The greatest growth came in sales revenue in Latvia, and the volume of construction works performed outside Estonia in the first quarter was greater than the volume for Estonia.”

“In the first quarter, the trends of pressure on the growth of input prices and the limited availability of construction resources continued from last year. In the construction value chain, risks are being redistributed among parties, which also exerts an effect on general contracting companies and, ultimately, customers. Although compared to the first quarter of last year, construction volumes grew and profitability of construction service improved, we’re not satisfied with the overall result for our construction activity under contracts. We are continuing to look for greater effectiveness both in project management and on the expenses side and for optimum risk to income ratio, but not at the expense of construction quality. One quarter will not yield big major changes in this area, but solely growth in construction volumes is not a goal unto itself,” Trink continued.

In Q1, Merko Ehitus sold 51 apartments, compared to 141 last year in the same period. “Although the share of the apartment development activity was less of a factor in the results for Q1, this was more due to technical reasons: sales depend on the moment that the authorisation for use for the building is received, at which point we can start delivering the apartments to buyers. The number of apartments sold under preliminary contracts grew and these sales will be realised in quarters to come. We didn’t see major changes in the first three months of the year on the apartment market in the Estonian, Latvian and Lithuanian capitals. The economic environment is currently solid in the Baltic states, financing conditions are favourable and purchasing power remains stable. Driven by customer demand, more attention must be devoted in apartment development to well-designed and sustainable solutions and an integral living environment. Greater efficiency and rationality in processing building permits and planning documents would help to raise apartment development volumes. In the first quarter, we launched four new development projects with more than 140 apartments, and this year we plan to bring several new development projects to market in Vilnius, Riga and Tallinn,” said Trink in commenting on the results of the apartment development results.

In Q1 of 2018, Merko Ehitus posted revenue of EUR 80.3 million (EUR 58.1 million for the same period last year; growth of +38%), EBITDA of EUR 1.8 million, profit before taxes of EUR 1.3 million and net profit of EUR 1.1 million. In the first 3 months of 2018, the group entered into new contracts with a total volume of EUR 22.3 million, including for establishing public space for the central square in Kuressaare, Estonia and for performing additional works on the Z-Towers complex in Latvia. As of 31 March 2018, Merko Ehitus Group’s secured order book amounted to EUR 291.9 million.

Among major projects in progress in Q1 in Estonia there were the construction of T1 Mall of Tallinn shopping centre, Maakri Kvartal, Öpiku Maja’s building B, Noblessner residential quarter, Pärnu mnt 22 office building, expansion of Wendre production facility, and the residence of the Embassy of the People’s Republic of China, the Tallink office building, Viimsi state gymnasium and the Toom-Kuninga 21 apartment building. In Latvia, the major projects in progress were the Akropole and Alfa shopping centres, the Z-Towers complex and the Ventspils music school and concert hall; in Lithuania, the expansion of the Radisson Blu Hotel Lietuva, Neringa Hotel, a Philip Morris plant, and the Rinktines Urban and Basteja Life development projects. In Norway, the largest project under way in Q1 was the renovation and conversion of the office building at Akersgata 8 in Oslo.