Merko Ehitus revenue and net profit sees growth in Q1 of 2023

Q1 2023 revenue for Merko Ehitus was EUR 76 million, representing 11% growth compared to the same period a year ago. Net profit for the first quarter was EUR 5.9 million – nearly double that of Q1 2022. Merko delivered 145 apartments to new homeowners in Q1.

“Despite the good profit growth in Q1, we have entered a completely different apartment market situation than we had in 2020 and 2021 when transaction volume and prices peaked. Today we are dealing with drawing up the final contracts under property law for apartments pre-sold earlier, and this is also showing up in current financial results. The pace of new sales of apartments has dropped steeply compared to spring 2022 and is several times lower than before. Because of that, we have launched fewer development projects in the last 12 months, which in turn means fewer sold and completed apartments in the next few years. On the positive side of things, I would note that demand for new homes has increased somewhat in Q1,” said the Chairman of the Management Board of AS Merko Ehitus, Andres Trink.

In Q1 2023, the group companies signed new construction contracts worth EUR 170 million and the balance of secured order-book grew by approximately 10% to EUR 412 million. “The secured order book of the group companies is currently strong, which in the sense of construction volumes does to a certain extent balance the impacts of the apartment market declining in the next few years. In the project management business, we rely directly on the volume of construction orders, and these in turn depend on investment confidence and the general health of the economy. The outlook in this area is not good and continuing rapid inflation will give a rise to a number of risks on the construction contact expense side,” said Trink commenting the construction services market.

In Q1, Merko delivered 145 apartments to buyers and started the construction of the above grade volumes of the fifth stage of the Lahekalda residential development project in Tallinn. The decision to build the project to completion depends on the market situation and is planned to be made in autumn. As of the end of Q1, the group had 1,004 apartments under construction, of which more than 40% are covered by preliminary sale contracts. The largest apartment developments were Uus-Veerenni, Noblessner and Lahekalda in Tallinn, Erminurme in Tartu, Viesturdārzs, Mežpilsēta and Magnolijas in Riga and Vilnelės Skverai in Vilnius.

In Q1 of 2023, the largest projects under construction in Estonia were the third phase of the Mustamäe medical campus of the North Estonia Medical Centre, Rae and Pelgulinna state gymnasiums, Arter Quarter and the construction of infrastructure along the south-eastern border of the Republic of Estonia, Defence Forces buildings on Tapa base, a tram line between Old City Harbour and Rail Baltica Ülemiste passenger terminal and the renovation of Vana-Kalamaja Street. Projects in progress in Latvia were the GUSTAVS business centre, Elemental Business Centre office buildings and NATO infrastructure in Ādaži. In Lithuania, infrastructure for several wind farms and buildings and infrastructure for NATO training centres.