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Merko Ehitus revenue for H1 grows to EUR 217 million and net profit to EUR 19.4 million

Q2 2023 revenue for Merko Ehitus was EUR 142 million and the H1 figure was EUR 217 million. Net profit in Q2 was EUR 13.6 million and net profit for the last six months was EUR 19.4 million. Merko delivered 512 apartments to new homeowners and 15 commercial units to businesses in H1.

“Our profit for H1 was strong, as expected, since a number of apartment development projects were completed and pre-sold apartments were delivered to home-buyers. Yet the backstock of pre-sold apartments is nearing exhaustion and we are currently operating in a very different market situation than we were in 2020 and 2021. The pace of new apartment sales has dropped significantly, due to which also the launch of new development projects by us and on the Baltic market as a whole has slowed greatly. This in turn will mean fewer development projects reaching completion and fewer apartments sold in the coming years. On the positive side, we see that the situation on the apartment market has stabilized in H1, adjustment to the changes in the economic environment continues and market is seeing slightly more relaxed sentiment. Although there are currently fewer apartment buyers purchasing as an investment, new home purchase transactions are still being closed. We do not however see rapid change in demand in the near future and we are taking a cautious view of launching new projects,” said the Chairman of the Management Board of AS Merko Ehitus Andres Trink. In H1, the group invested a total of EUR 56.5 million into development projects in progress and new immovables.

In the first six months of 2023, the group companies signed new construction contracts worth EUR 255 million, which was 32% more than in the comparison period, and the balance of secured order-book grew by approximately 29% as compared to the last year to EUR 418 million. “In the sense of construction volumes, the group’s secured order-book will to a certain extent counterbalance the impacts of the apartment market decline in the next few years. At the same time, the operating environment in the construction sector remains unstable. Risk management is extremely important, as much as is possible given the high inflation and high interest rates, new regulations and administrative practices as well as the geopolitical situation,” said Andres Trink commenting the construction services market.

In the first six months of the year, Merko delivered 512 apartments to new homeowners and 15 commercial units to businesses. As of the end of Q2, the group companies had 978 apartments on their balance sheets. Of apartments under construction, approximately 40% were covered by preliminary sale contracts. The largest apartment development projects were Uus-Veerenni, Noblessner and Lahekalda in Tallinn, Erminurme in Tartu, Viesturdarzs, Mežpilseta and Magnolijas in Riga and Vilneles Skverai in Vilnius.

In Q2 of 2023, the largest sites under construction in Estonia were the Rae and Pelgulinna state gymnasiums, Hampton by Hilton and Hyatt hotel buildings, Arter Quarter and the 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 first phase of Ülemiste terminal as well the renovation of Vana-Kalamaja Street. Projects in progress in Latvia were the GUSTAVS business centre and Elemental Business Centre office buildings. In Lithuania, wind farm infrastructure works and a substation in Kelmė region, and various buildings and infrastructure for NATO training centres.