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Merko Ehitus 9-month revenue grows to EUR 340 million and net profit to EUR 32 million

Q3 2023 revenue for Merko Ehitus was EUR 122 million and total revenue for the first nine months was EUR 340 million, representing 11% and 28% growth compared to the same periods a year ago. Net profit in Q3 grew 29% to EUR 12.7 million and net profit for the first nine months was up by 89% to EUR 32 million. Merko delivered 665 apartments and 22 commercial units to customers in the first nine months of 2023.

“Similarly to the first half-year, the Q3 and nine-month results were supported by delivery of presold apartments to customers in completed apartment developments. As we have highlighted, our inventory of apartments that are under construction and presold is significantly smaller than in the past few years due to the recession and the slump in the real estate market and this will exert a negative impact on the group’s results in coming years,” said Andres Trink, Chairman of the Management Board of AS Merko Ehitus. “The poor macroeconomic picture and general uncertainty did not improve in Q3 and investments into new development projects are still being curtailed. The outlook in this regard is also very weak, the economic outlook has deteriorated and the recovery has been deferred to the more distant future due to central bank interest rate policy, continuing inflation, unstable energy and tax policies and, above all, the geopolitical situation,” added Trink. Over nine months of 2023 the group has invested a total of EUR 73 million into ongoing development projects and acquisitions of new properties.

In the first nine months of 2023, the group companies signed new construction contracts worth EUR 379 million, which was 31% more than in the comparison period, and the balance of secured order-book grew by approximately 30% to EUR 449 million. “The group’s secured order-book continued growth in Q3 and is currently strong, which does partially counterbalance the impacts of the slumping apartment market on the group’s construction volumes. Yet profitability of construction service is under constant strain and the risks are high, since in the medium to long term, cautious positions are predominant in markets and supply chains, and there is an extreme amount of uncertainty about the impacts of governments’ economic and foreign policy measures. Therefore, the group companies will have to devote great attention to risk management,” said Trink commenting the construction services market.

In the first nine months of the year, Merko delivered 665 apartments to new homeowners and 22 business premises. As of the end of Q3, the group companies had 825 apartments on their balance sheets. About 40% of the apartments in the construction phase 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 Vilnelės Skverai in Vilnius.

In Q3 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, the logistics centre for Tallinn Kaubamaja Group, the infrastructure along the south-eastern border of the Republic of Estonia, the renovation of Vana-Kalamaja Street, a tram line between Old City Harbour and Rail Baltica Ülemiste passenger terminal, and the first phase of Ülemiste terminal. In Latvia, the Elemental Business Centre office buildings were in progress. Projects in Lithuania were wind farm infrastructure works in Kelme and Pagėgiai regions, and various buildings and infrastructure for NATO training centres.