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Merko Ehitus saw both revenue and net profit increase in 2023

Q4 2023 revenue for Merko Ehitus was EUR 126 million and the 12-month revenue amounted to EUR 466 million. In 2023, Merko delivered 948 apartments and 27 commercial units to customers. In 2023, the group companies signed new construction contracts worth more than EUR 500 million. The company’s net profit in Q4 2023 was EUR 13.9 million and the 12-month net profit amounted to EUR 46 million.

“We as Merko owe our undoubtedly solid 2023 results to our people, who have made good decisions in the last few tumultuous years and adapted to market demand in the field of both construction service and real estate development. Construction and real estate development projects generally span more than one reporting period and the final results become evident at the end of the projects. The 12-month and Q4 results of 2023 are driven by the coincidence of several important factors. In the past few years, we had the capability for launching large construction projects, of which the Kapitel’s contracts are the most extensive, totalling more than EUR 200 million. At the end of 2023, we completed Kapitel’s two office buildings in Riga and the majority of the construction works of three high-rise buildings in the Arter Quarter in central Tallinn. The results were clearly supported by the real estate development business, where in 2023, we handed over almost a thousand apartments pre-sold in the last two years and now completed,“ commented Ivo Volkov, the Chairman of the Management Board of AS Merko Ehitus.

“In real estate development, an era is over – i.e. pre-sold apartments have been completed and delivered to customers, and now we are operating in a much more difficult market situation. The apartment market in the Baltics is uncertain, interest rates have risen and the pace of sales of new apartments has slowed significantly due to the changed economic situation. We have launched construction of a smaller number of apartment development projects and in the near future there is no grounds for expecting results comparable to 2023 in real estate development,“ said Volkov commenting the real estate development business. Over 12 months, the group invested EUR 86 million into ongoing development projects and acquisitions of new properties.  

“The group’s secured order-book continued growth in Q4 and is exceeding previous expectations, which does partially counterbalance the negative impacts of the slumping apartment market on our construction volumes and revenue. Yet profitability of construction service is under constant strain and the risks continue – supply chains are seeing another price rise and macroeconomic problems have made private sector customers cautious about investments. There are many defence and energy-related projects in the pipeline, but the volume of these orders will decline in the medium to long term. Thus, risk management for the group companies – above all hedging price risks – is under continued scrutiny,” said Volkov as regards construction services business. In 2023, the group companies signed new construction contracts worth EUR 501 million, which was 58% more than last year, and the balance of secured order-book grew by more than 60% compared to the end of 2022 to EUR 477 million.

In 2023, Merko delivered 948 apartments to homebuyers and 27 commercial units. As at the end of 2023, the group companies had 697 apartments on their balance sheets and about 5% of the 393 apartments in the construction phase were covered by preliminary sale contracts. The largest apartment developments were Uus-Veerenni, Noblessner and Lahekalda in Tallinn, Erminurme in Tartu, Viesturdarzs, Mežpilseta and Magnolijas in Riga, and Vilneles Skverai in Vilnius.

In Q4 of 2023, the largest sites under construction in Estonia were the Rae state gymnasium, Hampton by Hilton and Hyatt hotel buildings, Arter Quarter, the logistics centre for Tallinn Kaubamaja Group, the barracks at the Defence Forces’ Ämari base, the road overpasses for Rail Baltica in Harju County, 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 in Kelme and Pagegiai regions, and various buildings and infrastructure for NATO training centres.