News

08. Aug 2014

Nordecon group’s gross profit grows to 4.2 million euros in first half of year

The Nordecon group’s gross profit grew to 4.2 million euros in the first half of 2014, representing a gross profit margin of 6.2%. During the same period last year the group’s gross profit was 3.3 million euros, with a gross profit margin of 4.3%. Its sales revenue in the first half of 2014 was 67.44 million euros. Nordecon’s portfolio of work in progress covered by construction contracts currently amounts to 87 million euros.

The Nordecon group’s gross profit grew to 4.2 million euros in the first half of 2014, representing a gross profit margin of 6.2%. During the same period last year the group’s gross profit was 3.3 million euros, with a gross profit margin of 4.3%. Its sales revenue in the first half of 2014 was 67.44 million euros. Nordecon’s portfolio of work in progress covered by construction contracts currently amounts to 87 million euros.

“We earned most of our profit in Q2, when the weather conditions that normally affect results in the first part of the year had relented and we no longer had fixed costs related to the break in technology we’d taken,” explained Jaano Vink, the chairman of the management board of Nordecon AS. “The reason behind the marked improvement in our main activities is the work we’ve been doing to boost efficiency and our focus on results rather than volume per se. That said, the proportion of contracts that are being entered into in light of the market and competition conditions at the moment is growing all the time, which is forcing us to look for different ways of bettering our processes.”

The group’s sales revenue for the first half of 2014 was 67.44 million euros – a decrease of 11% on the same period from the previous year, when it posted revenue of 75.49 million euros. “The drop in sales revenue was caused first and foremost by the fact that this time last year we had three major road construction projects on the go that were valued at around 70 million euros,” Vink explained. “We were also involved in a lot more engineering technology projects that were being supported from EU structural funds. The fact that their numbers are falling is something we’ve referred to in previous periods.”

Vink added that competition at present in all areas of the construction market is fierce. “The average number of companies taking part in construction procurements is on the rise again, as is the difference from the average of the price of the tenders that are winning them. In some ways it’s similar to how things were back in 2009, when construction prices pre-empted the fall in demand by dropping off, taking a lot of input prices with them. One key difference at the moment is that we’re not seeing a massive reduction in input prices, so for companies who are putting a lot into that in the tender phase their contracts could end up posing problems. But the pressure that competition’s wielding on construction prices – and through that on profit – is palpable.”

Nordecon continues to operate in two main areas: project management and general contracting in the construction of buildings and other structures. “We’re doing what we can to keep those two segments in balance in terms of the proportion of sales revenue they represent, but because of the road construction projects we completed in the second half of last year the buildings segment is currently accounting for 71% of the group’s revenue,” Vink said. “These changes in the structure of our sales revenue are being reflected as well in our volume of work in progress that’s covered by contracts – in the first half of this year the proportion of contracts connected to the buildings segment was 67%.”

Cash flows from the group’s investment activities amounted to 0.6 million euros in the first half of 2014.