News

14. Feb 2013

Nordecon to end the year with net profit

The sales revenue of the Nordecon Group amounted to almost €160 million and increased by 8% year over year. The Group converted its lossmaking operations of the last couple of years into profitable ones and its unaudited net profit amounted to €1.9 million.

The sales revenue of the Nordecon Group amounted to almost €160 million and increased by 8% year over year. The Group converted its lossmaking operations of the last couple of years into profitable ones and its unaudited net profit amounted to €1.9 million.

“Although the overall situation on the Estonian construction market has clearly improved since 2011 due to the increase in volumes, it took us a lot of effort to come out of the red. In comparison with the previous years, 2012 was a good one, but this does not mean that it was an easy one,” said Jaano Vink, chairman of the management board of Nordecon AS. “In order to improve our performance, we took planned steps in our work routines and also carefully followed the targets set for the management of costs. Profitability increased throughout all segments, though not so much that we can be fully satisfied.” The net profit of the Group for the 2012 financial year was €1.9 million while a year ago the group ended the financial year with a loss of roughly €4.7 million.

According to Jaano Vink, a good sign in the last year was the fact that the share of investments made by private customers increased significantly, although the construction of structures financed by the public sector still formed the highest percentage of construction volumes. The construction market continued to grow and the stabilised prices of construction materials and subcontracting contributed to the increase in profitability too. “The competition on the market remained intense and varied between sectors, for instance it was easier to conclude contracts for building roads and utilities than for buildings,” Jaano Vink explained.

He added that the increase in Nordecon's last year’s sales revenue was to a great extent based on the large contracts entered into in 2011. The first half of 2012 was also successful in terms of new contracts. By the end of the year the total value of outstanding work on contracts entered into by the Group undertakings was €127.3 million, which is 5% less than in the end of the previous year. “The addition of such large-scale projects – for instance the construction of the new quays of Sillamäe Port – is quite random and at first they drastically increase the volume of the work portfolio, but as the work progresses, the current situation on the market does not offer many chances to offset them with new contracts of the same scale,” Jaano Vink said. “On the other hand, it is quite obvious by now that the competition in 2013 will be tougher in every construction segment and this has already had some effect on the portfolio.”

In 2013, the largest volumes on the Estonian construction market will remain in the segment of structures and facilities, but will be adversely affected by the cessation of funding from the European Union budget for 2007– 2013. The construction market is still disproportionally dependant on public procurements and projects carried out with the support from the EU's structural funds. “The volume of new procurements will decrease most in the last year of the budgetary period, as the support allocated from the funds has mostly been divided between procurements. As the terms of co-funding generally require that projects should be completed during the budgetary period, the invitations to remaining tenders will be issued in the first half of 2013. This might lead to a situation, where the construction volumes on the construction market in relation to public procurements will be significantly lower in the second half of 2013. A good thing is that the debate over the EU budget for the period 2014-2020 has almost been completed. With quick and decisive action, this would enable preparations to be made in the second half of 2013 for issuing tender notices for construction already in 2014.

“The year 2013 will be challenging due to increased competition, but Nordecon has enough experience and scale to maintain the level achieved in 2012 and to increase both its sales revenue and profitability,” stated Jaano Vink.