COMMENTARY FROM MANAGEMENT
Merko Ehitus generated revenue of EUR 57 million in the first quarter of 2026, with a net profit of EUR 4.3 million. As of the end of the first quarter, the company’s secured order book reached an all-time high of EUR 826 million.
According to the management of Merko Ehitus, the first-quarter results were in line with expectations. By mid-2025, the group had completed several large-scale projects that made a significant contribution to revenue and profit, while also creating a high comparison base for the first half of this year. Although the results for the first quarter of 2026 were lower than in the same period last year, they are comparable to the results of preceding years.
The private sector remains cautious in placing orders, and the market continues to be driven primarily by public sector tenders in defence and infrastructure. In January, Merko signed the largest contracts in history for the construction of two phases of the Rūdninkai military campus in Lithuania. Under these PPP contracts group is responsible for building sections B and C of the campus and managing them for more than ten years after completion. In March, Merko also launched construction works on a military campus in Latvia. The total construction cost of these projects in Lithuania and Latvia exceeds EUR 400 million, which has increased the order book to a record-high level of EUR 826 million. For large-scale construction projects, the preparation and design phases are lengthy, meaning their impact on revenue will become more visible toward the end of 2026. For current year, the goal is to exceed last year’s sales revenue. It is important to note that due to the scale of these projects, results are more volatile, as the impact of each individual project is substantial. This was already observed last year with the Arter and Pabradė projects and will remain the case in the coming years. In the first quarter of 2026, Merko signed new construction contracts worth EUR 407 million.
Global uncertainty persists. In addition to the war in Ukraine, a new crisis hotspot has emerged in the Strait of Hormuz, constraining one of the world’s key energy and oil supply routes and raising concerns not only about oil prices but also about availability. This has a significant impact on the construction sector, as oil is not only a direct energy source but also a key raw material for the chemical and plastics industries. For construction companies, this creates additional risks, particularly in fulfilling long-term, non-indexed contracts signed over the past year. The successful completion of such projects and the performance of construction companies will depend on the willingness of clients and contractors to cooperate.
In real estate development, there are seeing the effects of the market downturn from three to four years ago, which led the group to launch fewer new developments at that time. As a result, Merko reported significantly fewer apartment handovers in the first quarter. Demand for new apartments has increased over the past 12–18 months, enabling the group to start construction on a larger number of new apartments, which creates a solid basis for improved results going forward. Over 800 apartments are scheduled for completion this year, with a substantial proportion located in Vilnius, the most active market. Over 40% of the apartments under construction have already been pre-sold.
In the first quarter of 2026, major development projects included Uus-Veerenni, Noblessner and Lahekalda in Tallinn; Erminurme and Leedri in Tartu; Lucavsala, Arena Garden Towers and Mežpilsēta in Riga; and Vilnelės Skverai and Šnipiškių Urban in Vilnius. During the first three months of the year, Merko delivered 36 apartments and 3 commercial units to buyers and launched the construction and sales of 38 apartments in the Õielehe project in Jüri.
In Estonia, the company’s largest ongoing projects in the first quarter of 2026 included the City Plaza 2 and Viktor Masing office buildings, the Kullo Hobby Centre in Tallinn, the National Defence Building in Tartu, and the hotel and event centre in Pärnu, as well as the Rail Baltica Ülemiste passenger terminal and the fourth stage of the Rail Baltica mainline in Harju County and the Tallinn-Pärnu section. In Lithuania, major construction projects included wind farm infrastructure in the Pagėgiai and Telšiai regions and the Rūdninkai military campus. In Latvia, Merko was engaged in the construction of a student hotel in Riga and wind farm infrastructure in the Smiltene municipality.
OVERVIEW OF THE 3 MONTHS RESULTS
PROFITABILITY
2026 3 months’ pre-tax profit was EUR 1.7 million (3M 2025: EUR 11.6 million), which brought the pre-tax profit margin to 3.0% (3M 2025: 13.6%).
Net profit attributable to shareholders for 3 months 2026 was EUR 4.3 million (3M 2025: EUR 10.5 million) and 3 months net profit margin was 7.6% (3M 2025: 12.3%).
REVENUE
2026 3 months’ revenue was EUR 57.2 million (3M 2025: EUR 85.2 million). 3 months’ revenue decreased by 32.9% compared to same period last year. The share of revenue earned outside Estonia in 3 months 2026 was 42.1% (3M 2025: 45.6%).
SECURED ORDER BOOK
As of 31 March 2026, the group’s secured order book was EUR 825.8 million (31 March 2025: EUR 331.9 million). In 3 months 2026, group companies signed contracts in the amount of EUR 406.8 million (3M 2025: EUR 50.6 million).
REAL ESTATE DEVELOPMENT
In 3 months 2026, the group sold a total of 36 apartments; in 3 months 2025, the group sold 121 apartments. The group earned a revenue of EUR 7.0 million from sale of own developed apartments in 3 months 2026 and EUR 24.7 million in 3 months 2025.
CASH POSITION
At the end of the reporting period, the group had EUR 40.6 million in cash and cash equivalents, and equity of EUR 264.7 million (62.3% of total assets). Comparable figures as of 31 March 2025 were EUR 78.5 million and EUR 264.7 million (61.0% of total assets), respectively. As of 31 March 2026, the group’s net debt was EUR 8.5 million (31 March 2025: negative EUR 53.4 million).
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
unaudited
in thousand euros
| 2026 3 months | 2025 3 months | 2025 12 months | |
| Revenue | 57,223 | 85,236 | 310,941 |
| Cost of goods sold | (51,747) | (70,323) | (255,081) |
| Gross profit | 5,476 | 14,913 | 55,860 |
| Marketing expenses | (1,329) | (1,275) | (5,823) |
| General and administrative expenses | (3,217) | (4,275) | (17,478) |
| Other operating income | 508 | 561 | 2,285 |
| Other operating expenses | (122) | (41) | (501) |
| Operating profit | 1,316 | 9,883 | 34,343 |
| Finance income/costs | 383 | 1,717 | 10,425 |
| incl. finance income/costs from joint ventures | 318 | 1,501 | 10,381 |
| interest expense | (173) | (210) | (836) |
| foreign exchange gain (loss) | 204 | 115 | (18) |
| other financial income (expenses) | 34 | 311 | 898 |
| Profit before tax | 1,699 | 11,600 | 44,768 |
| Corporate income tax expense | 2,644 | (1,140) | (4,850) |
| Net profit for financial year | 4,343 | 10,460 | 39,918 |
| Other comprehensive income, which can subsequently be classified in the income statement | |||
| Currency translation differences of foreign entities | (165) | (59) | 20 |
| Comprehensive income for the period | 4,178 | 10,401 | 39,938 |
| Earnings per share for profit attributable to equity holders of the parent (basic and diluted, in EUR) | 0.25 | 0.59 | 2.26 |
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
unaudited
in thousand euros
| 31.03.2026 | 31.03.2025 | 31.12.2025 | |
| ASSETS | |||
| Current assets | |||
| Cash and cash equivalents | 40,573 | 78,525 | 41,424 |
| Short-term deposits | 21,000 | 17,000 | 18,000 |
| Trade and other receivables | 38,583 | 62,815 | 43,658 |
| Prepaid corporate income tax | 1,080 | 105 | 1,347 |
| Inventories | 233,114 | 197,861 | 219,812 |
| 334,350 | 356,306 | 324,241 | |
| Non-current assets | |||
| Investments in joint ventures | 32,275 | 23,072 | 31,957 |
| Other shares and securities | 80 | 80 | 80 |
| Other long-term loans and receivables | 20,265 | 19,044 | 20,658 |
| Deferred income tax assets | 3,163 | 4,830 | 2,874 |
| Investment property | 12,362 | 12,525 | 12,395 |
| Property, plant and equipment | 22,048 | 17,419 | 22,117 |
| Intangible assets | 694 | 388 | 714 |
| 90,887 | 77,358 | 90,795 | |
| TOTAL ASSETS | 425,237 | 433,664 | 415,036 |
| LIABILITIES | |||
| Current liabilities | |||
| Borrowings | 3,140 | 10,110 | 3,079 |
| Payables and prepayments | 90,481 | 114,153 | 95,920 |
| Income tax liability | 809 | 6,487 | 510 |
| Deferred income from government grant | 4 | – | 2 |
| Short-term provisions | 9,790 | 8,564 | 10,426 |
| 104,224 | 139,314 | 109,937 | |
| Non-current liabilities | |||
| Long-term borrowings | 45,942 | 15,002 | 30,012 |
| Deferred income tax liability | 3,901 | 6,539 | 7,448 |
| Other long-term payables | 6,426 | 8,150 | 7,073 |
| 56,269 | 29,691 | 44,533 | |
| TOTAL LIABILITIES | 160,493 | 169,005 | 154,470 |
| EQUITY | |||
| Share capital | 7,929 | 7,929 | 7,929 |
| Statutory reserve capital | 793 | 793 | 793 |
| Currency translation differences | (186) | (100) | (21) |
| Retained earnings | 256,208 | 256,037 | 251,865 |
| TOTAL EQUITY | 264,744 | 264,659 | 260,566 |
| TOTAL LIABILITIES AND EQUITY | 425,237 | 433,664 | 415,036 |
