COMMENTARY FROM MANAGEMENT
Merko Ehitus generated revenue of EUR 118 million in the third quarter of 2026 and EUR 268 million in the nine months of the year. Net profit amounted to EUR 12.6 million for the third quarter and EUR 25.4 million for the nine months of 2026.
According to the management of Merko Ehitus, real estate development and construction services both contributed equally to group third-quarter results. During the quarter completed and handed over 118 apartments and 18 commercial units to buyers, almost as many as in the first two quarters of the year combined. Merko secured order book remains strong at close to EUR 770 million, and several large projects moved into the active construction phase in the third quarter. Group companies' main task now is to complete the projects under way and keep risks under control.
According to management, the construction market continues to be dominated by the public sector in the construction services business segment, driven by defence and infrastructure procurements, and public sector related contracts also account for the majority of Merko's order book. The rise in fuel and energy prices over the year has taken its toll on the profitability of construction services. Group road construction company has been most affected by rising fuel prices, as it is proportionally the most exposed to fuel prices. In the third quarter, Merko signed new construction contracts worth EUR 22 million, the largest of which was for the Volta 1b residential development in the Krulli Quarter in Tallinn.
In the real estate development segment, according to the group's management, consumer confidence has been edging up in all of Merko's home markets, which has supported growth in the share of apartments sold under pre-sale agreements. As times remain uncertain, management does not predict that this trend will continue. Apartment supply remains high across all markets, giving buyers plenty of choice, which in turn keeps competition between developers intense and puts pressure on margins. This year, the new-build apartment market in Riga has picked up considerably, and group has launched several new development projects there as well.
To focus on core business - construction services and residential real estate development - Merko sold majority shareholding in the companies linked to the large-scale Rudninkai military campus PPP project in Lithuania in the third quarter. Kapitel acquired a 70% stake in the companies delivering the PPP project and managing and maintaining the completed facilities. Merko retains a 30% minority stake in these companies. As the general contractor, Merko remains responsible for delivering design-and-build contracts worth more than EUR 370 million in total. Engaging an investor helps the group maintain its strong liquidity.
Over the nine months, Merko handed over 238 apartments and 23 commercial units and started construction and sales of 394 apartments and four commercial units. At the end of the third quarter, 1325 apartments were under construction or completed, approximately one third of which were covered by pre-sale agreements. The largest development projects under way in the third quarter of 2026 were Uus-Veerenni, Noblessner and Lahekalda in Tallinn, Õielehe near Tallinn and Leedri in Tartu; Lucavsala, Arena Garden Towers, Magnolijas and Mežpilseta in Riga; and Vilneles Skverai and Šnipiškiu Urban in Vilnius.
In the third quarter of 2026, major construction projects under way in Estonia included the City Plaza 2 and Viktor Masing House office buildings, the Kullo Hobby Centre, and the Event Centre, the main building named Kasvuhoone, Volta 1b apartment buildings and infrastructure in the Krulli Quarter in Tallinn; the National Defence Building in Tartu; a hotel and event centre in Pärnu; the Rail Baltica Ülemiste passenger terminal; and the fourth stage of the Rail Baltica main line in Harju County and the Tallinn-Pärnu section. In Lithuania, the largest projects were wind farm infrastructure in the Pagegiai district and the Rudninkai military campus. In Latvia, the group was building military campuses and wind farm infrastructure in Smiltene municipality.
OVERVIEW OF THE III QUARTER AND 9 MONTHS RESULTS
PROFITABILITY
2026 9 months' pre-tax profit was EUR 25.0 million and Q3 2026 was EUR 14.2 million (9M 2025: EUR 40.2 million and Q3 2025 was EUR 16.6 million), which brought the pre-tax profit margin to 9.3% (9M 2025: 16.6%).
Net profit attributable to shareholders for 9 months 2026 was EUR 25.4 million (9M 2025: EUR 36.7 million) and for Q3 2026 net profit attributable to shareholders was EUR 12.6 million (Q3 2025: EUR 15.0 million). 9 months net profit margin was 9.5% (9M 2025: 15.2%).
REVENUE
Q3 2026 revenue was EUR 118.2 million (Q3 2025: EUR 73.9 million) and 9 months' revenue was EUR 268.1 million (9M 2025: EUR 241.8 million). 9 months' revenue increased by 10.9% compared to same period last year. The share of revenue earned outside Estonia in 9 months 2026 was 42.6% (9M 2025: 47.4%).
SECURED ORDER BOOK
As of 30 September 2026, the group's secured order book was EUR 769.1 million (30 September 2025: EUR 486.2 million). In 9 months 2026, group companies signed contracts in the amount of EUR 508.6 million (9M 2025: EUR 322.8 million). In Q3 2026, new contracts were signed in the amount of EUR 22.2 million (Q3 2025: EUR 99.6 million).
REAL ESTATE DEVELOPMENT
In 9 months 2026, the group sold a total of 238 apartments; in 9 months 2025, the group sold 315 apartments. The group earned a revenue of EUR 52.4 million from sale of own developed apartments in 9 months 2026 and EUR 59.7 million in 9 months 2025. In Q3 of 2026 a total of 118 apartments were sold, compared to 93 apartments in Q3 2025, and earned a revenue of EUR 24.7 million from sale of own developed apartments (Q3 2025: EUR 14.9 million).
CASH POSITION
At the end of the reporting period, the group had EUR 55.5 million in cash and cash equivalents, and equity of EUR 263.6 million (54.4% of total assets). Comparable figures as of 30 September 2025 were EUR 34.3 million and EUR 257.3 million (64.4% of total assets), respectively. As of 30 September 2026, the group's net debt was EUR 12.1 million (30 September 2025: negative EUR 8.0 million).
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
unaudited
in thousand euros
| 2026 9 months | 2025 9 months | 2026 III quarter | 2025 III quarter | 2025 12 months | |
| Revenue | 268,123 | 241,799 | 118,230 | 73,917 | 310,941 |
| Cost of goods sold | (234,943) | (194,749) | (102,435) | (55,938) | (255,081) |
| Gross profit | 33,180 | 47,050 | 15,795 | 17,979 | 55,860 |
| Marketing expenses | (4,119) | (3,753) | (1,395) | (1,052) | (5,823) |
| General and administrative expenses | (10,785) | (12,998) | (3,496) | (4,251) | (17,478) |
| Other operating income | 2,047 | 1,597 | 803 | 514 | 2,285 |
| Other operating expenses | (143) | (271) | 114 | (175) | (501) |
| Operating profit | 20,180 | 31,625 | 11,821 | 13,015 | 34,343 |
| Finance income/costs | 4,847 | 8,531 | 2,419 | 3,630 | 10,425 |
| incl. finance income/costs from associate and joint ventures | 4,876 | 8,486 | 2,425 | 3,642 | 10,381 |
| interest expense | (620) | (611) | (261) | (216) | (836) |
| foreign exchange gain (loss) | 313 | 19 | 137 | 33 | (18) |
| other financial income (expenses) | 278 | 637 | 118 | 171 | 898 |
| Profit before tax | 25,027 | 40,156 | 14,240 | 16,645 | 44,768 |
| Corporate income tax expense | 388 | (3,472) | (1,668) | (1,637) | (4,850) |
| Net profit for financial year | 25,415 | 36,684 | 12,572 | 15,008 | 39,918 |
| Other comprehensive income, which can subsequently be classified in the income statement | |||||
| Currency translation differences of foreign entities | (253) | (11) | (110) | (18) | 20 |
| Comprehensive income for the period | 25,162 | 36,673 | 12,462 | 14,990 | 39,938 |
| Earnings per share for profit attributable to equity holders of the parent (basic and diluted, in EUR) | 1.44 | 2.07 | 0.71 | 0.85 | 2.26 |
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
unaudited
in thousand euros
| 30.09.2026 | 30.09.2025 | 31.12.2025 | |
| ASSETS | |||
| Current assets | |||
| Cash and cash equivalents | 55,510 | 34,279 | 41,424 |
| Short-term deposits | 3,000 | 26,000 | 18,000 |
| Trade and other receivables | 71,742 | 54,537 | 43,658 |
| Prepaid corporate income tax | 696 | 714 | 1,347 |
| Inventories | 252,394 | 200,646 | 219,812 |
| 383,342 | 316,176 | 324,241 | |
| Non-current assets | |||
| Investments in associate and joint ventures | 35,155 | 30,060 | 31,957 |
| Other shares and securities | 80 | 80 | 80 |
| Other long-term loans and receivables | 29,944 | 18,281 | 20,658 |
| Deferred income tax assets | 2,873 | 3,594 | 2,874 |
| Investment property | 11,127 | 12,426 | 12,395 |
| Property, plant and equipment | 21,573 | 18,306 | 22,117 |
| Intangible assets | 632 | 703 | 714 |
| 101,384 | 83,450 | 90,795 | |
| TOTAL ASSETS | 484,726 | 399,626 | 415,036 |
| LIABILITIES | |||
| Current liabilities | |||
| Borrowings | 7,959 | 9,549 | 3,079 |
| Payables and prepayments | 127,219 | 92,325 | 95,920 |
| Income tax liability | 797 | 31 | 510 |
| Deferred income from government grant | - | - | 2 |
| Short-term provisions | 12,819 | 8,978 | 10,426 |
| 148,794 | 110,883 | 109,937 | |
| Non-current liabilities | |||
| Long-term borrowings | 59,670 | 16,710 | 30,012 |
| Deferred income tax liability | 4,164 | 6,773 | 7,448 |
| Other long-term payables | 8,495 | 7,959 | 7,073 |
| 72,329 | 31,442 | 44,533 | |
| TOTAL LIABILITIES | 221,123 | 142,325 | 154,470 |
| EQUITY | |||
| Share capital | 7,929 | 7,929 | 7,929 |
| Statutory reserve capital | 793 | 793 | 793 |
| Currency translation differences | (274) | (52) | (21) |
| Retained earnings | 255,155 | 248,631 | 251,865 |
| TOTAL EQUITY | 263,603 | 257,301 | 260,566 |
| TOTAL LIABILITIES AND EQUITY | 484,726 | 399,626 | 415,036 |
Interim report is attached to the announcement and is also published on NASDAQ Tallinn and Merko's web page (group.merko.ee).
Urmas Somelar
Head of Finance
AS Merko Ehitus
+372 650 1250
urmas.somelar@merko.ee
AS Merko Ehitus (group.merko.ee) group companies construct buildings and infrastructure and develop real estate. We create a better living environment and build the future. We operate in Estonia, Latvia and Lithuania. As at the end of 2025, the group employed 613 people, and the group's revenue for 2025 was EUR 311 million.
