Merko Ehitus results for the first half of 2025 remain better than last year – net profit increased by 24%, but mostly due to the impact of the first quarter.

In the second quarter of this year, the company failed to reach last year’s revenue level in the construction segment, resulting in an overall revenue decline of 32%. Nevertheless, while the beginning of last year was challenging for the real estate development segment, this year the segment continues to show a recovery in sales. In the second quarter of 2025, 101 apartments were sold compared to 61 in the same period last year, and revenue grew by 86%.

Results by segments, 2025 Q2

A positive sign for the construction segment – the volume of new signed contracts increased in both quarters of this year. Over the half-year, it grew by 60% compared to the same period last year, reaching €223M. The order book at the end of the second quarter also recovered, reaching €444M compared to €332M at the end of the first quarter.

Signed new contracts

The company’s profit in the second quarter declined less sharply than revenue. This was driven by an increase in the gross margin – from 12% in the second quarter of 2024 to 17% this year. Gross profit in the second quarter fell by only 4.5%, even though revenue dropped by 32%. However, operating profit still declined by 18%, as operating costs did not adjust quickly enough to the sharp drop in revenue.

Operating profit

After the second-quarter results, the trailing twelve months free cash flow stood at €38M (a 7% yield), but it was supported by the results of the last two quarters of the previous year. In the first half of this year, the company did not generate free cash flow. In the second quarter, funds from operations was rather weak. At the same time, €14M was invested in working capital – receivables increased. This put pressure on free cash flow.

Free cash flow

The upcoming quarter has a high bar for performance — in the third quarter of last year, Merko Ehitus delivered impressive growth in both revenue and profitability.