The sales revenue of Nordecon AS in the first nine months of 2011 was 103.3 million euros – a 37% rise on the same period last year, and indeed more than the group’s turnover for the whole of 2010. However, despite the profit made by the group in Q3, its gross losses for the nine months stand at 717,000 euros.
"Compared to last year, when the construction market was really at its lowest point, things are definitely looking up," said Jaano Vink, chairman of the management board of Nordecon AS. "In the nine months of 2011 so far we’ve recorded higher turnover than for all of 2010 put together, which is a great sign and really takes the edge off our nerves! Given the way the economic environment is at the moment we haven’t taken any excessive risks, and at the same time quite a few new building sites have been added to our portfolio in a pretty short space of time. And the amount of work we have ahead of us amounted to 155 million euros at the end of September, which is 70% more than at the same time last year."
Vink explained that the main factors in the growth of Nordecon’s portfolio were a certain degree of normalisation in the competition situation – particularly in the construction of roads and utilities – and the restructuring undertaken and efficiency measures implemented in response to the recession, which have enabled the company to participate more successfully in tenders. The market situation has also improved slowly but steadily where buildings are concerned, providing builders with more work.
"Our operations are still focussed on getting back into profit," Vink said. "Historically Q3 is always the best quarter for building companies, and this year we managed to stay in the black in terms of our core operations. The overall picture for the reporting period is still being influenced though by the contracts we entered into in earlier periods with lower margins. But looking ahead, I’d say we were more optimistic than anything, because the quality of the profitability in our contract portfolio’s rising. That said, it’d be pointless of us to hope for a sudden jump in profit in the next few quarters, since the deadlines for a lot of the projects we’re working on won’t be up for more than year – so making any profit at all will take time."
Vink added that the comparatively warm autumn has been a boost to construction and that the first couple of months of winter – which are also forecast to be fairly mild – bode well for the company’s performance of contracts in Q4. "We’re hoping to be able to work on the new docks at the Port of Sillamäe until the end of the year, for example," he said.
Nordecon’s 9-month sales revenue was divided almost equally between the buildings and structures segments – striking the kind of balance that has been one of the group’s objectives in hedging its risks. The majority of work on buildings has involved the construction of social and industrial premises, while most of the structures the group has worked on have been in the areas of road construction and maintenance and the construction of external networks.
Vink says that as the volume of construction the group is carrying out has grown and the number of remaining contracts with low margins decreases, the need has arisen to inject additional turnover capital. "The liquidity risk is great for any company dealing with general contracting and project management, because they’re in a position where money’s having to be paid out quicker than it’s coming in – clients’ payment deadlines are basically twice as long as the deadlines on the sub-contracting market," he explained. "The banks are aware of this, too, and thankfully they’re prepared to offer us additional financing options to reduce our liquidity risks. We should be entering into those agreements with them before the end of the year."
