Q4 in 2010 was the second quarter in a row which the Nordecon group ended with a gross profit, despite the fact that more accurate forecasts saw some projects making additional losses and fulfilment of road maintenance contracts ending the quarter in the red. The unaudited sales revenue of the group for 2010 as a whole was 99.5 million euros. The cleaning of the group’s balance sheet which took place throughout the year has now been completed, and overall losses for the year came to 12.5 million euros.
“2010 proved to be the hardest year for the group since it began operating, but in spite of the sheer size of the loss we made, it ended on a slightly more upbeat note than we were expecting,” explained Jaano Vink, chairman of the board of Nordecon AS. “We’re glad to be able to say that for the second quarter running our gross profit came in on the right side of the ledger.” The group’s turnover in Q4 was 24.3 million euros, with gross profit just exceeding the profit margin. Turnover at the same time a year ago was 28.3 million euros, which meant losses of 1.85 million euros. Vink says that profit came regardless of the fact that losses were forecast for certain projects and that fulfilment of road maintenance contracts was hampered during the quarter, and in particular in December, by inclement weather.
“That’s also reflected in the fact that the amount of salt we had to use in December because of the slipperiness of the roads was the largest it’s been in the last eight years, and three times the amount we used in previous winters, when the winters weren’t nearly as harsh,” he said. “The same goes for the amount of fuel we had to use for maintenance work, and other things along those lines. Having said all that, the revenue we earn from road maintenance each month is fixed by the state and doesn’t really depend on what the weather is like in a given period.”
Nordecon’s general administrative costs in 2010 were 4.9 million euros – 3.1 million euros less than in 2009. Two objectives were met here: at least a 30% reduction is costs year-on-year; and the costs being no more than 5% of the value of sales revenue. “I’m really impressed with the way the staff in our companies have handled these changes, in terms of cutting costs and implementing new approaches, which at the end of the day haven’t affected our ability to operate on the construction market as effectively as ever at all,” said Vink. “If anything, it’s the other way round – the influence the cost-cutting will have down the line will undoubtedly be positive, both seasonally and in the longer term, taking into account the likelihood that the market will take off again during the second half of the year.”
Nordecon registered extraordinary losses in late 2010, with the writing-off of claims arising from the construction of the Pärnu Keskus centre comprising 2.7 million euros. Vink says that 100% of these claims have now been written off, since the group’s efforts to find a rational solution to the situation were not supported by the other parties involved. The issue should therefore no longer produce unfavourable news. Late 2010 also saw a line drawn under costs related to withdrawing from the Latvian market, where net losses amounted to 0.5 million euros. The 1.2 million euro sales profit posted at the start of the year was offset by the 1.7 million euros in losses posted in connection with meeting the financial obligations of the group’s former subsidiary Nordecon Infra SIA.
“The group’s portfolio of incomplete work has remained relatively stable over the last few quarters, reaching 88.3 million euros at the end of 2010,” Vink explained. “We’re still thinking along the lines that we shouldn’t be making a grab for every job we can get our hands on and trying to boost our volume of work with projects whose prospects are poor given the risks that exist today.”
Founded in 1989, Nordecon AS (www.nordecon.com) is one of the leading construction companies in Estonia. It has been listed on the NASDAQ OMX Tallinn Stock Exchange since May 2006. The group comprises more than 10 subsidiaries in addition to the parent company. Its unaudited consolidated turnover in the 2010 financial year was almost 100 million euros.
