With the recovery on the local construction market, the sales revenue of Nordecon AS rose in 2011 by 51% to 149.6 million euros. The group’s main areas of operation proved cost-effective in Q3 and Q4, and it ended the year with a gross profit of 195,000 euros.
“After hitting rock bottom in 2010, following almost three straight years of decline, the Estonian construction market bounced back a bit in 2011,” explained Jaano Vink, chairman of the management board of Nordecon AS. “It’s picked itself up and is brushing itself down, and that’s likely to continue for a while yet. But the turnaround in our results isn’t just down to the recovery in the sector, but mostly to the remarkable effort everyone’s put in to pull the company out of the recession.”
Vink says that key factors in boosting Nordecon’s turnover in 2011 included reduced competition in certain areas of construction, the group’s success in tenders for structures and the slight improvement in market volume in terms of buildings. However, he added that the number of buildings being constructed remains low while competition remains high.
“Ending the year in the black was obviously a great result for us, when you consider we still had a handful of unprofitable large-scale projects that needed finishing off,” he said. “We lost out on them mostly because of unforeseen costs and price rises, which had the biggest effect on our results for the first half of the year. In the second half of the year our operations were much more profitable, on the whole. The average profit margin on the contracts we’ve got on the go at the moment has improved as well, which was another goal we wanted to achieve – although there’s still a long way to go until we reach results that completely satisfy us.”
Vink added that the fact overheads were able to be reduced in 2011 – at the same time as the volume of work was rising – also had a positive influence on the company’s results. The general administration costs of the group were 4.6 million euros for the year, representing 3.1% of sales revenue. The same figure for 2010 was 4.9%.
By the end of the year the total value of outstanding work on contracts entered into by Nordecon was 134 million euros – significantly higher than the 85.6 million euros at the end of 2010. “We added quite a bit to our contract portfolio during the year, which gives us a sense of security going into 2012 – considering the situation on the market at the moment is likely to continue and we’re not likely to see any major positive developments,” Vink said. “I’m hoping private sector orders for buildings will take off again. We’re still seeing next to no investment on the market in that area.”
In hindsight, Vink says the merger of the group’s companies in early 2011 into the single Nordecon AS was the right – and only – move to make: “We’ve had a year now to get used to working with one another, and that’s produced results,” he explained. “Our internal processes are working better than ever, and the image of the company as a whole has improved. And you can see how well we’ve gelled in the tenders we’ve won for some pretty big projects – the Aruvalla-Kose stretch of the Tallinn-Tartu highway, the Luige intersection on the Tallinn ring road and the wharves at the Port of Sillamäe. And we’ve finished quite a few projects ahead of time, too, without compromising on quality.”
