Market announcement

Title

2025 9 months and III quarter consolidated unaudited interim report

Message

COMMENTARY FROM MANAGEMENT

Merko  Ehitus generated revenue of EUR 74 million  in the third quarter of 2025
and  EUR  242 million  in  the  first  9 months  of  the year. Net profit for Q3
amounted  to EUR 15.0 million, while  net profit for the  9-month period was EUR
36.7 million.  So far this  year, Merko has  handed over 55% more apartments and
commercial premises to buyers than in the first nine months of last year.

According to the management of Merko Ehitus, the third quarter, some of the most
significant  construction projects  in recent  times and  the largest in Merko's
history  were completed - the Arter quarter  together with the interior works of
the  Swedbank  headquarters  in  Tallinn  and  the  Pabrad?  defence  campus  in
Lithuania.  As a result, group is returning to its more usual revenue structure.
During  the first nine months of this year, the share of real estate development
increased  and accounted for more than a quarter of sales revenue. Consequently,
the operating profit margin has also improved.

The  real estate  market remains  most active  in Lithuania,  while year-on-year
conditions  have improved in Estonia, and  Latvia continues on a slightly upward
trend. The market recovery is well illustrated by the fact that, in a nine-month
comparison,  group companies have handed over  more than 55% more apartments and
commercial  units to  buyers. The  volume of  apartments under  construction and
completed  has slightly decreased compared  to the end of  the second quarter of
this  year, and half of  them are located in  Vilnius, which has the most active
market. Management continues to forecast real estate market developments hand in
hand with changes in consumer confidence.

In the construction market, there are few tenders and mostly they involve large-
scale  works. Competition  remains extremely  intense and,  as a result, service
margins  are low. This year  and last year, Merko  companies have signed several
large-scale  contracts related  to the  construction of  Rail Baltica, including
Estonia's  largest alliance contract as part of an international consortium. Due
to the nature of these contracts, where a significant amount of time is spent on
design,  actual  construction  will  begin  in  the  coming quarters and will be
reflected  in sales revenue  accordingly. The volume  of unfinished construction
work in the group is at a historical high.

The  group's  financial  position  is  strong,  and  net debt is negative. Joint
ventures  involved in the construction and maintenance of energy infrastructure,
Connecto  Infra  and  Connecto  Eesti,  continue  to  contribute strongly to the
results.  For Merko, these  are financial investments,  and the revenue of these
companies is not reflected in Merko's consolidated sales revenue. Connecto has a
high volume of work due to significant investments directed into the sector, but
many  large-scale  projects  in  this  sector  are  also nearing completion, and
network  operators' investment plans are expected  to decline in the foreseeable
future.

In  the first nine months of 2025, Merko signed new construction contracts worth
EUR 323 million, the largest of which were the Rail Baltica Ülemiste terminal in
Tallinn,  the Rail Baltica mainline  section from Tallinn to  Pärnu, a hotel and
event  centre in Pärnu,  and the construction  of foundations and infrastructure
for  the Augstkalni wind farm in Latvia. As of the end of the third quarter, the
balance of secured order-book for external clients amounted to EUR 486 million.

During  the  nine  months  of  2025, Merko  handed over 315 apartments and three
commercial  units  to  buyers  in  Estonia,  Latvia,  and Lithuania. In the same
period,  Merko started the  construction and sale  of 771 new apartments and 21
commercial  units, nearly two-thirds of them in the Shnipishki? Urban and Vilnel?s
Skverai  projects in Vilnius.  As of the  end of the  third quarter, the balance
sheet   included   1,089 apartments,  of  which  19% were  covered  by  pre-sale
agreements.   The   largest  ongoing  development  projects  were  Uus-Veerenni,
Noblessner  and Lahekalda in  Tallinn, Õielehe in  Jüri, and Erminurme in Tartu;
Lucavsala,  Arena Garden Towers and Mezhpils?ta in Riga; and Vilnel?s Skverai and
Shnipishki? Urban in Vilnius.

In  the third  quarter of  2025, the largest  construction sites  were the Hyatt
hotel  building, the Kullo Hobby Centre and  the City Plaza 2 office building in
Tallinn,  the National Defence Building in Tartu, and the hotel and event centre
in  Pärnu, the Rail Baltica Ülemiste joint terminal, and the fourth stage of the
Rail  Baltica  mainline  in  Harju  County  and  the  Tallinn-Pärnu  section. In
Lithuania,  the largest construction sites were  wind farm infrastructure in the
Pag?giai,  Telshiai and  Pasvalys regions,  as well  as various  national defence
buildings  and infrastructure.  In Latvia,  construction is  underway on a solar
power  plant in  V?rme Parish,  a student  hotel in  Riga, and infrastructure in
Augstkalni wind farm.

OVERVIEW OF THE III QUARTER AND 9 MONTHS RESULTS

PROFITABILITY
2025 9 months'  pre-tax profit  was EUR  40.2 million and  Q3 2025 was EUR 16.6
million  (9M  2024: EUR  49.6 million  and  Q3 2024 was EUR 31.3 million), which
brought the pre-tax profit margin to 16.6% (9M 2024: 13.1%).
Net  profit attributable to shareholders  for 9 months 2025 was EUR 36.7 million
(9M   2024: EUR  44.8 million)  and  for  Q3  2025 net  profit  attributable  to
shareholders  was  EUR  15.0 million  (Q3  2024: EUR 27.3 million). 9 months net
profit margin was 15.2% (9M 2024: 11.8%).

REVENUE
Q3  2025 revenue was EUR 73.9 million (Q3 2024: EUR 175.1 million) and 9 months'
revenue  was EUR  241.8 million (9M  2024: EUR 378.7 million). 9 months' revenue
decreased  by  36.1% compared  to  same  period  last year. The share of revenue
earned outside Estonia in 9 months 2025 was 47.4% (9M 2024: 60.1%).

SECURED ORDER BOOK
As  of 30 September 2025, the  group's secured order  book was EUR 486.2 million
(30 September 2024: EUR 430.9 million). In 9 months 2025, group companies signed
contracts in the amount of EUR 322.8 million (9M 2024: EUR 292.1 million). In Q3
2025, new  contracts were signed in the amount of EUR 99.6 million (Q3 2024: EUR
152.6 million).

REAL ESTATE DEVELOPMENT
In  9 months 2025, the group sold a  total of 315 apartments; in 9 months 2024,
the  group sold 194 apartments.  The group earned  a revenue of EUR 59.7 million
from  sale of own developed apartments  in 9 months 2025 and EUR 36.0 million in
9 months 2024. In Q3 of 2025 a total of 93 apartments were sold, compared to 74
apartments in Q3 2024, and earned a revenue of EUR 14.9 million from sale of own
developed apartments (Q3 2024: EUR 14.6 million).

CASH POSITION
At  the end of the reporting period, the  group had EUR 34.3 million in cash and
cash  equivalents,  and  equity  of  EUR  257.3 million (64.4% of total assets).
Comparable  figures as of 30 September 2024 were EUR 61.1 million and EUR 234.6
million  (51.3%  of  total  assets),  respectively. As of 30 September 2025, the
group's  net debt was negative EUR  8.0 million (30 September 2024: negative EUR
22.2 million).

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
unaudited
in thousand euros

                             2025      2024         2025         2024      2024
                         9 months  9 months  III quarter  III quarter 12 months

 Revenue                  241,799   378,676       73,917      175,108   539,049

 Cost of goods sold     (194,749) (315,597)     (55,938)    (135,738) (443,162)

 Gross profit              47,050    63,079       17,979       39,370    95,887



 Marketing expenses       (3,753)   (3,366)      (1,052)      (1,073)   (5,030)

 General and
 administrative
 expenses                (12,998)  (15,115)      (4,251)      (6,485)  (21,908)

 Other operating income     1,597     4,965          514          572     5,724

 Other operating
 expenses                   (271)   (2,512)        (175)         (46)   (2,190)

 Operating profit          31,625    47,051       13,015       32,338    72,483



 Finance income/costs       8,531     2,524        3,630      (1,071)     3,931

 incl. finance
 income/costs from
 investments in
 subsidiaries                   -   (3,119)            -      (3,119)   (5,087)

 finance income/costs
 from joint ventures        8,486     6,634        3,642        2,979     9,951

 interest expense           (611)   (1,469)        (216)        (353)   (1,823)

 foreign exchange gain
 (loss)                        19     (931)           33        (875)     (948)

 other financial income
 (expenses)                   637     1,409          171          297     1,838

 Profit before tax         40,156    49,575       16,645       31,267    76,414



 Corporate income tax
 expense                  (3,472)   (4,867)      (1,637)      (4,004)  (11,820)



 Net profit for
 financial year            36,684    44,708       15,008       27,263    64,594

 incl. net profit
 attributable to equity
 holders of the parent     36,684    44,781       15,008       27,302    64,668

 net profit
 attributable to non-
 controlling interest           -      (73)            -         (39)      (74)



 Other comprehensive
 income, which can
 subsequently be
 classified in the
 income statement

 Currency translation
 differences of foreign
 entities                    (11)       129         (18)          105       105

 Comprehensive income
 for the period            36,673    44,837       14,990       27,368    64,699

 incl. net profit
 attributable to equity
 holders of the parent     36,673    44,902       14,990       27,401    64,764

 net profit
 attributable to non-
 controlling interest           -      (65)            -         (33)      (65)

 Earnings per share for
 profit attributable to
 equity holders of the
 parent (basic and
 diluted, in EUR)            2.07      2.53         0.85         1.54      3.65

CONSOLIDATED STATEMENT OF FINANCIAL POSITION
unaudited
in thousand euros

                                          30.09.2025   30.09.2024   31.12.2024

  ASSETS

  Current assets

  Cash and cash equivalents                   34,279       61,115       91,879

  Short-term deposits                         26,000        5,000       10,000

  Trade and other receivables                 54,537      108,930       51,419

  Prepaid corporate income tax                   714          377          270

  Inventories                                200,646      199,628      196,521

                                             316,176      375,050      350,089

  Non-current assets

  Investments in joint ventures               30,060       25,549       21,571

  Other shares and securities                     80           80           80

  Other long-term loans and receivables       18,281       21,580       40,196

  Deferred income tax assets                   3,594        5,849        5,056

  Investment property                         12,426       12,645       12,606

  Property, plant and equipment               18,306       16,609       17,147

  Intangible assets                              703          466          350

                                              83,450       82,778       97,006



  TOTAL ASSETS                               399,626      457,828      447,095



  LIABILITIES

  Current liabilities

  Borrowings                                   9,549       11,541       21,303

  Payables and prepayments                    92,325      161,699      129,786

  Income tax liability                            31        6,838        7,101

  Short-term provisions                        8,978        7,325        7,678

                                             110,883      187,403      165,868

  Non-current liabilities

  Long-term borrowings                        16,710       27,357       12,102

  Deferred income tax liability                6,773        1,715        6,148

  Other long-term payables                     7,959        6,925        8,719

                                              31,442       35,997       26,969



  TOTAL LIABILITIES                          142,325      223,400      192,837



  EQUITY

  Non-controlling interests                        -        (220)            -

  Equity attributable to equity holders
  of the parent

  Share capital                                7,929        7,929        7,929

  Statutory reserve capital                      793          793          793

  Currency translation differences              (52)         (16)         (41)

  Retained earnings                          248,631      225,942      245,577

                                             257,301      234,648      254,258

  TOTAL EQUITY                               257,301      234,428      254,258



  TOTAL LIABILITIES AND EQUITY               399,626      457,828      447,095

Interim  report is attached to the announcement  and is also published on NASDAQ
Tallinn and Merko's web page (group.merko.ee (https://group.merko.ee/en/)).

Urmas Somelar
Head of Finance
AS Merko Ehitus
+372 650 1250
[email protected] (mailto:[email protected])

AS Merko Ehitus (group.merko.ee (https://group.merko.ee/en/)) 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 2024, the group employed 605 people, and the
group's revenue for 2024 was EUR 539 million.