Market announcement

Title

2026 3 months consolidated unaudited interim report

Message

COMMENTARY FROM MANAGEMENT

Merko  Ehitus generated revenue of EUR 57 million in the first quarter of 2026,
with  a net profit of EUR  4.3 million. As of the end  of the first quarter, the
company's secured order book reached an all-time high of EUR 826 million.

According  to the management of Merko  Ehitus, the first-quarter results were in
line with expectations. By mid-2025, the group had completed several large-scale
projects  that made a significant contribution to revenue and profit, while also
creating  a high comparison base  for the first half  of this year. Although the
results  for the first quarter  of 2026 were lower than  in the same period last
year, they are comparable to the results of preceding years.

The  private sector remains cautious in placing orders, and the market continues
to  be driven primarily by public  sector tenders in defence and infrastructure.
In  January, Merko signed the largest  contracts in history for the construction
of  two phases of  the R?dninkai military  campus in Lithuania.  Under these PPP
contracts  group is responsible for building sections  B and C of the campus and
managing  them for more  than ten years  after completion. In  March, Merko also
launched   construction  works  on  a  military  campus  in  Latvia.  The  total
construction  cost of  these projects  in Lithuania  and Latvia exceeds EUR 400
million,  which has increased the order book  to a record-high level of EUR 826
million.  For  large-scale  construction  projects,  the  preparation and design
phases  are lengthy,  meaning their  impact on  revenue will become more visible
toward  the end  of 2026. For  current year,  the goal  is to exceed last year's
sales  revenue. It is important to note that due to the scale of these projects,
results  are  more  volatile,  as  the  impact  of  each  individual  project is
substantial.  This was  already observed  last year  with the  Arter and Pabrad?
projects  and will remain the case in the  coming years. In the first quarter of
2026, Merko signed new construction contracts worth EUR 407 million.

Global  uncertainty persists. In  addition to the  war in Ukraine,  a new crisis
hotspot has emerged in the Strait of Hormuz, constraining one of the world's key
energy  and oil supply routes and raising concerns not only about oil prices but
also  about  availability.  This  has  a  significant impact on the construction
sector,  as oil is not only  a direct energy source but  also a key raw material
for  the  chemical  and  plastics  industries.  For construction companies, this
creates  additional  risks,  particularly  in  fulfilling long-term, non-indexed
contracts  signed over the past year. The successful completion of such projects
and  the performance of construction companies will depend on the willingness of
clients and contractors to cooperate.

In  real estate development, there are seeing the effects of the market downturn
from  three  to  four  years  ago,  which  led  the  group  to  launch fewer new
developments  at  that  time.  As  a  result, Merko reported significantly fewer
apartment  handovers  in  the  first  quarter.  Demand  for  new  apartments has
increased  over the past 12-18 months, enabling  the group to start construction
on  a larger number of new apartments,  which creates a solid basis for improved
results  going forward.  Over 800 apartments  are scheduled  for completion this
year,  with a substantial proportion located in Vilnius, the most active market.
Over 40% of the apartments under construction have already been pre-sold.

In  the first quarter of 2026, major development projects included Uus-Veerenni,
Noblessner  and Lahekalda in Tallinn; Erminurme  and Leedri in Tartu; Lucavsala,
Arena  Garden Towers and Mezhpils?ta in  Riga; and Vilnel?s Skverai and Shnipishki?
Urban in Vilnius. During the first three months of the year, Merko delivered 36
apartments  and 3 commercial units  to buyers and  launched the construction and
sales of 38 apartments in the Õielehe project in Jüri.

In Estonia, the company's largest ongoing projects in the first quarter of 2026
included  the City Plaza  2 and Viktor Masing  office buildings, the Kullo Hobby
Centre  in Tallinn, the  National Defence Building  in Tartu, and  the hotel and
event  centre in Pärnu, as well as  the Rail Baltica Ülemiste passenger terminal
and  the  fourth  stage  of  the  Rail  Baltica mainline in Harju County and the
Tallinn-Pärnu  section. In Lithuania, major  construction projects included wind
farm  infrastructure  in  the  Pag?giai  and  Telshiai  regions and the R?dninkai
military  campus. In Latvia, Merko was engaged  in the construction of a student
hotel in Riga and wind farm infrastructure in the Smiltene municipality.

OVERVIEW OF THE 3 MONTHS RESULTS

PROFITABILITY
2026 3 months'  pre-tax profit was EUR  1.7 million (3M 2025: EUR 11.6 million),
which brought the pre-tax profit margin to 3.0% (3M 2025: 13.6%).
Net  profit attributable to  shareholders for 3 months  2026 was EUR 4.3 million
(3M  2025: EUR  10.5 million)  and  3 months  net  profit  margin  was  7.6% (3M
2025: 12.3%).

REVENUE
2026 3 months'  revenue  was  EUR  57.2 million  (3M 2025: EUR 85.2 million). 3
months'  revenue decreased by 32.9% compared to same period last year. The share
of revenue earned outside Estonia in 3 months 2026 was 42.1% (3M 2025: 45.6%).

SECURED ORDER BOOK
As  of 31 March 2026, the  group's secured order  book was EUR 825.8 million (31
March   2025: EUR  331.9 million).  In  3 months  2026, group  companies  signed
contracts in the amount of EUR 406.8 million (3M 2025: EUR 50.6 million).

REAL ESTATE DEVELOPMENT
In 3 months 2026, the group sold a total of 36 apartments; in 3 months 2025, the
group  sold 121 apartments. The  group earned a  revenue of EUR 7.0 million from
sale  of own  developed apartments  in 3 months  2026 and EUR 24.7 million in 3
months 2025.

CASH POSITION
At  the end of the reporting period, the  group had EUR 40.6 million in cash and
cash  equivalents,  and  equity  of  EUR  264.7 million (62.3% of total assets).
Comparable  figures as  of 31 March  2025 were EUR  78.5 million and  EUR 264.7
million  (61.0% of total assets), respectively. As of 31 March 2026, the group's
net debt was EUR 8.5 million (31 March 2025: negative EUR 53.4 million).

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
unaudited
in thousand euros

                                                        2026     2025      2025
                                                    3 months 3 months 12 months

 Revenue                                              57,223   85,236   310,941

 Cost of goods sold                                 (51,747) (70,323) (255,081)

 Gross profit                                          5,476   14,913    55,860



 Marketing expenses                                  (1,329)  (1,275)   (5,823)

 General and administrative expenses                 (3,217)  (4,275)  (17,478)

 Other operating income                                  508      561     2,285

 Other operating expenses                              (122)     (41)     (501)

 Operating profit                                      1,316    9,883    34,343



 Finance income/costs                                    383    1,717    10,425

  incl. finance income/costs from joint ventures         318    1,501    10,381

 interest expense                                      (173)    (210)     (836)

 foreign exchange gain (loss)                            204      115      (18)

 other financial income (expenses)                        34      311       898

 Profit before tax                                     1,699   11,600    44,768



 Corporate income tax expense                          2,644  (1,140)   (4,850)



 Net profit for financial year                         4,343   10,460    39,918

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

 Currency translation differences of foreign
 entities                                              (165)     (59)        20



 Comprehensive income for the period                   4,178   10,401    39,938

 Earnings per share for profit attributable to
 equity holders of the parent (basic and diluted,
 in EUR)                                                0.25     0.59      2.26

CONSOLIDATED STATEMENT OF FINANCIAL POSITION
unaudited
in thousand euros

                                          31.03.2026   31.03.2025   31.12.2025

  ASSETS

  Current assets

  Cash and cash equivalents                   40,573       78,525       41,424

  Short-term deposits                         21,000       17,000       18,000

  Trade and other receivables                 38,583       62,815       43,658

  Prepaid corporate income tax                 1,080          105        1,347

  Inventories                                233,114      197,861      219,812

                                             334,350      356,306      324,241

  Non-current assets

  Investments in joint ventures               32,275       23,072       31,957

  Other shares and securities                     80           80           80

  Other long-term loans and receivables       20,265       19,044       20,658

  Deferred income tax assets                   3,163        4,830        2,874

  Investment property                         12,362       12,525       12,395

  Property, plant and equipment               22,048       17,419       22,117

  Intangible assets                              694          388          714

                                              90,887       77,358       90,795



  TOTAL ASSETS                               425,237      433,664      415,036



  LIABILITIES

  Current liabilities

  Borrowings                                   3,140       10,110        3,079

  Payables and prepayments                    90,481      114,153       95,920

  Income tax liability                           809        6,487          510

  Deferred income from government grant            4            -            2

  Short-term provisions                        9,790        8,564       10,426

                                             104,224      139,314      109,937

  Non-current liabilities

  Long-term borrowings                        45,942       15,002       30,012

  Deferred income tax liability                3,901        6,539        7,448

  Other long-term payables                     6,426        8,150        7,073

                                              56,269       29,691       44,533



  TOTAL LIABILITIES                          160,493      169,005      154,470



  EQUITY

  Share capital                                7,929        7,929        7,929

  Statutory reserve capital                      793          793          793

  Currency translation differences             (186)        (100)         (21)

  Retained earnings                          256,208      256,037      251,865

  TOTAL EQUITY                               264,744      264,659      260,566



  TOTAL LIABILITIES AND EQUITY               425,237      433,664      415,036

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 2025, the group employed 613 people, and the
group's revenue for 2025 was EUR 311 million.