There are redundant capacities in road construction in Estonia now and intentional consolidation would be the sensible thing to do in the sector, says Andres Trink, CEO of the listed construction group Merko Ehitus.
Estonian road builders should consolidate - Merko
24th February 2013, 12:25
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Merko has not set its sights on market share in road construction in Estonia but is trying to maintain profitability, Trink told BNS in an interview. "This is a field where you can feel clearly that surplus capacities exist. Too many asphalt plants, machines and equipment. Intentional consolidation is what would make sense," Trink said.
The current developments on the world's currency markets influence Merko Ehitus via commodity prices. "We are interested in the price of bitumen, which has an effect on asphalt. We have used financial instruments specifically to hedge ourselves against price risk in bitumen, above all in the case of agreements concluded for a longer period," Trink said.
He said that in agreements signed for two or three years it was optimal to use certain price hedging instruments in terms of the cost-effect ratio. "But we haven't done it in other things. Using hedging instruments definitely isn't cheap," said Trink. "When we anticipate big fluctuations on the market and look at the hedging cost, and see that it's cheap, then we use it."
Merko Ehitus has a fully owned road building subsidiary, Tallinna Teede AS, and the group is active in road construction in Estonia alone now. In the roads segment Merko Ehitus posted a pretax profit of 1.67 million euros on unaudited revenues of 45.15 million euros for 2012. In 2011 the result was a pretax loss of 5.74 million euros on revenues of 52 million euros.