OREANDA-NEWS. Nordecon group ended the first half of 2014 with a gross profit of 4,212 thousand euros (H1 2013: 3,273 thousand euros) and a gross margin of 6.2% (H1 2013: 4.3%). The period's profit was earned in the second quarter when performance was not undermined by adverse weather conditions and the fixed costs of a technological standstill that typically characterise the first quarter. We succeeded in maintaining or improving the profitability of long-term contracts secured in 2013 and the margins of contracts secured in the current year also met expectations.

Future revenue composition will be increasingly impacted by contracts secured in the current market and competitive environment. The Group's management highlighted the expected fall in demand and rise in competitive pressure in previous periods already (see also the chapters Order book, Description of the main risks, and Outlooks of the Group's geographical markets) and has enforced measures for maintaining and, possibly, improving profitability in a situation where volumes decrease. We remain aware that rises in input prices pose a risk for long-term contracts and continue to prioritize profitability over revenue growth or retention.

The Group's administrative expenses for the first half of 2014 totalled 2,471 thousand euros, 6% up on a year ago (H1 2013: 2,327 thousand euros). The ratio of administrative expenses to revenue (12 months rolling) was 3.1% (H1 2013: 3.0%). Our cost-control measures continue to yield strong results - administrative expenses remain below the target ceiling, i.e. 4% of revenue.

Operating profit for the first half-year amounted to 1,507 thousand euros (H1 2013: 954 thousand euros) while EBITDA grew to 2,455 thousand euros (H1 2013: 1,965 thousand euros).

Adverse movements in the euro/hryvna exchange rate gave rise to exchange losses that were significantly larger than those of previous periods. The Ukrainian hryvna weakened by around 31%, which meant that Group entities whose functional currency is the hryvna had to re-measure their euro-denominated liabilities. The Group's exchange losses, which are reported within finance costs, totalled 854 thousand euros (H1 2013: an exchange gain of 41 thousand euros). The same exchange loss gave rise to a positive 808 thousand-euro change in the translation reserve reported in equity (H1 2013: a negative change of 33 thousand euros) and the net effect of the exchange loss on the Group's net assets was 46 thousand euros (H1 2013: a gain of 9 thousand euros).

As a result, the Group's net profit amounted to 454 thousand euros (H1 2013: 812 thousand euros) of which the profit attributable to owners of the parent, Nordecon AS, was 221 thousand euros (H1 2013: 728 thousand euros).