The low investment activity is reflected in the slower growth of corporate debt

The growth of corporate debt decreased at the start of the year. In quarterly terms, the volume of loans taken and bonds issued stopped increasing by the end of the first quarter of 2015, but year-on-year, the growth reached nearly 4%. The volume of long-term loans has decreased because of moderate investment activity, both in case of loans taken from the Estonian financial sector and loans taken from abroad.

Corporate equity decreased somewhat in the first quarter. Reduced profits and relatively substantial dividend payouts meant that reinvested profits also decreased, and the growth of equity, which was fast-paced after the economic crisis, stopped. In international comparison, however, the level of equity in the Estonian corporate sector is quite high.

The incomes and savings of households are still growing faster than their loan liabilities. Higher incomes helped the cash and deposits of households to increase by 9% over the year, to 6.3 billion euros. At the same time, loan liabilities grew by 3.5% and reached 7.8 billion euros. The growth rate of both long-term housing loans and short-term loan liabilities has accelerated somewhat. The indebtedness of households as a ratio of disposable income decreased and as a ratio to GDP remained at 40%.

Like in the past five years, Estonian residents still invested or returned more funds abroad than they took in from there. This was because Estonian residents still saved more in the first quarter than they invested.

Source: Bank of Estonia

Author: Taavi Raudsaar, Economist at Eesti Pank

Businesses proficts decreased in the 1st quarter

According to Statistics Estonia, in the 1st quarter of 2015, the total profit of the business sector was 650 million euros, which was 9% less than in the same period a year ago.

Compared to the 1st quarter of 2014, total profit decreased in almost all economic activities.

The biggest contribution to the total profit was made by trade, real estate and transportation and storage enterprises. The growth in the profit of the business sector was negatively influenced mostly by manufacturing, information and communication and agricultural enterprises. The profit of manufacturing decreased about a fourth, mainly due to the decrease in profits in the export-oriented manufacture of electronics, metal products and wood.

In the 1st quarter of 2015, enterprises sold goods and services for 11.6 billion euros, which was 2% less than in the same period a year ago. The turnover of trade enterprises, which have the biggest share in the total turnover of the business sector, decreased 7%, influenced mostly by a decrease in the turnover of wholesale trade. At the same time, the turnover of retail trade continued to grow. The turnover of manufacturing enterprises increased 5%.

Compared to the 1st quarter of 2014, the total costs of enterprises decreased 1%, while personnel expenses increased 8%. The number of persons employed and the number of hours worked increased 4% and 5%, respectively. The labour productivity of the business sector on the basis of value added amounted to an average of 5,080 euros per person employed in a quarter and was 2% smaller than in the 1st quarter of 2014.

In the 1st quarter of 2015, enterprises invested 458 million euros, which was about a tenth less than in the same period the year before. The decrease in investments compared to the corresponding quarter of the previous year continued for the sixth quarter in a row. The largest investments were made mainly in equipment and machinery and buildings. The main investors were manufacturing, energy, trade and transportation and storage enterprises with more than a half of the total investments of enterprises. Compared to the 1st quarter of 2014, the investments in buildings, in vehicles and in computers increased. Other investments decreased, with the biggest decrease registered in investments in equipment and machinery.Diagram: Total profit of the business sector, 1st quarter 2010 – 1st quarter 2015

Source: Statistics Estonia

Companies made 3.3 billion euros profit last year

According to the preliminary data of Statistics Estonia, in 2014 the total profit of the business sector was 3.3 billion euros, which was 3% more than the year earlier. The increase in the business sector’s total profit continued for the fifth year in a row.

Compared to 2013, the total profit increased in almost all economic activities. The biggest contribution to the growth in total profit was made by transportation and storage and information and communication activities. The growth in the profit of the business sector was negatively influenced mostly by construction and wholesale trade activities. The profit of manufacturing, which holds the largest share in the total profit of the business sector, increased 1% compared to 2013, mainly due to the decreased profits in the manufacture of electronics and fuel oil products.

In 2014, enterprises sold goods and services for 50.3 billion euros, which was the same as the year before. The turnover of trade enterprises, which have the biggest share in the total turnover of the business sector, decreased 1%, influenced mostly by a decrease in the turnover of wholesale trade. At the same time, the turnover of retail trade continued to grow. The turnover of manufacturing enterprises increased 4%.

Compared to 2013, the total costs of enterprises also stayed on the same level, while personnel expenses increased 8%. The number of persons employed and the number of hours worked increased 3% and 5%, respectively. The labour productivity of the business sector on the basis of value added amounted to an average of 22,300 euros per person employed in a year and was 4% higher than in 2013.

The investment activity of enterprises continued to decrease for the second year in a row. In 2014, enterprises invested 2.4 billion euros, which is about a tenth less than the year before. Similarly to 2013, the largest investments were made mainly in equipment and machinery and in the construction and alteration of buildings. The main investors were energy, manufacturing, agricultural and transportation and storage enterprises with more than a half of the total investments of enterprises. Compared to 2013, the investments in land, acquisition of buildings and computers increased. Other investments decreased, with the biggest decrease (21%) registered in investments in equipment and machinery.

In the 4th quarter of 2014, enterprises sold goods and services for 13.0 billion euros, which was 2% more than in the same period of 2013. In the 4th quarter of 2014, enterprises invested 768 million euros, i.e. 2% less than in the 4th quarter of 2013.

Diagram: Total profit of the business sector, 2002–2014

 

Source: Statistics Estonia

President opened a water filter plant in Narva

The President, Toomas Hendrik Ilves, opened the Aquaphor water filter plant in Narva today, which is the largest and most modern of its kind in Estonia and in Europe in general.

“The fact that the plant was built right here demonstrates recognition and trust in Narva and the local people,” said the Head of State, who added that the plant will provide employment for approximately 300 local people.

“This also shows the good opportunities offered by Narva, a border town of the European Union, with both a good geographical location and a local, motivated labour force willing to learn. This has been spotted by many entrepreneurs; however, there is still room for more in both Narva and Ida-Virumaa in general,” said President Ilves.

“An innovative and modern Estonia, a country with transparent rules and well-developed IT solutions, represents an environment that supports entrepreneurship and encourages each and every entrepreneur who wishes to seriously connect themselves with Estonia,” confirmed the Head of State, as he welcomed Аquaphor Group, an international concern that last year achieved sales turnover of over 100 million USD, and wished them luck with their venture in Narva.

The everyday running of the business in Estonia will be managed by Westaqua-Invest OÜ, a subsidiary of the holding company Electophor Inc. (USA), which last year had a turnover of 15.3 million euros and a profit of 2.7 million euros.

Aquaphor’s water filter plant is located in the Narva logistics and industrial park. This is a part of the Foundation Ida-Virumaa Industrial Areas Development, which was established by the towns of Narva, Jõhvi, Kohtla-Järve and Kiviõli and the ministries of finance, economic affairs and communications and environment.

Source: Office of the President, Public Relations Department via Estonian Review

Businesses made less profit this year

According to Statistics Estonia, in the 3rd quarter of 2014, the total profit of the business sector was 859 million euros, 7% less than the same time a year ago.

The profit of the business sector was negatively influenced mostly by construction and wholesale activities. The profit of manufacturing, which holds the largest share in the total profit of the business sector, decreased 13%, mainly due to a decrease in the profits of the export-oriented manufacture of electronics, and wood and fuel oil products. The biggest positive contribution to total profit was made by transportation and storage, and accommodation and food service activities.

In the 3rd quarter of 2014, enterprises sold goods and services for 12.6 billion euros, which was 2% less than in the same period a year ago. The turnover of trade enterprises, which have the biggest share in the total turnover of the business sector, decreased 4%, influenced mostly by a decrease in the turnover of wholesale trade. At the same time, the turnover of retail trade continued to grow. The turnover of manufacturing enterprises increased 7%.

Compared to the 3rd quarter of 2013, the total costs of enterprises decreased 1%. Personnel expenses increased 8%. The number of persons employed and the number of hours worked increased 3% and 6%, respectively. The quarterly labour productivity of the business sector on the basis of the value added amounted to an average of 5,600 euros per person employed, remaining on the level of the previous year.

The investment activity of enterprises continues to decrease. In the 3rd quarter of 2014, enterprises invested 586 million euros, which was 16% less than in the same period of the previous year. The largest investments were made mainly in buildings, equipment and machinery. The main investors were energy, manufacturing and transportation and storage enterprises with a half of the total investments of enterprises. Compared to the 3rd quarter of 2013, there was an increase in investments in land and computers. Other investments decreased, with investments in equipment and machinery declining the most.

Diagram: Total profit of the business sector, 1st quarter 2010 – 3rd quarter 2014

Source: Statistics Estonia

Saaremaa businesses eyeing 25 MEUR conference center

A group of businesspeople are planning to build a 25 million euro concert and conference venue in the capital of the Estonian island of Saaremaa and are hoping to raise the necessary money from local businesses and EU funds.

“Even though the planned center is not tangible reality yet, negotiations are under way and Saaremaa businesspeople have a firm intention of building a center for international events namely in Kuressaare or near it. The aim is to host at least 40 international conferences per year, which would bring the region some 12 million euros of additional revenue,” Tullio Liblik, member of the group, said in a press release.

The main hall of the multifunctional concert and conference center would have a capacity of 1,600 seats and an overall capacity of up to 4,390. In-between major conferences it would serve as a theater, a venue for concerts, exhibitions and receptions. In addition to the main hall the facility would have several smaller conference and rehearsal rooms as well as a planetarium.

Liblik said that while the decision about the location has yet to be made, several potential sites on Kuressaare’s fringes or just outside the city boundaries were being considered. The initial draft places the center on the shore of Poduste River near the Kuressaare golf center, with a view of the sea and Kuressaare Castle.

A competition for the architectural design will be held once the detailed plan has been approved, Saare County Governor Kaido Kaasik said.

Source: BNS via Estonian Review

Lawyer named ‘Entrepreneur of the Year’

raidlaThe founder and senior partner of law firm Raidla Lejins & Norcous, Jüri Raidla, has been named ‘Entrepreneur of the Year’, with Merinvest CEO Enn Meri picking up the ‘Lifetime Achievement Award’.

Raidla founded the company in 1993, a year after serving as the Minister of Justice. Raidla Lejins & Norcous has expanded to Latvia, Lithuania and Belarus, employing 120 lawyers and 35 support staff.

Raidla and his company have also received international recognition.

Meri, who owns and leads car part manufacturer Merinvest, returned to Estonia in 1991 and set up a string of manufacturing companies, some of which are still active today.

He said his main factory is in Kuressaare, because he was born there and the staff are more loyal: “The further you are from Tallinn, the more loyal the staff are,” he noted.

Meri said that Estonia has one of the best environments for business in Europe. He recently joined the new Free Party and plans to run for Parliament.

The ceremony, organized by the Ernst & Young Baltic, took place for the seventh time. Brothers Peeter and Priit Rebane won the ‘Entrepreneur of the Year’ award last year.

Source: ERR via Estonian Review

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