Modest growth of sales expected in 2015

• Profitability stable despite stagnant turnover
• Investment volumes a bit larger outside the energy sector
• Modest growth of sales expected in 2015

Profitability stable despite stagnant turnover
In 2014, enterprises’ turnover and costs in Estonia stayed at the previous year’s level. While the level of total costs did not change, labour costs increased; therefore, the share of personnel expenses to total costs rose from 12% in 2013 to 13% in 2014. Despite no change in turnover, total profits grew by 3%. Profitability, measured as the ratio of total profits to turnover, has been at the same level for three years.

Investment volumes a bit larger outside the energy sector
Business sector investments increased by 2%, excluding the energy sector. Compared with 2013, investments in land, acquisition of buildings, and computers increased. Other investments decreased, with the biggest decline registered in investments in equipment and machinery, due to smaller investment volumes in the energy sector.

Modest growth of sales expected in 2015
The growth of sales and profits will probably remain limited this year. Sentiment indicators have worsened in recent months. Operating capacity in the manufacturing sector hit the seasonal average of recent years in January, but the volume of orders has been declining during the last few months. Exports to Russia have been hit, but the volume of total exports of goods was still growing, at least in January. According to the recent Swedbank survey of Estonia’s manufacturing sector, 64% of polled industrial enterprises planned to increase their turnover (by 3.0%, on average), and 44% of companies expected an increase in their profitability in 2015.

Source: Swedbank

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Interview with DELFI shareholder Hans Luik

One of Estonia’s richest people and shareholder of DELFI, one of the biggest media groups in the Baltics, Hans Luik shares stories about getting into the media industry, doing business in Ukraine and challenges to free media raised by dictatorial governments as well as technological advances.

In 2007, you invested into DELFI and it was quite an expensive purchase – it still is the most expensive media transaction in the Baltic history. Do you consider it a successful investment?

I do indeed. Our company, Ekspress Grupp, was a publisher of magazines and newspapers with no future. We were profitable but not digital. I decided that we’d better take a big loan to dive into the digital future. Nobody knew that we were simultaneously diving into an international financial crisis.

As for today, we have recovered the loan. Meanwhile, I had to bring my personal guarantees and pledge my belongings in order to secure bank loans for the DELFI purchase. But we are number-one digital news company in the Baltics.

It was a forced situation with DELFI in 2007. DELFI belonged to an American fund called Texas Pacific. They had a 5-year investment horizon, and their five years came to an end. So in 2007 they were selling – either to us or our competitors.

There were a lot of interested parties: Norwegians, who started 15 Minutes afterwards, and Finnish publishers. At the time, when we paid over 50 million euros to Texas Pacific, they chose to invest into a real estate company called Washington Mutual. The financial crises began and Washington Mutual went bankrupt with a huge investment from Texas Pacific. It seems that big money made nobody happy in times of crisis…

Last year, the result of Ekspress Grupp was close to 9 million EBITDA profit. So the risk has been worthwile.

It has not been an all-lucky trip. The thing I regret is DELFI Ukraine. We had great expectations and we kept on investing for years. Editors and IT people from Lithuania and Estonia were helping to support DELFI in Kiev. But there is an oligarchic structure of Ukrainian media market with lots of middlemen. For an outsider, it was too hard to gain foothold in the advertising market. We made the hard decision to close down in Kiev.

Talking about innovation, we believe that there will be less direct mail in our postboxes, because it is not very accurately targeted advertising. We want to take information about retail discounts digital, at our new website We already have 60 Lithuanian retailers drawn to our idea.

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Russian company opens a factory in Narva

Estonia’s third largest city, Narva, has a new factory, with Russian paint manufacturer Emlak opening a three-million-euro plant, creating 80 jobs.

Head of the group, Mikhail Polovnikov, said that Narva was chosen due to its proximity to St. Petersburg and due to Estonia’s good business environment.

“Among other reasons, Estonia has a great environment for developing business – all problems are solved hastily. To be honest, in St. Petersburg we would not have been able to set up such a large factory in such a short time, taking into consideration the corruption, for example. It is like going on holiday when we come here,” he said.

He said that the current low point in EU-Russian relations has no effect on the plant as the Estonian subsidiary is an Estonian company and will produce for the European market.

Emlak is one of a number of new plants opened in Narva in recent months, mostly by Russian companies seeking to move or open production in Estonia.

Source: ERR via Estonian Review

Estonian businessman claims 51 mEUR from Latvian state

Estonian businessman Indrek Kuivallik has gone to court against the Latvian state, and is claiming 51 million euros in compensation for his investments, writes Äripäev.

„Suing a state is an extreme measure, sort of last resort,” said Kuivallik who is founder of Estonian cable TV company Starman.

The dispute is between Winergy Ltd that is controlled by Kuivallik and owns Latvia’s largest wind farm, and a local bank Norvik Banka from which Winergy borrowed 18.6 million euros in 2012.

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Cabinet stops sale of TV broadcaster operator Levira

The government stopped the process of selling Estonia’s sole TV broadcast operator citing a change in the security situation.

“Tallinn TV Tower, owned by Levira, is property of critical importance for offering vital services and the transmitter is a pivotal part of the network which covers Estonia. In the climax of heightened tension in security, it would be short-sited to privatize Levira and the TV tower,” Economy Minister Urve Palo said.

She said the 314-meter tower is a popular tourist object which was only recently renovated at great cost to the taxpayer and any sale would not guarantee it remained open.

The government decided last summer to sell the company but leave the TV tower in state hands, but negotiations with the other shareholder, France company TDF Group, which hold 49 percent of Levira, broke down.

Levira owns 23 transmitter towers across Estonia.

Source: ERR News

Developer of taxi booking app Taxify raises 1.4 mEUR

Taxify, developer of a taxi booking app of the same name, has raised 1.4 million euros to support expansion into new markets.

The founder of Taxify, Markus Villig, said the company will use the investment to reinforce its leader’s position in Eastern Europe and secure rapid growth in expanding into markets of Central Europe. In addition to Estonia, Finland, Latvia and Lithuania Taxify is planning to launch its service in four more countries of Europe in the coming months.

The parties behind the 1.4-million-euro investment are Adcash, Rubylight, and Odnoklassniki, TMT Investments, as well as angel investors Rain Rannu from Fortumo and Indrek Kasela.

Taxify is a taxi booking app with dispatcher and backend software solutions for taxi fleet management developed by the technology company Taxify established in Estonia in 2013. Taxify employs more than 30 people in eight countries.

Source: Baltic News Service through Estonian Review


Finnish company is Estonia’s largest private forest owner

The Estonian arm of Tornator Oyj, the third largest wood production company in Finland, recently purchased 13,000 hectares of woodland in Estonia, making it the largest private forest owner in the country.

Tornator now owns over 40,000 hectares of land, although a pale shadow of the close to 600,000 hectares of woodland owned in Finland.

The company grows and manages forests selling the timber or timber rights to logging companies. It registered 1.5 million euros in sales last year.

Estonia is rich in forests – they cover almost half of the country’s territory. The largest forests can be found in the North East and Central Estonia and they stretch from the north coast to the Latvian border. About 10 per cent of Estonia is a nature reserve.

Source: ERR News


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