BONJOUR L'ESTONIE

Estonia leads in business creation

TALLINN - Around 20,000 new companies a year have been founded in Estonia over the past three years, and every third new entrepreneur is a woman, while every fifth founder of a new company has had experience with entrepreneurship before, reports Public Broadcasting citing a study on new companies compiled by SEB.

Forty-three percent of the founders of companies are in the 26-35-year age group and half of them have higher education, or they are acquiring it. The key elements for starting a company are personal belief, self-confidence to start and succeed as an entrepreneur.

“The fear of business failure and readiness to enter business at different ages is changing. The profile of people starting with business is becoming wider and the starters’ knowledge base is becoming more mature. It is not an unimportant fact that every third new company in Estonia today is founded by a woman, which is a very positive trend,” said SEB’s business innovation leader Mart Maasik.

A new direction, the study says, is for specialists moving to business, which creates new challenges for their existing employers since, due to the deficit of experienced professionals, the solution is often that an employee is replaced with the role of service provider. Thus employee relationships become more flexible, people’s skills more widely enforceable and operations more efficient.

As compared to Latvia and Lithuania, 4,000 and 7,000 companies more are created, respectively, in Estonia each year. The technical simplicity of starting a company, and state measures, definitely helps, but they are not the most important parts of an environment favoring business activity.

Estonia to raise bank capital requirements to 12.5% from 1st of August

Estonia's central bank said on Tuesday it would raise the minimum capital requirement for the eurozone country's banks to 12.5 percent on August 1 to cover systemic risks in the small open economy.

The central bank said in October last year it would add 2 percentage points to the European Central Bank's (ECB) minimum capital requirement of 8 percent, and an additional 2.5 percentage points in line with ECB rules for capital conservation buffers.

"Estonia's small, open economy poses a systemic risk for banks due to external factors such as a sudden worsening of the economic situation, which could quickly lead to loan servicing problems in the private sector and a worsening of bank finances," Ardo Hansson, Estonia's central bank governor said in a statement.

Estonia's banking sector is 95 percent controlled by large Nordic banking groups, such Swedbank, SEB, Danske and Nordea.

Reporting by David Mardiste, editing by Louise Heavens

Hilton Hotel in Tallinn gets a cornerstone

The cornerstone for a Hilton hotel at Gonsiori street in Tallinn was laid last week. The 13-story hotel and entertainment center is due for completion at the end of 2015.

Head of Olympic Entertainment Group Armin Karu said that the 36-million euro hotel will be the most modern hotel and casino in the region.

Besides Karu, Mayor of Tallinn Edgar Savisaar, US Ambassador to Estonia Jeffery Levine, the head of the region at Hilton Worldwide Tim Ettelt, and Toomas Annus, the supervisory board chairman at Merko Ehitus - the construction company tasked with building the hotel - also attended the ceremony.

Toomas Höbemägi

Estonian Air's loss made 8.1 mln euros in 2013

Estonia's national carrier Estonian Air announced that its revenue for the year 2013 was 72.3 million and net loss 8.1 million euros, informs LETA.

The results are in line with the restructuring plan which is reflected by the positive operating result of 7.4 million euros, the company said. Estonian Air’s core business turned profitable in the second and third quarter, and in 2013 the airline managed to post its first positive monthly result in over three years. For the full year, the airline’s operating loss amounted to 4.2 million euros.

In 2013, the sales revenue of Estonian Air was 72.3 million euros. The company’s gross profit was 7.4 million euros and net loss 8.1 million euros. As compared to 2012, the sales revenue was by 21% lower. The gross profit increased by 147% and net loss was reduced by 83%. The loss of the airline in 2012 was 49.2 million euros.

"Estonian Air is in a much better position today than it was on 1 November 2012, when I took over as Chairman of the Management Board and CEO of Estonian Air. My mandate was to restructure the airline to sustainable operations. The airline has taken all the planned steps to reach that goal," said Jan Palmér, the CEO of Estonian Air.

Biggest private investor pulls out of Estonian share

Stefan Andersson, a Swedish private investor who has been one of the biggest investors in Tallinn Stock Exchange, has sold most of its holdings, writes Äripäev.

Last year, Andersson sold 842,706 euros worth of shares of Merko Ehitus, 235,000 euros worth of Tallinna Vesi, 115,000 euros worth of Tallink and 95,000 euros worth of Järvevana.

In addition, he sold 413,000 euros in Fortum shares and 163,000 euros of UPM shares. All in all, Andersson sold about 1.9 million euros worth of shares in 2013. According to his company’s annual report, he earned about 275,000 euros in profit from shares and 48,000 euros in dividends in 2013.

The company has more than 1.2 million euros in retained earnings. Andersson paid himself 100,000 euros in dividends for last year. Commenting the reason why he is pulling out of Tallinn Stock Exchange, Andersson said that he was seeing nothing interesting at present in the Tallinn bourse.

"Competition is becoming tougher, Estonia’s growth outlooks are becoming more insecure and the liquidity of Tallinn Stock Exchange is critically low,” he added. Speaking of Estonian listed companies, Andersson said that his favourite is Merko which is Estonia’s best construction company with an investor-friendly dividend policy.

"This has made this share investment very successful,” he added.

Toomas Hõbemägi

Estonian economy shrinks 1.9% in Q1

According to the flash estimates of Statistics Estonia, the gross domestic product of Estonia contracted 1.9 percent year-on-year in the first quarter of 2014

The previous time that the GDP fell was in the 1st quarter of 2010. Compared to the 4th quarter of 2013, the seasonally and working-day adjusted GDP decreased by 1.2%.

Energy was one of the areas that slowed down GDP growth the most, with consumers using less energy, and energy producers importing electricity to replace their own production.

Real estate and transport were other areas that saw a year-on-year decrease. The main reason for the deceleration in real estate was an accelerated rise in prices.

The growth of manufacturing, which is the main contributor to economic growth in Estonia, slowed down mainly due to a decrease in the manufacture of electronic and chemical products. However, the economy was bouyed by the manufacture of wood.

Toomas Hõbemägi

 

Estonia intends to issue millions ID cards to foreigners

In the near future, foreigners will be able to apply for a non-resident's ID card in Estonia that will enable them to use Estonian e-services and an aim has been set to issue ten million such cars in ten years, LETA/Postimees writes.

The idea of the interior ministry to start issuing ID cards to foreigners is seven years old already. After the government approved of the e-residents concept at the end of April, the idea is becoming reality. If the Riigikogu manages to approve of the necessary law amendments by autumn, the ministry is ready to issue the first e-resident's ID cards before the end of this year.

Initially the persons have to submit the application in Estonia but next year most likely it will be possible to ID a person and issue the documents in Estonian embassies and consulates.

Economy and communications ministry communications and state information systems deputy chancellor Taavi Kotka together with interior ministry and State Chancellery officials submitted a position to the Development Fund economic ideas contest, according to which 10 million people could have connected themselves with Estonia's e-identity by the year 2025.

Estonia has not moved closer to Nordic countries in twenty years

Estonian columnist and political analyst Ahto Lobjakas says that now that Estonia is celebrating 10th year of EU membership, it’s time to accept the fact that in twenty years Estonia is still far from the level of its Northern neighbours in Scandinavia, reported ETV in its weekly news roundup.

"In twenty years, we have not gotten closer to becoming a Nordic country. There are no such reference points, except perhaps some very formal ranking, where we had been a Nordic country or more Nordic than we were twenty years ago. It’s a question of solidarity – they don’t see us as one of them,” said Lobjakas.

According to the analyst, EU sees Estonia as a good student because the country has no debt and Estonia’s image as a sustainable country is good. Lobjakas added that Estonia’s voice has been strengthened in the actions of Russia because people who ten years ago spoke about the threat of Russia have now turned out to have been clairvoyants.

"The European Union is changing, seats are being redistributed and people who come from Eastern Europe, including Estonia, are now in a better position as candidates than they were five years ago,” he said.

Toomas Hõbemägi

Bilateral code share agreement in between Estonian Air and Aeroflot

 

Starting in mid-April, a bilateral code share agreement between Estonian Air and Aeroflot was established on Tallinn-Moscow flights, the Estonian national carrier announced, reports LETA.

Up to now, only Estonian Air flights on the Tallinn-Moscow-Tallinn route were operated under the code share agreement with Aeroflot. From now on, also Aeroflot flights on the Moscow-Tallinn-Moscow route will be operated under the code share agreement with Estonian Air.

The bilateral cooperation is widening collaboration between the two airlines, simplifying the purchase of combined flight tickets and widens the current sales network. Estonian Air operates, between Tallinn and Moscow, seven flights a week. From June 26 to Aug. 29, Estonian Air will be operating nine flights a week on this route.

Swedbank blesses state with dozens of millions

Along with its quarterly economic results, Swedbank yesterday declared its new rules starting this year. Namely: in Estonia, as in other subsidiaries in the Baltics, a new dividends policy will apply, pursuant to which 60 percent of profits will be drawn out. For the Estonian state, this means tax income reaching into tens of millions of euros.

One of the legends linked to our banking is that the banks which belong to foreign owners take the profits out of Estonia, not paying income tax on it. In reality, the opposite is true.

In January, Postimees wrote that as the foreign owned big banks have not taken dividends out of local subsidiaries – some for years, some never – then they have also not paid income tax to the state, for pursuant to Estonian law enterprises shall not pay corporate income tax as long as they do not withdraw dividends. Swedbank has already allotted €6m for income tax payments postponed in first quarter, meaning that the bank reckons in needs to pay the state some quarter of hundred million euros worth of income tax.

«Over the years, our operations in Estonia have created an excellent capital base; due to that, Swedbank Group has decided to start paying dividends on profits earned here,» said Swedbank CEO Priit Perens. «True, Estonian law favours accumulation of capital; still, now the time is obviously ripe to also pay the state taxes on profits earned.» According to Mr Perens, in earlier years Swedbank has paid income tax via subsidiaries, if dividends have been drawn from these. «For instance, for last year we paid €16.3m of income tax into state budget,» he underlined.

One of Russia's biggest cosmetics industries will open a plant in Estonia

One of Russia's biggest cosmetics industries Natura Siberica will open a plant in Tallinn in October, intending to make natural cosmetics out of plants grown in the Estonian Saaremaa island, LETA/Postimees writes.

"We intend to send the first products to Estonian and foreign markets in October this year," the company's owner Andrei Trubnikov told Postimees. "By producing in Estonia, we can reduce the price of our cosmetics sold in Europe by a fifth, which will certainly increase trust towards us."

Trubnikov's Estonian-registered company Eurobio Lab invests up to 5 mln euros of money borrowed from banks in the plant developed in the former Coca-Cola plant in Tallinn's Mustamäe city district. Trubnikov plans that when the plant is working at full capacity, it will have a hundred employees and nearly 40 mln euros of annual turnover, which would form a tenth of the volume of his current business.

Trubnikov is also looking for land in the Saaremaa island to grow ecologically clean herbs and studies the nature of Saaremaa to create an Estonian cosmetic products series. "Estonia has a very good reputation in Russia and elsewhere in the world, which is why we hope to be a success with Estonian products," he said.

Andrei Trubnikov owns the company Pervoye Reshenie, which issues 30 brands of cosmetics. His brands include Retsepty Babushki Agafi, Organic Garden, Eco Hysteria etc. The brand and company Natura Siberica started out in 2007.

The company has four plants in Russia and stores in Moscow, St Petersburg and Rostov by Don. The company's turnover is nearly 53 million euros a year and export volume nearly 400,000 euros.

Money exchange startup TransferWise hits the £1 billion mark

Shoreditch-based TransferWise has now transferred over £1 billion of customers' money, a jump from £ 125 million almost a year ago.

Co-founder Taavet Hinrikus said it shows people are realising the ‘poor value’ that banks offer when it comes to sending money abroad.

‘In financial services there has been so little change for so long. But people won’t put up with opaque fees and poor service from banks any longer. TransferWise has saved our customers over £45m in banking fees,’ Hinrikus told MT.

TransferWise, which was started three years ago by Estonian-born Taavet Hinrikus and Kristo Käärmann, was given a massive boost when Peter Thiel, co-founder of PayPal and Facebook’s first investor, invested $6m in the startup last May. It was the first European investment for Thiel's fund Valar Ventures.

The money has been used to grow the number of currency transfers that TransferWise offers, which now includes the Polish Zloty, Indian Rupee, Chinese Yuan and South African Rand. A year ago just some European currencies and US dollars were on offer. If one currency is in stronger demand, Hinrikus says the firm works with large institutional partners to deal with the imbalance at the opposite end.

Lithuanian retail mogul promises to conquer the Estonian market

Maxima is determined to become the market leader on the grocery market in Estonia and hopes that it happen soon, according to Lithuanian businessman Nerijus Numavičiuse who owns the Maxima retailer.

In an interview to Forbes, Numavičius promised to conquer the Estonian grocery market in the near future.

Maxima Group that was founded in 1992 started to expand outside Lithuania in 2000, first by entering the Latvian market. It took Maxima three years in Latvia to reac 180 million euros in sales and become bigger than Norwegian-owned competitor RIMI.

In Estonia, however, the company has been struggling because in 2001 when Maxima started to open stores in Estonia, the Estonian market was already divided between Säästumarket, Selver and Rimi.

Maxima made a loss of over 8m euros in Estonia in 2011.

Toomas Hõbemägi

Estonian Air's loss may be slightly bigger than expected

While auditing company Deloitte is working hard these days to issue an evaluation about the financial situation of Estonia's national carrier Estonian Air, and the net loss figure can change during auditing, Postimees daily claims that its sources indicate that the carrier posted a loss of 8.1 million euros in 2013, by one million more than the state forecast, cites LETA.

Estonian Air's council chairman Jaan Tamm and council member Erki Urva confirmed that the unaudited loss in that range. The company CEO Jan Palmér didn’t wish to talk about figures yet but said that they are fulfilling the restructuring plan that was submitted to the European Commission a year ago.

"If we distribute our business into parts, then the main activity that we want to continue with in long-term perspective will most likely post a profit," said Palmér. "But then we have two planes that we cannot get rid of. We try to conduct as many charter flights with them as possible but we are not in black with them yet. Also last year, the majority of restructuring took place. We reduced the number of employees and planes and sold property."

Estonian smartphone sales rise in February

Handset sales totaled 26,000 units in Estonia in February, according to a study from GfK Retail and Technology. Smartphones' share of handset sales, in units, grew by 7.5 percent year-on-year.

Tele2 Estonia claims that the smartphone share jumped by 25 percent in its shops in February. Sales of Sony devices were a growth drive, with sales of the Sony Xperia M smartphone surging 900 percent month-on-month thanks to their joint promotion.

Some 7,600 conventional mobile handsets and 18,600 smartphones were sold in Estonia in February, according to the study. The average retail price of a moble phone was EUR 252, or EUR 205 in Tele2 Estonia branded shops. The handset sales volume in Estonia in February was EUR 5 million.

Delfi Holding transferred the shares of Ukraine subsidiary

SIA Delfi Holding has transferred 100% of the shares of the Ukraine subsidiary LLC Delfi, which operated news portal delfi.ua. The purpose of the transaction is to terminate business activity in Ukraine as stated in the announcement published on 2 February 2014.

The intellectual property related to the portal will still belong to SIA Delfi Holding but the portal will be operated on a contractual basis by persons not related to AS Ekspress Grupp.

The transaction can’t be treated as a transaction with a related party and the members of the supervisory and management board do not have any personal interest in the transaction.

         Additional information:
         Gunnar Kobin
         Chairman of the Management Board
         GSM: +372 5188111
         e-mail: [email protected]

Estonia’s alcohol industries may have to close plants for months because of excise tax increase

Janek Kalvi, manager of Estonia's biggest strong alcohol producer Liviko, and head of Estonian Alcohol Producers Association, said that alcohol industries may have to close their plants for months if the new coalition implements the promised 15% alcohol excise tax increase next year, LETA/Postimees Online reports.

"For companies to be strong exporters, they have to be strong at the domestic market too and they should be offered here a stable economic environment. If alcohol excise tax is increased by 15 percent, and strong alcohol producers especially will be forced to close their plants as the result of it for practically a half a year, what exports are we talking about then," said Kalvi.

"With an excise tax increase that abrupt, any kind of threshold of reasonability is crossed. Alcohol excise tax is already today so high. With such an increase, what will happen is that retail trade will buy bigger reserves in advance and producer companies will have to reorganize their work for at least three to four months. Most likely we will be forced to send our employees to forced vacations after that."

One of the sources of financing for promises made by new government coalition is an increase of excise taxes for alcohol and tobacco products: by 15% starting next year instead of the initially planned 5% for alcohol excise tax and 16% instead of the planned 6% for tobacco excise tax.

Estonian sees rise in online-shopping packages from China

Estonia's national Eesti Post is currently sorting through up to 9,000 Online-shopping parcels from China daily, which is a three-fold growth compared with last year and lingering at Christmas-rush levels, according to local media.

In the first two months of 2013, 55,000 packages were sent to Estonia from China, but the trend of buying cheap goods from online Chinese retailers has grown to 130,000 during the same period this year, Estonian internet portal Delfi reported Friday.

Kaido Padar, head of the state-owned Eesti Post's package service, said that deliveries from China have to be entered into the Estonian system manually, which takes up increasing man hours. He said European postal authorities are in talks with China over automating this process, the Estonian Public Broadcasting reported.

During the last Christmas and New Year holiday season, postal workers in Estonia sorted through around 10,000 parcels per day, mostly Estonian consumers' online-shopping from China for its huge variaty and competitive price.

Estonian exporters suffer from Russians' lower purchasing power

According to Estonian enterprises doing business in Russia, business is being affected also because the purchasing power of Russians has been weakening, partly because of devaluation of ruble.

Erik Laidvee, CEO of Transiidikeskus that operates Estonia’s only container terminal in Muuga, said that the company handled only 2.6% more consumer goods in the East-West direction.

“We expected volume of consumer goods shipped to Russia to increased 19% in the first two months. It’s clear that because of weakening ruble, Russians can no longer afford import goods such as toys and sports goods,” said Laidvee.

Also Estonian manufacturer of building products Krimelte says that its sales in Russia have been decreasing. Because of falling purchasing power, Krimelte’s plant in Moscow oblast made a loss.

“Only 10% of the plant’s costs are in euros, but the ruble devaluation is affecting us in a major way,” says Jaan Puusaag, adding that the Zhukovsk plant contributes between 15 and 20% of the group revenue.

Although because of its energy dependency, the EU is not too willing to impose trade sanctions on Russia over the Ukraine events, any worsening of EU-Russian trade will also affect Baltic enterprises, writes Postimees. Since Russia itself depends on goods imported from Western Europe, it is clear that neither side is ready for an all-out trade war.

Toomas Hõbemägi

Estonia registers EU's second steepest increase in retail trade turnover in January

Retail trade turnover in Latvia increased 3.2% in January 2014, compared to January 2013, the ninth steepest increase in all European Union countries for which data are available, according to the latest data from the EU's statistical office Eurostat. Increase in Estonia made 8% and in Lithuania 4.8%, informs LETA.

The steepest year-on-year increases were recorded in Luxembourg – 12.2%, Estonia – 8%, Portugal – 6.6%, and Romania – 5.9%.

Year-on-year reductions were registered only in Denmark and Malta – 0.7% each. Retail trade turnover in Finland remained unchanged.

Retail trade turnover in Lithuania grew 4.8%, the seventh steepest increase across the EU.

In comparison with January 2013, retail trade turnover in the EU increased 1.9% in January 2014, the euro area saw a 1.3% increase.

Compared to December 2013, retail trade turnover grew 0.9% in the EU and 1.6% in the euro area in January 2014.

The steepest month-on-month increases were observed in Portugal – 6.7%, Estonia – 4.6%, and Germany – 2.5%.

Month-on-month reductions were recorded in Great Britain – 1.5%, Ireland and Malta – 1% each, Denmark – 0.9%, and Latvia – 0.6%.

Compared to December 2013, retail trade turnover in Lithuania rose 0.8% in January 2014.