Business news from Ukraine

OWNERS OF MORGAN FURNITURE LLC TO INVEST UAH 280 MLN, BOOST SALES BY 3.4 TIMES IN THREE YEARS

KYIV. April 15 (Interfax-Ukraine) – The McMahon spouses who are owners and investors in Ukraine’s leading manufacturer of upholstered furniture, Morgan Furniture LLC (Kvasyliv, Rivne region), plan to invest UAH 280 million (EUR 9.3 million) in the expansion of production facilities and additional equipment within three years.

The implementation of the project will let the company boost output and exports by 3.4 times from the target indicators of 2016 to UAH 3 billion, co-founder of Morgan Furniture LLC Lorraine McMahon said at a press conference at Interfax-Ukraine on Thursday.

The number of jobs available at the enterprise is also expected to increase to 2,100 from 750 as of today, and the company will ensure a large number of jobs with Ukrainian suppliers.

In addition, the furniture manufacturer plans to expand its premises by 18,000 square meters.

Director of Morgan Furniture LLC Roman Basarab announced at the press conference that as of the end of 2015, the company’s revenue was UAH 485 million (all output was exported), which was 39% up on 2014.

“In 2014, when Ukraine’s economy was seeing the most difficult periods, the company demonstrated revenue growth and exports by almost three times, having sold products worth UAH 350 million. As a result, in 2014 and 2015, the company was in the lead in the manufacture of upholstered furniture in Ukraine,” Basarab said.

In the current year, the company’s production is expected at UAH 880 million.

The average wage at the company’s factory is UAH 5,000, which is 43% up on the average monthly wage in Rivne region.

The investors plan to transform the company into a world-class production facility, as the Rivne complex has all the preconditions for this, Lorraine McMahon said.

In particular, it has entered a large European market and established relationships with most of retail chains. What is more, Rivne has a strategically convenient location for easy access to EU markets.

“Morgan Furniture’s success story is a positive message for the business community that one can do business in Ukraine successfully. The investors of the company are interested in spreading this positive message, as they have serious plans for further expansion of business in Ukraine,” she said.

At present, the factory’s products are exported to Germany, France, Great Britain, Poland, Austria, and other Paneuropean Union member states.

According to her, the fact that Ukraine signed the Association Agreement with the EU plays a positive role in business development, in particular due to the abolition of taxes during the procurement of components abroad as of January 1, 2016.

“This increases our competitiveness compared to similar products in Poland and Romania,” she said.

Franklin McMahon in turn said that the planned increase in turnover to up to UAH 3 billion is an achievable target, because the capacity of the European furniture market is great and is estimated at EUR 1.6 billion nowadays.

“Our goal is to become a leading Ukrainian exporter,” he said.

Ukraine accounts for the smallest share in total production by all of the company’s factories, Lorraine McMahon added.

“However, we expect it will become the largest due to the implementation of the project for the expansion of production,” she said without elaborating on the size of these shares.

Answering a question from Interfax-Ukraine if the company plans to start selling furniture in Ukraine, Lorraine McMahon answered: “Yes, we do. This is a big country.” But she did not give any other details.

According to her, the company’s success in Ukraine is based on two factors ‒ “working hard” and “not to be afraid of communicating with partners in Europe.”

“When in 2014 the media constantly reported about war in Ukraine, our large customers suggested that we move production facilities to Poland or other countries, fearing the failure to meet contractual obligations. They did not understand that Rivne is far away from the combat zone. And one client from Finland even put forward a condition that the products should be manufactured in Poland, which made me very angry. I said: “You in Finland were at war with Russia in 1940 and should help Ukraine by buying furniture, rather than cease production. We have guaranteed to all customers in Europe that we would deliver products in any way, but if necessary, we could produce sofas in Lithuania,” she said.

Assessing the risks of work in Ukraine, she emphasized positive trends seen in the last two years, in particular the simplification of VAT collection.

“This does not mean that ideal conditions have already been created for investors and businesses, and the government has a lot to do in order to turn [Ukraine] into a country that attracts investment, this in particular concerns the liberalization of regulatory policy. We have never paid bribes here and have proven that it is possible to work this way,” she added.

As reported, in June 2012, the McMahon spouses opened a furniture factory, Morgan Furniture LLC, on the basis of the Rivnesilmash plant, which they acquired. They invested EUR 10.5 million in this production facility. Initially, the company employed 120 people.

The company is part of Home Group SA, a large European manufacturer of household goods, which is registered in Luxembourg.

The holding has production facilities in Poland, Estonia and Ukraine, with several thousand employees. It handles export and import operations with 22 countries in Europe and the rest of the world.

The McMahon spouses have been investing in Ukraine for more than a decade.

FOREIGN DIRECT INVESTMENT (EQUITY CAPITAL) FROM EU COUNTRIES TO UKRAINE

Note. Excluding the temporarily occupied territories of the Autonomous Republic of Crimea, the city of Sevastopol and in a part of the zone where the anti-terroristic operation. Source: State Statistics Services

Note. Excluding the temporarily occupied territories of the Autonomous Republic of Crimea, the city of Sevastopol and in a part of the zone where the anti-terroristic operation. Source: State Statistics Services

INVESTMENT IN KYIV REAL ESTATE ON FIRST REALTY GROUP DEALS 22% UP IN MARCH

KYIV. April 14 (Interfax-Ukraine) – Capital investment in residential real estate in Kyiv under transactions carried out by Blagovist and Park Lane real estate agencies (both based in Kyiv), part of First Realty Group, in March 2016 increased by 22% compared to February and amounted to $19.207 million, while the number of purchase and sales transactions rose by 24%.

Blagovist said, with reference to its CEO Halyna Melnykova, this data includes the calculation of the cost of a transaction in the national currency at the average exchange rate to U.S. dollars on the day of the transaction.

According to the report, in the total number of First Realty Group transactions in March 2016 the share of deals in the price range of up to $50,000 was 35%. The largest demand was fixed for one- and two-room apartments in Holosiyivsky, Darnytsky, Desniansky, Obolonsky and Sviatoshynsky districts in Kyiv.

According to the company, the most “low-cost” object sold in Kyiv in March 2016 was a one-room apartment of 36 square meters without repair, located in a new building in Krushelnytska Street in Darnytsky district. This apartment was sold for $20,000.

In addition, the category of low-cost objects included a flat of 21.7 square meters, located in Volkova Street in Desniansky district, which sold for $21,000.

 

GERMANY TO PROVIDE EUR 17 MLN TO CHERNIVTSI TO RENEW DRINKING WATER SYSTEM

KYIV. April 14 (Interfax-Ukraine) – The Federal government of Germany via KfW investment bank will provide EUR 17 million to renew drinking water system in Chernivtsi, the Delegation of the European Union (EU) to Ukraine has reported.

The EU will support the project via its Neighbourhood Investment Facility (NIF) under the “Programme for Modernisation and Rehabilitation of Municipal Infrastructure” in Ukraine and will provide EUR 3 million.

The first of three installments of the loan totals up to EUR 17 million.

The project will enable the municipality of Chernivtsi to manage its regional water resources in a more efficient, environmentally sound and sustainable way. Moreover, it will improve the living conditions of the local citizens by providing round-the-clock access to a higher quality drinking water. The loan funds measures include the rehabilitation of pumping stations and groundwater intakes in order to increase energy efficiency. Replacing old and leaking pipes in the drinking water distribution system will reduce physical water losses.

The total cost of the project is EUR 61.5 million.

ЕRNST & YOUNG, DELOITTE TO IMPROVE FINANCIAL STATE OF KYIV METROPOLITEN, KYIVPASTRANS

KYIV. April 14 (Interfax-Ukraine) – Leading audit companies Еrnst & Young and Deloitte in partnership with the European Bank for Reconstruction and Development (EBRD) will help to improve the financial and operational state of municipal enterprises Kyiv Metropoliten and Kyivpastrans.

An Interfax-Ukraine correspondent has reported that the memorandum was signed in Kyiv City Administration on Wednesday.

Earlier EBRD Senior Banker Mark Mageletsky said that the project is financed by the EBRD as part of technical assistance for development of transport infrastructure in Kyiv city. The funding totals EUR 400,000 – EUR 200,000 for each enterprise.

Audit companies within one year to conduct a financial, law and operation analysis of the companies, offer concrete steps to improve their state and accompany these processes.

CHORNOBYL EXCLUSION ZONE AGENCY SEEKS TO RESTRUCTURE CHORNOBYL NPP ENTERPRISE

KYIV. April 14 (Interfax-Ukraine) – The State Agency of Ukraine for Managing Exclusion Zone seeks to restructure state-run specialized enterprise Chornobyl Nuclear Power Plant (NPP) and separating four core types of operation, Agency Head Vitaliy Petruk has said.

He said that starting from 2018 spent nuclear fuel, radioactive waste, new safe confinement and servicing are to be separated.

This would allow more efficiently using the existing infrastructure of the Exclusion Zone and cutting gas consumption thanks to sustainable energy.

Petruk said that development of solar energy is an interesting project. The zone has power lines and non-farmland.

Head of Chornobyl Institute of Research and Development Vitaliy Demyaniuk said that attitude to the Exclusion Zone should be changed. Chornobyl should be associated with research and science, engineering achievements, sustainable energy and natural preserve.