Swedes to finance new furniture factory

  • 2004-07-28
  • From wire reports
VILNIUS - Vakaru Medienos Grupe (Western Timber Group) and Sweden's furniture giant IKEA have agreed to joint finance on the construction of a new furniture factory in Kazlu Ruda, Lithuania.

Under the agreement, VMG and IKEA are to invest over 40 million litas (11.6 million euros) in the project, which will be carried out at Giriu Bizonas, one of the four VMG-controlled wood processors and furniture manufacturers.
"This is our second joint project with IKEA Trading as part of our strategic partnership agreement with IKEA," said Nerijus Tilindis, director of VMG.
Their first joint project was the 2002 construction of a 25 million litas furniture factory at Klaipedos Mediena, a wood processing company.
Tilindis did not disclose how much IKEA would contribute toward the new project, but he did say that the Swedes' share would be relatively higher than it was in the Klaipedos Mediena project and that IKEA would not take any equity stake in the new factory.
"We have a five-year contract to sell them our products. The contract will be renewed later," he told the Baltic News Service.
Tilindis added that because the first factory had met investors' expectations in terms of product quality, delivery time and production volumes, IKEA entered this agreement without hesitation.
Laimas Devetinas, CEO of Giriu Bizonas, said that the new production facility should produce over 40 million litas' worth of furniture from chipboard in its first year of operation and raise output to 120 million litas' worth in two year's time.
All furniture will be exported to Western Europe.
"We expect that the new factory will start production as soon as this December and reach its full production capacity in a year or two," Devetinas said.
The new factory will employ about 200 people, manufacturing cupboards, beds and other pieces of furniture.
Apart from Giriu Bizonas and Klaipedos Mediena, VMG also owns the furniture producers Sakuona and Baldistra. The group is in the process of selling the latter company, which is based in Silute, to U.K. investors.
The four VMG-controlled companies posted preliminary pretax earnings of over 6 million litas on sales of 101.93 million litas for the first half of 2004. Their aggregate net profit for the full year of 2003 reached less than a million litas.
The group exports around 90 percent of its products to Western Europe, with IKEA being among its key customers.
VMG's major shareholders are Sigitas Paulauskas and Rimandas Stonys, who are senior executives at the West Lithuanian Industry and Finance Corporation.