IKEA group prefers Lithuania to Estonia

The Swedish furniture group IKEA, the largest shareholder of furniture producer Vilniaus Baldu Kombinatas, is increasing its orders to Lithuanian suppliers to over 100 million litas (28.9 million euros).

VBK had set the total sales target for 2003 at 95 million litas, of which sales to IKEA had been estimated to reach 80 million litas this year, Viktoras Majauskas, managing director of IKEA, said.

"We have the capacity of producing furniture for 100 million litas, but the actual volume of sales to IKEA will depend upon assimilation of new products and agreement upon the selling prices with the group," Majauskas said.

IKEA has about 2,500 suppliers, and VBK is ranked fifth on the Swedish company's list.

The Estonian business newspaper Eesti Paevaleht reported on April 4 that IKEA is phasing out contracts in Estonia in favor of Lithuania, where production is cheaper.

As a result, cancellation of subcontracting orders may cost the Estonian furniture producers at least 100 million kroons' (6.4 million euros') worth of orders, which will be channeled to Lithuania.

Representatives of the Estonian business development fund say such trend is not at all surprising, as businesses are always looking for a cheaper labor force.

Majauskas said he was not in the position of giving comments on the reports of Eesti Paevaleht, as IKEA never discusses its plans with suppliers.

VBK posted an audited net profit of 6.5 million litas on sales of 82.2 million litas for the year 2002, a 32.2 percent increase over 2001.

In the first quarter of this year, VBK's turnover grew by 17.2 percent from 17.5 million litas to 20.5 million litas.

VBK has an authorized capital of 15.5 million litas. Invalda, a local investment holding company, owned 68.7 percent of voting shares in the company as of April 3.