Large companies in Baltics show cautious optimism

In September 46% of large companies in Baltics expected the business environment to be favourable for the next six months. Share of optimistic-minded companies in Lithuania and Estonia has grown while in Latvia it has remained unchanged.

SEB bank’s Survey of Chief Financial Officers shows that in September 46% of large companies in Baltics expected the business environment to be favourable for the next six months. Share of optimistic-minded companies in Lithuania and Estonia has grown while in Latvia it has remained unchanged.

Lithuanian companies have demonstrated the most positive outlook regarding the business prospects – since September 2014 the share of optimists has increased by 4 percentage points, reaching 57%. Meanwhile CFOs of Estonian large businesses are more sceptical: this year only 36% evaluate the business environment as favourable (an increase from 23% in 2014). In Latvia the share of positive-minded CFOs has remained unchanged – 45% in 2014 and 44% of financiers this year have characterised the business environment as favourable. However, the share of CFOs in Latvia who anticipate an unfavourable business environment has increased since last year from 11% to 17%.

Ints Krasts, member of SEB Latvia management board: “Geopolitical tensions caused by developments in Ukraine and the Russian embargo on imports have left a considerable impact on the mood of large companies in Baltics. In spring of 2014 50% of large businesses had a positive outlook, but by the end of last year their share dropped by 10%. Currently companies recognize that the most adverse scenarios have not materialized. Businesses have found new export markets and new partners, and the confidence is returning.”

Also the self-confidence of large companies in Baltics is increasing. 87% of Lithuanian CFOs have characterized the position of their company as “stable” or “very stable”. This view is shared by 66% CFOs in Latvia and 64% financiers in Estonia.

Nevertheless, in several areas opinion of Latvian CFOs differs from that of Lithuanian and Estonian colleagues. 43% Lithuanian and 54% Estonian large companies are planning to invest their surplus financial assets in developing their businesses. Since last year the share of companies with such plans in Lithuania and Estonia has increased while in Latvia it is decreasing: in September only 31% of large companies in Latvia confirmed such intentions. Instead, in Latvia the share of companies that are planning to pay dividends has increased to 18%, while in Lithuania 14% and in Estonia only 10% of large companies have such plans. 31% of large companies in Latvia plan to use surplus cash to reduce their existing debt, while in Lithuania 20% and in Estonia 15% of large businesses see this as the best way to utilize the available funds.

“The number of Lithuanian and Estonian companies that are investing in developing their businesses is growing. Meanwhile, half of large companies in Latvia plan to use their cash to repay loans and pay dividends to shareholders. This attitude bears a significant risk, especially because we see a very similar picture in the SME segment.

By delaying investments, Latvian companies run the risk of lagging behind in their competitiveness. Besides, currently the interest rates for loans are at their historical low, which means that this is the right time to accelerate investment plans and obtain long-term financing with very affordable rates,” I.Krasts points out.

Opinion of Latvian CFOs is different also in terms of the expected changes in turnover. This year 49% of large companies in Latvia anticipate their turnover to increase during next 12 months, while last year 66% had such expectations. Another 38% of CFOs expect their turnover to remain unchanged, and 13% predict a decline in turnover. Lithuanian and Estonian colleagues are more positive: 58% of Lithuanian and 51% of Estonian CFOs expect their turnover to increase. Also, in Lithuania and Estonia share of companies who expect a turnover decline is smaller: 11% and 8% respectively.

This is the third survey of Baltic Chief Financial Officers. Previous surveys were done in March 2014 and September 2014. Results reveal whether CFOs expect that next six months will bring good or bad news for businesses, identify which are the main concerns and challenges, indicate whether businesses plan to expand or decrease their workforce and give an insight in other topics as well. Around 240 largest companies with annual turnover over 20 million euros from Latvia, Lithuania and Estonia participated in the survey.

More information
Mārtiņš Panke, SEB banka external communication manager – 67215520, 26556965, martins.panke@seb.lv