Increasingly more Baltic large companies plan to boost their costs and staff

A survey of Chief Financial Officers conducted by SEB bank indicates that 25% of large companies in Latvia, 33% Estonian and 43% Lithuanian large enterprises intend to increase the number of their employees within next six months. Correspondingly, 61% of Lithuanian, 53% Estonian and 48% Latvian large companies have made plans for year 2017 to increase their costs.

Ints Krasts, board member of SEB Latvia: "Lithuanian big companies have clear ambitions to boost their costs and staff. This mood is linked to the overall optimism which is currently present in the Lithuanian economy. It is reflected also in the amounts of lending: in terms of lending to companies and private individuals this year Lithuania has outpaced both Latvia and Estonia by a large margin. Also Estonian corporations are stepping up their ambitions while the plans of Latvian companies in terms of costs and staff remain fairly down to earth.

During previous two years we have been observing as Lithuanian and Estonian corporations are focusing on investing in development of their businesses, while Latvian big companies were using their cash surplus to pay their debt and dividends to shareholders. In other words, they were taking the money out of their businesses. Therefore I am glad to see that this year the investment ambitions of Latvian companies are no longer lagging behind its two Baltic neighbours. In all three states around 60% of large companies intend to spend their cash surplus in developing their businesses."

Meanwhile, 16% of CFOs in Latvian large companies have admitted that they have plans to reduce the number of employees in their company, and 23% of Latvian companies will cut their expenses next year. 9% of Lithuanian and 7% Estonian corporations gave similar intentions to decrease the number of employees, while cost cuts are on the table for 20% Estonian and 18% Lithuanian large companies.

Half of Baltic large companies expect turnover increase

More than half of Baltic large companies have a positive business outlook: 52% of Latvian CFOs, 53% of their colleagues in Estonia and 50% in Lithuania are looking forward to an increase in their company's cash flow during the next 12 months. However, 9% of large companies in Latvia and Estonia and 10% in Lithuania are sceptical and expect that their turnover will decrease.

Most of the Baltic corporations have characterized their own financial position as good or very good: this view was expressed by 67% of Latvian, 68% Estonian and 74% Lithuanian CFOs. On the other hand, 10% of Latvian CFOs have said that their company's financial position is not favourable, a view shared by 5% Estonian and 3% Lithuanian financiers.

Evaluation of business conditions: stable

Lithuanian companies are the most optimistic about the general business conditions as well: 53% of them have said it is favourable, while 45% of Estonian and 43% Latvian companies agree to such viewpoint.  Meanwhile, there is a substantial number of companies with an opposing opinion. 16% of Latvian and Estonian and 11% of Lithuanian CFOs think that the current business environment is not favourable for their company.

“The mood of large companies is influenced in a negative way by the lack of access to EU funds, which is equally relevant for all three Baltic countries. More likely than not, this situation will change in next year and flows of EU financing will become available in Baltics, enabling companies to step up their investment plans. Moreover, interest rates are currently at their historically lowest positions which makes this a very good time to back your investment plans with long term financing”, points out I.Krasts.

This is the fourth survey of Baltic Chief Financial Officers. Previous surveys were done in 2014 and 2015. 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. 263 largest companies with annual turnover over 20 million euros from Latvia, Lithuania and Estonia participated in the survey, which was carried out during September of this year.