Construction Ukraine - NEWS

LPP, a prominent Polish clothing producer and retailer and the operator of the Reserved, CroppTown, Henderson, Promostars and Esotiq brands, has reported a decline in net profit in the second quarter this year from PLN 38.8m (€11.7m) in Q2 2007 to PLN 34.8m (€10.5m). The company has, however, reported a 10.4% year-on-year increase in sales revenues, to PLN 358.1m (€108.2m).

The reduction in the net profit figure was caused by the recession on the markets of the Baltic states, where the company has its stores. LPP has also enlarged its retail network, and this has resulted in a larger workforce and thus higher costs. In addition, salaries at the company have increased by 20% on average.

In order to increase its profits, LPP plans to expand on the Russian, Ukrainian and Middle Eastern markets. The opening of the first store in Dubai is scheduled for the first quarter of 2009. Overall the company plans to enter seven countries in the Persian Gulf region. LPP is planning to launch several dozen stores over the next two-to-three years.

In Russia the retailer intends to launch 32 stores, bringing the total to 79 outlets on that market. Another six stores are to be launched in Ukraine, where the company already has eight outlets. It plans to enlarge its retail space by 60,000 m² over the next 12 months, mainly in Russia and Ukraine. At present LPP manages 159,000 m² of retail area.

Market analysts estimate that LPP’s net profit will be PLN 170-200m (€51-60m) in 2008 in contrast to PLN 135m (€40.8m) in 2007. The company has not disclosed its financial prognosis, but the management agrees with the expert forecast.

The Extraordinary General Meeting (EGM) of Ukrainian insulin maker Indar – in which Bioton owns over 29% of shares – scheduled for 11 August did not take place, as representatives of Gerist Invest, the main shareholder that called the EGM, failed to turn up. This will temporarily allay the concerns – voiced last week by the Ukrainian Health Ministry – that Gerist is bent on closing down Indar. However, it also prolongs the stalemate over the company’s future. In February, Gerist, a secretive British investment firm, snatched control over Indar from the Ukrainian state just as Bioton was about to lift its stake in the company to a controlling 60%. The Ukrainian prosecutor’s office is still conducting an investigation into the circumstances surrounding the deal, which many observers thought was illegal. The probe has so far brought no conclusive results.

Ukraine figures prominently in Bioton’s growth strategy. The impasse at Indar means it may have to go it alone in the Ukrainian market, which will slow down its rate of expansion there.

On 7 August 2008 the grocery chain MD Retail launched four stores, in Popasnaya (Lugansk region), Dokuchaievsk (Donetsk region), Orekhov (Zaporizhye region) and Krinichki (Dnipropetrovsk region).

Overall, by the end of 2008 MD Retail plans to open up to 110 convenience stores with an average area of 500 m², mainly in Eastern and Central Ukraine, according to Interfax-Ukraine.

The company’s strategy provides for the opening of four-five new outlets across the country on a weekly basis. By 2012 the company aims to have 1,500 outlets.

The first MD Retail outlet opened in Kharkiv in June 2007. Currently, MD Retail, which is managed by Midland Group, runs 41 stores.

Apart from MD Retail chain, Midland also owns Amstor Group (chain of 21 hypermarkets) and DonetskProdTorg (food distributor). The company is also active in steel manufacturing, shipping and real estate development .