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Swedwood calls time-out for investment

ONE OF Slovakia's largest furniture producers has announced a re-evaluation of its investment plan because of a dispute with Slovakia's state-owned forest company over wood prices.
Swedwood, a subsidiary of Swedish furniture giant Ikea, had been planning to spend over Sk500 million ($11 million) on the construction of a new sliced-veneer plant in the central Slovak town of Nová Baňa, a plan now put on hold due to what company managing director Štefan Sústrik called the state's failure to respect contract conditions agreed on last January.
However, state-owned Lesy SR, which was to be the plant's wood supplier, claims that Swedwood is demanding too much high-quality wood at significantly lower prices than the goods command at auction.

ONE OF Slovakia's largest furniture producers has announced a re-evaluation of its investment plan because of a dispute with Slovakia's state-owned forest company over wood prices.

Swedwood, a subsidiary of Swedish furniture giant Ikea, had been planning to spend over Sk500 million ($11 million) on the construction of a new sliced-veneer plant in the central Slovak town of Nová Baňa, a plan now put on hold due to what company managing director Štefan Sústrik called the state's failure to respect contract conditions agreed on last January.

However, state-owned Lesy SR, which was to be the plant's wood supplier, claims that Swedwood is demanding too much high-quality wood at significantly lower prices than the goods command at auction.

"Our price equals the price we get for wood at auctions. The difference between our requirement and the Swedish offer is over 30 per cent. If we accepted the Swedish bid, we could be accused of defrauding the state," said Lesy head Ján Mičovský.

Swedwood, which employees 1,500 people in four furniture and chipboard facilities in Slovakia, counters that Lesy had agreed to their price in a pair of January framework agreements between the firm and the Agriculture Ministry, which oversees the forester.

Furthermore, said Sústrik, the impasse illustrates Slovakia's failure to develop its key woodworking industry, particularly the value-added side.

"The project was based on the fact that there is no veneer production in Slovakia at all. At our factory in Trnava we unfortunately have to import all of our veneer from abroad. It's ridiculous, because [Slovak beech] logs are exported mostly to Germany, and we are importing veneer from Germany."

Sústrik also said that the auction price Lesy was citing represented unit prices for small lots of the highest quality beech, while Swedwood is looking for 16,000 cubic meters annually for 20 years.

He also said that this quantity could provide around 80 per cent of the veneer used at the Trnava facility, all of which is currently imported.

This is not the first time Swedwood has charged Lesy with not keeping contract conditions. In past years, said Sústrik, the supplier had failed to meet long-term agreements on the supply of low-grade wood for chip-board production at the firm's Malacky facility, north of Bratislava.

"They were not providing the specification [on wood quality] that we had agreed - they were complaining that they did not have enough of that quality of wood, which is their problem, not ours. But they were then moving us to more expensive wood, which had a very bad influence on the economy in Malacky.

"We were shaken because agreements made with the state forest company were not kept," said Sústrik.

Swedwood, which has invested over Sk6 billion ($130 million) into its Slovak facilities so far, emphasizes that the new investment project has been halted, but not scrapped altogether.

Sústrik also said that the Agriculture Ministry had to decide whether to sacrifice immediate cash for added economic benefits, including 300 jobs that would be created at the plant, as well as value-added export earnings from furniture production.

"This is the best project we have initiated so far," said Sústrik, adding that: "We hope we have left the door open in case there is serious interest from the Slovak side."

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