by Ihor Eros, Kyiv Post Staff Writer
Leading Western banks have agreed to loan more than $121 million to two foreign-owned wood businesses in Ukraine.


The credit lines, both announced this month, mark two of the largest financing deals involving Ukraine’s wood business and the continued flow of investment into Ukraine.

Kronospan Ukraine, a particleboard producing subsidiary of Austria’s Kronospan Group, inked a $72 million syndicated loan agreement with two banks: the European Bank for Reconstruction and Development and Austria’s Erste Bank.

Additionally, the EBRD granted a $49.2 million credit line towards the Ukrainian expansion plans of Barlinek, the largest Polish floor board manufacturer.

The EBRD is the largest financial investor in Ukraine, having committed to date over 2.4 billion euros (more than $3 billion) across all sectors in the country. 

Kronospan’s bold expansion

Established in 1897, Kronospan claims to be the world’s largest wood-based panel producer with a strong production presence in Europe. The syndicated loan will help Kronospan install a particleboard production plant in Ukraine’s northwest Volyn Region.

Kronospan is planning to refurbish an existing factory building and install two particleboard production lines, enabling the company’s Ukraine arm to manufacture standard and melamine-faced particleboard, which are used in the production of household-office furniture and kitchen cabinets.

Kronospan also plans to improve its handling of wood byproducts by installing a collection system for saw dust and chips.

The upgrades and expansion plans will cost some $120 million.

Erste Bank spokesperson Hana Cygonkova said her bank would provide $30 million of the $72 million loan. Cygonkova said Erste Bank has provided loans to Kronospan in the past for its operations in Bulgaria, the Czech Republic, Poland, Romania and Slovakia.

Roman Plavitskiy, general director at Eurotrade Trade Company, a diversified production and trading company that uses Kronospan’s wood to produce furniture, said the Austrian company is already a leader on the Ukrainian market. While exact market share figures are hard to come by, Plavitskiy said the Austrian wood company has a strong chance of gobbling up a large share of Ukraine’s wood market by providing quality particleboard at competitive prices.

“The quality of particleboard produced by Ukrainian companies does not generally compare with that of Kronospan. More customers are ready to pay good prices for good quality. Kronospan may win a very good market position if they lower the prices on the market,” Plavitskiy said.

Eurotrade operates a furniture factory in Ukraine’s capital and is currently building a new one in the Tarashchansky district of Kyiv Region.

Barlinek’s first steps

Barlinek, a Warsaw Stock Exchange listed company, will use the loan to launch a Greenfield production facility with an annual capacity of 2 million square meters of floor board in Vinnytsya Region.

Jerzy Kozubski, the company’s investment director, said the factory construction project represents Barlinek’s second phase of expansion into Ukraine.

“We started our activities in Ukraine by setting up a facility for making half-finished products to see how it would work out for us in Ukraine, considering the different legislative system and other factors,” Kozubski said.

“Now we are ready to expand our operations to full scale production and have already started constructing a plant that is expected to be ready for production by May 2014,” he added.

In addition to selling floor board in Ukraine, the new facility will seek to export to other markets, including Russia, the United States and Western Europe, according to Kozubski.

While a newcomer, Barlinek is not expecting tough competition in Ukraine.
“According to the information we have, there’s no single quality floor board manufacturer in Ukraine,” Kozubski said.