Estonian Bauhof is curtailing its activities in Ukraine

Following development companies, retailers began to leave the Ukrainian market. As Kommersant has learned, the Estonian DIY chain Bauhof will close its Ukrainian subsidiary in November. The retailer, which promised to open 16 construction supermarkets in Ukraine by 2013, abandoned expansion due to crises: financial in Europe and political in Ukraine.

Estonian Bauhof entered the Ukrainian market in February last year by registering a subsidiary, Bauhof Ukraine. By 2013, the retailer planned to operate 16 DIY (do it yourself - building materials and household goods) supermarkets in Ukraine with an area of 8-20 thousand square meters. m each. The first store was planned to open in 2009; investments in opening one store were estimated at $20 million.

Kommersant has obtained a letter from Bauhof Ukraine director Alexey Revin to the company’s Ukrainian partners, in which he reports the closure of Bauhof’s Ukrainian subsidiary as of November 1. “The Bauhof company is suspending its activities in Ukraine. This is due to the global financial crisis, as well as the instability of the political situation within the country,” the document says. Among the companies that received a letter from Bauhof are Panorama Group, Jones Lang LaSalle Ukraine, Domus, Pedersen & Partners, Re&Solution, 1849plc and Dragon Capital.

The Bauhof network (until 2007 - Ehitus Service) was founded in 2000 in Tallinn. As of September, it united nine stores in Estonia and three in Lithuania. Financial indicators are not disclosed. 60% of Bauhof shares belong to the Swedish investment fund Askembla Asset Management, the rest to private investors.

Alexey Revin confirmed to Kommersant that the company is leaving the Ukrainian market. According to him, Bauhof may still return to Ukraine, but not earlier than in one and a half to two years. The retailer’s project in Latvia has also been frozen due to the unstable situation surrounding the country’s GDP growth, Mr. Revin noted. “Bauhof was at the stage of signing agreements to open three stores, but the company’s board of directors decided to leave the market, and we stopped negotiations,” said Alexey Revin. According to him, stores could open in Odessa (where Bauhof had a land plot), Donetsk (the company was negotiating with the developer Domus) and Poltava (the retailer was negotiating with Velikaya Kishenya).

Ukraine was an important market for Bauhof. To expand into the markets of Ukraine, Lithuania and Latvia, the retailer even changed its sign in November last year - from “Ehitus Service” to “Bauhof” (translated from German as “Construction Yard”). Then, at a press conference on the occasion of the name change, Bauhof executive director Mart Wau said that “a time of stagnation has come in Estonia, and the company doubts the advisability of opening three new Bauhof supermarkets in the country.” This, according to him, was one of the main reasons for the retailer’s expansion into neighboring markets: “We did not even expect such a sudden calm in the construction market. Therefore, at the end of the year, the company’s turnover will be less than the expected 1 billion crowns ($89.64 million). - Kommersant), the profit will also be significantly less than last year - 50 million crowns ($4.48 million - Kommersant)." At the expense of Ukraine, the retailer planned to manage a network of 44 stores already in 2010, according to the company’s presentation for partners (available to Kommersant).

The DIY market in Ukraine, compared to Estonia, on the contrary, is growing - by 25-30% per year, experts say. “There has been no political stability in Ukraine for a long time. Therefore, it is not clear why the company decided to leave the market - just recently they were developing very actively, we negotiated with them on several objects,” says Elena Kravtsova, director of the strategic consulting department at Jones Lang LaSalle Ukraine. Re&Solution executive director Alexander Lanetsky notes that Bauhof planned to develop in Ukraine using loans from SEB Bank (owned by the Swedish SEB group, one of the investors in the Askembla fund). “But loans have become more expensive for everyone, and Bauhof is no exception. In such a situation, companies with ‘real money’ will be able to survive in the market,” says Mr. Lanetsky.

Elena Kommersant-Sinitsyna

The crisis has entered the store