Investors in Lithuania generate higher returns and pay off their investments faster than those in other investment locations, according to a new study. The study, conducted by analysts at the investment development agency Invest Lithuania, looked at levels of return on invested capital (ROIC). They concluded that, thanks to strong ROIC levels, companies see their investments in Lithuania pay off 30% faster than in other locations.
ROIC is a ratio used to calculate the relative profitability of a company. Focusing on investors from Lithuania’s priority markets, namely Scandinavia, Germany, the US and the UK, the analysts found that investors see an average ROIC of 10%. By contrast, the average in other investment locations is just 7%, meaning companies break even 30% faster in Lithuania. The 10% figure also exceeds the ROIC level of 9% that Invest Lithuania itself had projected.
Giedrius Rudis, an analyst in the Project Management Department of Invest Lithuania, believes these strong results will bring in even more foreign investors, further strengthening the business environment. “Between 2010 and 2015, foreign investors operating in Lithuania successfully implemented around 90 development projects,” states Mr Rudis. “We believe that these strong ROIC figures will influence the decision-making of other investors, encouraging them to approve their own development plans. The fact that the investors who are already here are doing so well is also important. Companies abroad are likely to follow the recommendations of successful foreign investors. In this way, the strong results achieved by investors contribute substantially to the development of the Lithuanian economy.”
Analysis has also been conducted into the average ROIC level of all enterprises in Lithuania. From 2011 to 2014, this level was a more modest 6 %, although as Mr Rudis explains, this does not necessarily mean Lithuanian capital companies were less successful. “The data shows that Lithuanian businesses are more cautious, plus they tend to finance over half of their assets using their own equity. In contrast, foreign businesses operating in Lithuania tend to use creditors’ services more actively. This is important because even if two companies use their available assets equally effectively, the business which borrows more can reap a higher ROIC.”
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