Observer "Lietuva"
WEEK 2nd

Saturday, 10th of January

Lithuanian Airlines cuts ticket prices
National air carrier Lietuvos Avialinijos (Lithuanian Airlines or LAL) cuts prices for flights from Vilnius to nine European cities. Thus, one will be able to reach Amsterdam, Berlin, Brussels, Frankfurt, Helsinki, Copenhagen, London, Stockholm and Tallinn for only LTL 500 (the price does not include airport fees).
The price cut is temporary however. The new price will be valid from January 15 to March 15, 2004.
Dalijus Zebrauskas, head of LAL Sales and Marketing Department, says the volume of passengers is down in winter, thus low prices should encourage people to fly more often. He adds that LAL will continue cutting prices in the future.
Besides the above-mentioned cities, LAL flies to Kiev, Prague, Warsaw and Moscow.
(Lietuvos Zinios)

Bus carrier Kautra sold for LTL 11.11 million
Lithuania's local and international passenger service operator Kautra, 100 percent owned by the local authority of Kaunas, the second largest Lithuania's city, was sold for LTL 11.11 million, LTL 1.11 million above the starting price, for Hermis Fondu Valdymas, the subsidiary of the investment company Vinvesta.
Two bidders took part in the Friday auction of Kautra, which also operates the Kaunas bus hub. The sale procedures might last a month and a half, reserved for the drafting of a sale agreement and approval thereof by the privatization commission of the local authority.
The investor shall settle payment for the passenger service operator in five days from the date of signing of the agreement.
In 2002 earnings of Kautra reached LTL 1.5 million on a turnover of LTL 27.3 million. As of the end of September, liabilities of Kautra totalled LTL 9.7 million, while long-term assets made up LTL 14.3 million.
The company, which employs a workforce of over 400 people, services over 4 million passengers per year.
(Lietuvos Rytas, Respublika, Kauno Diena)

Lithuanian exports rose by 8.5 percent
Lithuanian exports rose by 8.5 percent in the first eleven months of 2003 compared with the same period in 2002, while imports grew 4 percent, the Statistics Department has announced.
The preliminary data, based on customs declarations, showed that Lithuania's eleven-month exports reached LTL 20.295 billion, while imports totalled LTL 27.088 billion in the January-through-November period of 2003.
The country's foreign trade deficit narrowed by 7.4 percent year-on-year, to LTL 6.793 billion from LTL 7.333 billion in the first eleven months of 2002.
European Union countries account for 42.2 percent of all goods exported from Lithuania. Export to the EU candidate countries account for 19.4 percent of the total export volume.
(Lietuvos Zinios)

Friday, 9th of January

Experts say profit should be invested into technologies
Lithuanian companies demonstrated better profitability last year compared to 2002. Experts predict the results to be even better this year and recommend investing profit into new technologies.
Vadimas Titarenko, president's adviser at Nord/LB Lietuva, says membership in the European Union brings not only advantages but challenges as well. Thus, he thinks companies should invest into the modernization of production processes, cost-cutting measures, production quality and packaging. He adds that management structures should be improved as well.
Gintautas Pangonis, CEO of the Lithuanian hardboard and tissue mill AB Grigiskes, says the company will invest profit into new equipment and packaging technologies. The profit of AB Grigiskes grew threefold in 2003 to reach LTL 10 million.
AB Snaige, the largest producer of refrigerators in the Baltic countries, will invest all of its LTL 30 million profit into the construction of a new plant in Kaliningrad, as well as into the development of production capacity and technologies.
(Verslo Zinios)

Managed without Lithuanian banks
VP Market starts implementation of the investment project estimated at EUR 141 million. The company has recently borrowed EUR 35 million from the European Bank for Reconstruction and Development (EBRD). The company says the bank proposed better conditions than the Lithuanian banks. However, some market participants think Lithuanian banks have already borrowed so much for VP Market that they are close to the limit of loan norm allowed for one debtor.
VP Market usually works with the Lithuanian banking leaders – Vilniaus Bankas, Hansabankas and Nord/LB Lietuva. Ignas Staskevicius denies rumours that VP Market has used its loan limit.
Meanwhile, Gintaras Liubinas, head of communications at Vilniaus Bankas, says the bank has received an invitation to participate in the new investment project of VP Market but refused to participate because it is already involved in several large projects linked with VP Market.
Aidas Ignatavicius, head of Hansabankas Business Clients' Department, does not think VP Market has reached loan limits in Lithuania. He adds that the agreement with EBRD shows VP Market is one of the exceptional companies in Lithuania. According to Ignatavicius, only several Lithuanian companies have been granted loans from EBRD.
VP Market plans to allot EUR 141 million for expansion in Lithuania. It will open new Maxima supermarkets in Alytus, Utena, Marijampole and renovate a number of Saulute stores. The money will be used to finance the construction of Akropolis in Kaunas and investments into computer systems.
(Verslo Zinios)

Bus manufacturers target Kaunas
Decision of Kaunas municipality to buy 50 new city buses caused huge interest among the biggest European manufacturers. The municipality is prepared to spend up to EUR 10 million for the new buses.
Mindaugas Grigelis, CEO of Kauno Autobusai (Kaunas Buses), says the contract would be a significant one for any company, thus the city expects some very attractive proposals.
Kauno Autobusai has tested 13 different buses over the last two years. Four companies – MAN, Solaris, Karosa and Nabi Excel - presented their newest models in the last months of last year. Among other manufacturers that have shown interest are Mercedes-Benz, Volvo, Scania and several less-known companies.
The purchase tender will be announced at the end of February, although one can already find an advertisement informing about the tender on the website of the European Bank for Reconstructure and Development. The bank will finance the purchase of the buses.
(Lietuvos Rytas)

Thursday, 8th of January

EBRD grants loan to VP Market
The European Bank for Reconstruction and Development (EBRD) is to extend a EUR 35 million loan to Lithuania's retail giant VP Market, which has recently purchased one of the country's two power distribution grid operators.
The EBRD has said that the loan will allow the company to fund its investment plan aimed at completing the expansion and development of its logistics and food retail network in Lithuania.
VP Market is the largest retailer in the Baltics with a chain of 266 stores in the three countries, of which 185 are in Lithuania, 80 in Latvia, and one in Estonia. The group has said it earmarked over 29 million euros for investments this year.
The EBRD has also said that the loan will help VP Market to improve corporate governance and reporting standards in the company, in particular by improving the transparency of the VP Group structure in Lithuania and financial reporting of the VP Group as a whole.
(Respublika, Lietuvos Zinios, Verslo Zinios, Lietuvos Rytas, Kauno Diena)

Vilniaus Vingis sets target for the future
Lithuania's Vilniaus Vingis, one of Europe's leading producers of deflection yokes for picture tubes with a one-fourth market share, is projecting steady growth in earnings and sales for the years 2005 to 2007.
Vilniaus Vingis has announced to the National Stock Exchange of Lithuania (NSEL) that it targets a net profit of LTL 8 million on sales of LTL 145 million for 2005.
The deflection yoke manufacturer posted sales of LTL 128.1 million for the full year 2003. The sales exceeded initial forecast by LTL 8.1 million.
(Verslo Zinios)

LTL 100 million for Lithuanian Gas
The Lithuanian government endorsed on Wednesday a draft agreement on the sale of a 34 percent equity stake in the natural gas distribution and transportation company Lietuvos Dujos (Lithuanian Gas) to Russia's gas giant Gazprom.
The Cabinet also approved a draft agreement between shareholders of the natural gas company.
Gazprom, the only natural gas supplier to Lithuania, has agreed to pay LTL 100 million for the 34 percent stake in Lietuvos Dujos. The deal on the sale of Lietuvos Dujos was reached after a year and a half of difficult negotiations.
Gazprom will commit itself to supplying 90 percent of Lithuania's natural gas needs. Lietuvos Dujos' market share should rise from approximately 28 percent to 70 percent.
Lietuvos Dujos posted a net profit of LTL 68.97 million for the first nine months of 2003, a 66.7 percent rise in year-on-year terms. The company anticipates a pretax profit of around LTL 84 million for the full year 2003.
(Respublika, Lietuvos Rytas, Verslo Zinios, Lietuvos Zinios, Kauno Diena)

Wednesday, 7th of January

Beer market slumped last year
Sales by Lithuanian brewers on domestic market declined 6.6 percent in 2003, year-on-year, to 241.63 million litres from 258.72 million litres in 2002.
According to the data of the Lithuanian Brewers' Association, which unites ten major local breweries, total domestic beer sales for December reached 19.98 million litres, achieving a rise of 6.5 percent versus December 2002.
Beer producers blamed harsh competition with producers of strong alcoholic drinks, alcoholic cocktails and cider for the decline of sales. Moreover, total sales were weighed down by lower investments into lotteries and various promotion campaigns, poor weather conditions.
Despite a decline in overall beer sales, Svyturys-Utenos Alus, controlled by the Nordic group Baltic Beverages Holding (BBH), retained the lead on Lithuania's beer market. It was followed by Kalnapilis-Tauras Group and Gubernija.
(Lietuvos Zinios)

Turnover of supermarkets grew by more than 10 percent last year
Turnover of the Lithuanian retail companies totalled LTL 14.335 billion for the January-October period of 2003. It is an increase of 12.8 percent compared to the same period in 2002. Department of Statistics reports that turnover of large enterprises grew by 18 percent, while turnover of small companies decreased.
VP Market announced that its turnover in 2003 was LTL 3.593 billion – an increase of 17.9 percent year-on-year. The company expects a 10 percent growth this year. Ignas Staskevicius, CEO of VP Market, says the company successfully expanded into smaller Lithuanian towns last year, renamed T-Market chain into Saulute and offered a number of lotteries for its customers. VP Market currently owns 266 stores in the Baltic countries.
The second largest retail chain in Lithuania IKI reported a turnover of LTL 1.123 billion, which is an increase of 12.3 percent compared to 2002. The company had a profitable year 2003 but does not disclose any details about its profit. Aidas Mackevicius, Director of Finances at Iki, says the company expects its turnover to grow this year as well.
Iki owns 118 stores in Lithuania and plans to open 20 new ones this year.

Baltika Lietuva plans a rapid growth
UAB Baltika Lietuva, which controls apparel stores Monton, Baltman and CHR/Evermen, reported sales of LTL 20.45 million for 2003, which is an increase of 23 percent compared to 2002.
Daina Vigeliene, marketing director of the company, says Baltika Lietuva expects its turnover to reach LTL 34 million in 2004, which would be a 66 percent increase over the results of 2003.
The company expanded its chain of stores at the end of 2003 - a new CHR/Evermen brand name was introduced and three stores under the same name were opened in the largest Lithuanian cities. Baltika Lietuva currently controls 14 stores in Lithuania.
Baltika Lietuva is the subsidiary of Baltika Group. The latter is the international manufacturer of apparel and retailer, which controls 79 stores in 7 countries.
(Verslo Zinios)

Tuesday, 6th of January

Rubikon acquires Vilnius television channel
Rubikon, one of Lithuania's biggest energy equipment production and utilities groups, has acquired Vilniaus Televizija (VTV), the TV station broadcasting in the region of Vilnius, from Vytautas Kvietkauskas, a lawmaker.
VTV had been looking for an investor for over a year. According to media reports, Bronislovas Lubys, Lithuania's leading industrialist, and a Swedish consulting company had earlier shown interest in acquiring the regional TV station.
The VTV deal marks the second acquisition by a domestic investor in Lithuania's TV broadcasting sector in recent weeks. The MG Baltic Group announced in late 2003 that it was buying a 100 percent interest in LNK, one of Lithuania's three private TV stations broadcasting nationwide, from Sweden's Bonnier Group.
(Verslo Zinios, Respublika, Lietuvos Zinios, Lietuvos Rytas)

Over 2,000 tons of carp were bred in the Lithuanian ponds in 2003. Almost a third of the amount was exported to Latvia, Poland and Sweden.
The total annual production value of the Lithuanian ponds is estimated at LTL 8-10 million. The statistics show that 16 enterprises and some 50 farmers are currently breeding fish for sale in the country's ponds.
Lithuania has over 10,000 hectares industrial fishery ponds.
(Lietuvos Rytas)

FDI grew by 1 percent
Foreign direct investments (FDI) in Lithuania notched up by 0.8 percent or LTL 106.7 million in the nine months of 2003, year-on-year, to reach LTL 13.291 billion on October 1.
FDI per capita climbed 1.2 percent to LTL 3,852 in the reporting period.
As of October 1, the manufacturing sector attracted 30 percent of the total FDI. Some 18.6 percent of FDI were channelled to the trade sector, 17.4 percent - to transport and communications services, and 15.7 percent - to the financial intermediation sector.
In the manufacturing sector, some 38.5 percent of the total FDI, attracted by the sector, went into the manufacturing of foodstuffs, beverages and tobacco. Further 17.5 percent were channelled to the oil refining and chemical industry, 10.2 percent - timber and paper manufacturing segment.
The list of major investors in Lithuania showed Denmark (17.4 percent of the total investment), Sweden (15.5 percent), Germany (10.2 percent) and the United States (8.6 percent).

Monday, 5th of January

Alga will enter waste business
Waste management company Marijampoles Svara has a new owner. Its controlling share has been purchased by Marijampole-based concern Alga.
Representatives of Alga do not comment on the transaction before the formalities are completed. Meanwhile, the municipality officials say that significant investments into the waste management sector will be needed as Lithuania enters the European Union and starts applying its standards.
75.5 percent stake in Marijampoles Svara has been sold in a public tender. The initial price of the package was set at LTL 500,000, while the sale price was LTL 616,000.
(Lietuvos Zinios)

Snuff and chewed tobacco remains undesirable
The ban imposed on two tobacco sorts in Lithuania – snuff and chewed tobacco – has not been lifted, following the Tobacco Control Law that steps into force as of May 1, 2004.
Snuff and chewed tobacco are not banned in many EU countries but EU regulations enable its members to introduce the requirements that, in their opinion, are necessary to protect health of their population. Lithuanian legislators have taken advantage of this right.
The Tobacco Control Law seeks to reduce consumption of tobacco products in our country, especially their availability to the minors.
The law imposes restrictions on the amounts of tars and nicotine in cigarettes. It forbids tobacco producers and distributors to sponsor radiocasts and events that take place in several countries or might have any effect beyond the limits of Lithuania.
From now on, fines for violation of the abovementioned law will be collected to the budget of a municipality that imposes a fine.
(Kauno Diena)

Mazeikiu Nafta posts first profit after privatisation
Lithuanian oil refinery Mazeikiu Nafta, controlled by the Russian oil company Yukos, posted its first profit after the company's privatisation.
Although the exact financial results will be announced later, employees of the company and Ministry of Economy have no doubts that the profit of the refinery will reach LTL 311 million for 2003 according to the Lithuanian accounting standards. If the US GAAP standards are applied, the profit of Mazeikiu Nafta should total LTL 120-134 million. In any case, the results significantly exceed initial expectation of Yukos, which predicted a loss of LTL 80 million for 2003. Mazeikiu Nafta posted a loss of LTL 114.33 million in 2002.
Yukos announced a conservative profit forecast of USD 20 million for 2004. The Russian company plans to invest USD 70 million into the oil refinery as well.
(Lietuvos Rytas)

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