Observer "Lietuva"

WEEK 30th

Saturday, 24th of July

Ikea will build another factory
Vakaru Medienos Grupe (Western Timber Group, or VMG) and Sweden's furniture group IKEA have agreed to jointly finance the construction of a new furniture factory in Kazlu Ruda, in south-western Lithuania.
Under the agreement, VMG and IKEA are to invest over LTL 40 million in the project to be carried out at Giriu Bizonas, one of the four VMG-controlled Lithuanian wood processors and furniture manufacturers.
"This is our second joint project with IKEA Trading as part of our strategic partnership agreement with IKEA," said Nerijus Tilindis, director of VMG.
Their first joint project was the construction of a furniture factory at the wood processing company Klaipedos Mediena in 2002. Investment in this project reached about LTL 25 million.
Laimas Devetinas, CEO of Giriu Bizonas, said that the new production facility should produce over LTL 40 million worth of furniture from chipboard in its first year of operation and raise its output to LTL 120 million worth of furniture in two year's time. All furniture will be exported to Western Europe.
Lietuvos Rytas

Lietuvos Energija posted LTL 63 million profit
Lietuvos Energija (Lithuanian Energy), the state-run power transmission company, has announced a preliminary pre-tax profit of LTL 62.8 million for the first half of 2004, a rise of 30.7 percent from a pre-tax profit of LTL 48.05 million a year ago.
Lietuvos Energija's first-half revenues fell by 2.9 percent, year-on-year, to LTL 476.4 million, brought down by a decline in the average electricity transmission price for domestic consumers and a drop in export volumes.
Power exports generated almost 50 percent of the first-half profit. The company exported 4.2 billion kilowatt-hours (kWh) of electricity during first six months of this year, down by 4.5 percent from the first half of 2003.
Kauno Diena, Lietuvos Zinios

Surplus
Lithuania's national budget revenues totalled LTL 5.608 billion in the first half of 2004, exceeding the revenue target by LTL 184.3 million, or 3.4 percent, the Finance Ministry has reported.
The central government's first-half budget revenues exceeded the plans by LTL 110.6 million, while municipal budget revenues came in LTL 73.7 million, or 9.4 percent, above the target and reached LTL 856.4 million. The national budget includes both the central government and municipalities.
Respublika

Friday, 23rd of July

Olympic patience in Mazeikiu Nafta
The Lithuanian oil refinery Mazeikiu Nafta (Mazeikiai Oil or MN), controlled by the Russian oil giant Yukos that is facing huge pressure of Kremlin, does not fear to be left without oil. On Thursday, Yukos announced that after the Russian authorities sell the main oil extraction company of Yukos, the concern might go bankrupt and cease oil export.
The sources of Lietuvos Rytas report that MN has several alternative variants of raw oil supply. One of the variants is to purchase oil from other companies. At present, MN receives some 200.000 tons of oil not from Yukos and this amount might grow in late September.
Another variant is related to the possible problems of Yukos to pay for oil transportation via Russian oil pipes. If Yukos could not pay for oil transportation to Mazeikiai, MN is resolved to take over these expenses.
Lietuvos Rytas, Respublika, Verslo Zinios

PZU group throws down the gauntlet
The Polish insurance group PZU plans to merge the insurance companies that it controls in Lithuania by the end of the year and to occupy 25 percent of the non-life insurance market and 15 percent of the life insurance market in the country by 2008.
This spring, PZU acquired two subsidiaries of the bank Nord/LB Lietuva – Nord/LB Draudimas (Nord/LB Insurance) and Nord/LB Gyvybes Draudimas (Nord/LB Life Insurance).
The merger of the two companies and the previously acquired UAB DK Lindra and UAB Lindra Gyvybes Draudimas (Lindra Life Insurance) has already been started.
At the end of the first six months of this year, Lindra together with Nord/LB Draudimas controlled 16.7 percent of the Lithuanian non-life insurance market and both companies ranked second yielding only to the market leader Lietuvos Draudimas (Lithuanian Insurance).
“The goals of PZU in Lithuania are very aggressive but the market is expanding and the company will seek to take advantage of this,” said Miroslavas Kavalskis, authorized representative of PZU board for market development in Eastern and Central Europe and CIS.
Verslo Zinios

Snoras revises profit plans
The fourth largest commercial bank of Lithuania in terms of assets, Snoras, boosted profit 2.6 times, to LTL 10.6 million, over the first half of this year. The bank claims that it does not feel the effect of the Russian banking crisis and plans to revise the activity plans for this year in near future.
Raimondas Baranauskas, the board chairman of Snoras, claims that the bank posted higher profit for the first half year than it planned for the whole year therefore it might initiate a shareholders’ meeting and ratify a new estimate of revenues and expenses for this year.
Representatives of Snoras claim that the bank succeeded in achieving bigger than planned profit thanks to increased revenues from services and commission fees. According to Baranauskas, Snoras tries not to get involved in the banks’ war over clients, which results in reduced interest rates. The bank is consolidating its positions in the retail banking market by expanding the portfolio of consumer loans beneficial for residents.
Lietuvos Zinios, Respublika, Verslo Zinios

Thursday, 22nd of July

Poles helped Ukmerge brewers
Ukmerge-based brewery Vilkmerges Alus has started bottling its productions not only in barrels and plastic bottles but also in glass bottles and cans this year.
However the beer of Vilkmerges Alus available in glass bottles and cans is produced in Lomza, Poland.
“In our opinion, big investments in production equipment are rather risky therefore it was decided to produce beer in glass bottles and cans in our partners’ factory in Poland,” the marketing director of Vilkmerges Alus Vitalijus Voleika said.
According to the marketing director of the brewery, they are projecting a possibility to invest in the beer glass bottling line in future.
At present, the company’s capacities are exploited nearly 100 percent.
Vilkmerges Alus can produce some 0.55 million litres of beer per month.
Lietuvos Rytas

Payment card market grows 9 percent this year
Lithuania's payment card market grew by 9.2 percent during the first half of 2004, with the number of different cards issued by local banks reaching 2.52 million and their aggregate turnover coming to LTL 6.839 billion as of July 1.
In year-on-year terms the total number of payment cards increased by 32.5 percent, while the turnover of cards soared by 35.2 percent.
The payment card market increased by 19 percent during the first half of 2003, with the annual growth rate of 61 percent.
Lietuvos Rytas

Rokiskio Suris posts LTL 9.6 million profit for first half year
Rokiskio Suris, Lithuania's leading cheese producer, has reported net earnings of LTL 9.6 million for the January-to-June period, a surge of 95.1 percent from the profit of LTL 4.92 million in the first half of 2003.
Rokiskio Suris group owns three main companies – Rokiskis-, Ukmerge- and Utena-based dairies and Eisiskes and Kalora milk buying up centres. Varenos Pienine (Varena Dairy) and Ignalina Pienine (Ignalina Dairy) are being liquidated at the moment.
Dalius Trumpa, production director of Rokiskio Suris, claims that the projected LTL 2.1 million subsidy is included in this year’s profit as well.
Verslo Zinios, Lietuvos Zinios, Lietuvos Rytas

Wednesday, 21st of July

Flow of foreign beer in stores
Import of beer to Lithuania continues growing, while prices of foreign beer brands are shrinking.
In the previous year, 12.523 million litres of beer were imported into the country, an increase of about 10.1 percent versus 2002. The imported beer was worth LTL 16.99 million. The imports slumped 1.8 percent from 2002.
"Beer imports should grow this year again, as importers, including large retail chains, are importing cheap beer. In addition, customers are interested in tasting new beer brands," Audrius Vidzys, head of the Lithuanian Brewers’ Association, claims.
Beer imports into Lithuania significantly increased after May 1, when the country joined the European Union.
Vidzys noted that despite the climbing beer imports this year imported beer would comprise just 6 to 7 percent of total beer consumption in the country at most. In 2003 imported beer accounted for 4.8 percent of total beer consumption in Lithuania.
Lietuvos Rytas, Lietuvos Zinios

VP Market reorganises management
VP Market, operator of the biggest retail trade chain in the Baltic countries, is reorganising management of the companies that it owns. The heads of VP Market and the natural persons related to them become the owners of these companies.
The Securities Commission reported that Vilniaus Prekybos Nekilnojamasis Turtas (Vilniaus Prekyba Real Estate) sold 24.38 percent of shares in Rudalita and 50.18 percent stake in Velga companies, while Vilniaus Prekybos Mazmena (Vilniaus Prekyba Retail) sold 48.98 percent of Rudalita’s shares, 9.99 percent of shares in Velga, 12.14 percent of shares in Vilniaus Prekyba and 14.27 percent of shares in Vilniaus Pergale.
“Factually we have not lost any oft the companies, these are internal deals carried out by VP Market group,” Zilvinas Marcinkevicius, one of the owners of VP Market, said.
He confirmed that they were considering a possibility to liquidate Vilniaus Prekyba but a shareholders’ decision was necessary for such actions.
Verslo Zinios, Lietuvos Rytas, Respublika

Gazprom and Dujotekana seek for Kaunas heating industry
The Russian gas concern Gazprom, which controls a 34 percent stake in the Lithuanian gas company Lietuvos Dujos (Lithuanian Gas), has submitted an application to the lease tender of the Kaunas heating network held by the power company Kauno Energija (Kaunas Energy).
Relying on unofficial data, Gazprom has submitted an application together with a gas import company controlled by private persons, Dujotekana. The latter’s market share in the gas import business has reduced significantly since July.
The Russian energy monopolist Inter RAO JES and the French concern Dalkia, which has leased Vilnius heating networks, have also showed interested in the abovementioned tender.
Kauno Energija announced an international LTL 231 million worth tender for the lease of Kaunas heating network in early July. The deadline for submittal of applications expired on Monday, July 19.
Relying on preliminary calculations, it is necessary to invest over LTL 500 million in Kaunas heating industry over 25 years; the biggest investments should be made in the coming five years.
Respublika, Lietuvos Rytas

Tuesday, 20th of July

Imperfect laws halt bicycle tourism
The government proposes the Seimas to change the Law on Engineless Transport Vehicles and to issue permission to equip bicycle routes in the roads of more intensive traffic.
These amendments would make it possible to use PHARE funds and implement the project of the longest bicycle path in Lithuania. PHARE has allocated EUR 3 million for the bicycle path project that should be completed by 2006.
Length of the new bicycle path in Western Lithuania would exceed 350 kilometres. At present, there are two well equipped paths in Lithuania – in Druskininkai and the Curonian Lagoon.
Relying on the data of the State Tourism Department, bicycle tourism in the central and Western Europe has been developing at a more rapid pace than the rest of the tourism market for the last fifteen years.
Lietuvos Rytas

Omnitel chases clients
With the help of franchise, the biggest mobile communications operator of Lithuania UAB Omnitel is increasing the number of its outlets where clients will be able not only to join the mobile communications network but also order the number portability, payment plan replacement and all other services of the mobile communications operator. Until now, 16 outlets of Omnitel have been offering the whole service package. This year, Omnitel in cooperation with its partner Mikrovisata will open 11 more outlets.
The competitor of Omnitel in the mobile communications market UAB Bite GSM claims that it started implementing the customer care standards in the outlets of its partners two years ago.
Verslo Zinios

Iki is opening for investors
The financial investors that the retail trade group Iki will start negotiating with on the purchase of the new equity issue worth EUR 50 million should become clear in September. The financial injection is to reach Iki group by the New Year.
Iki group controls UAB Palink and UAB Baltisches Haus in Lithuania. Aidas Mackevicius, director general of UAB Palink, is glad that their group attracts interest and that they have already been visited by investors from European financial institutions.
He says that representatives of Iki and the authorized London consultation company Sindicatum Ltd have also visited several potential investors.
Relying on the data of VZ, the foreign investment funds Amber Trust S.C.A. and Firebird are interested in the new equity issue of the retail trade group, while the Swedish investment fund, which has been investing actively in the Baltic countries, has not been offered shares of the retail trade chain yet.
Verslo Zinios

Monday, 19th of July

EU funds for IT support will reach Lithuania at the end of the year
Lithuanian public sector institutions will be able to receive support from the European Union’s funds for IT service and infrastructure development at the end of this year already.
It is planned to allocate LTL218 million for the support of Lithuania’s IT sector in 2004-2006. State and municipal institutions and public institutions will be able to apply for this support.
The support will be allocated to the projects of linking of the information systems of the public sector; promotion of electronic purchases, installation of e-services in the Lithuanian language, connection of electronic solutions, etc.
Verslo Zinios

Tamro purchases drugstore chain
A wholesale pharmacy company Tamro might acquire the company Farmacijos Projektai (Pharmaceutical Projects) that controls 46 drugstores in Lithuania.
On Thursday, the Competition Council issued permission to Tamro to acquire up to 100 percent of shares in Farmacijos Projektai. Tamro already controls 10 percent of the company’s shares.
Last year, Tamro established a group of Family’s Drugstores, which currently unites 80 drugstores controlled by different owners. The group also owns several Tamro drugstores.
Verslo Zinios

World Bank does not understand reasons of Lithuania’s economy growth
“Economical development of the Baltic countries might remain the fastest among the new European Union’s (EU) members in the eastern and central Europe, however, it is difficult to guarantee that Lithuania’s GDP will continue growing at such a rapid pace as until now,” Thomas Laursen, the chief economist of the World Bank for Central Europe and Baltic countries declared during presentation of the quarterly macroeconomic report of new EU countries in Vilnius.
In fact, analysts of the World Bank claim that the leap of Lithuania’s economy is related to the rise of the Russian economy. They guess that after drop in oil prices and the consequent slowdown of Russian economy growth, Lithuania would not manage to retain GDP growth rate.
Lithuanian experts and market participants sceptically value such statements.
Verslo Zinios, Respublika

Outdoors advertising is waiting for parliamentary elections
The outdoors advertising volumes are growing in Lithuania. Over the first five months of this year, the outdoors advertising area increased by 33 percent, if compared to the relevant period last year. Businessmen claim that this year, growth is preconditioned by political advertising.
Marius Jovaisa, board chairman of the Lithuanian Association of Communications Agencies, believes that the outdoors advertising market has increased this year due to the early presidential elections. Presumably, the parliamentary elections that will take place in autumn will also boost the volumes of the outdoors advertising. According to Jovaisa, mostly telecommunications companies, banks and trade centres choose this way of advertising.
Relying on the data of the market research company TNS Gallup, JC Desaux Unicom (JCDU) controlled 67 percent of the outdoors advertising market in Lithuania last year. Its main competitors were UAB Baltijos Vaizdine Reklama (Baltic Visual Advertising) with 13 percent market share and UAB Clear Channel Lietuva with 7 percent market share.
Verslo Zinios

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