Observer "Lietuva"

WEEK 7.2005

Saturday, 19th of February

Giriu Bizonas officially launches new furniture plant
Vakaru Medienos Grupe (Western Timber Group, or VMG), a private equity Lithuania's timber and furniture group, has opened a new furniture plant, which will be operated by Giriu Bizonas, a timber processing company based in Kazlu Ruda, Southern Lithuania.
Project investments, including the contribution of Swedish furniture trader IKEA, made up some LTL 40 million. The new plant was the second joint project with IKEA, said Nerijus Tilindis, VMG CEO. The first joint plant project was implemented at the facilities of Klaipedos Mediena, a VMG company, back in 2002.
The new plant will produce dressers, beds, bedside tables and other household furniture items. Output should make up some LTL 40 million in the first year of operation. By 2007 the output should rise to LTL 120-150 million, as the plant would reach its full design capacities. The plant will employ a workforce of about 220.
Kauno Diena

Attempts to oust Lithuanian business from Kaliningrad
Lithuanian entrepreneurs fear that small and medium-sized national companies will be driven from the Russian enclave of Kaliningrad. This area has absorbed more than a fifth of Lithuanian direct foreign investments abroad – LTL 125 million. At the beginning of next month, the Russian parliament is expected to deliberate a new bill concerning the exclusive economic zone of Kaliningrad. The new bill will reportedly grant customs and profit tax breaks only to the companies that invest at least LTL 15 million in the enclave.
"These terms will be discriminatory with respect to our businesses. It is likely that they will try to oust Lithuanian business from the region of Kaliningrad. That bill changes the rules of the game. They do not care about the investments that have earlier been made in the area; the companies already there are given a transition period of ten years to align themselves to new rules of the game," Raimundas Lopata, the head of the Lithuanian institute for international relations, said.
Lopata described the imminent reform as a political stride by the central government of Russia aimed to offer the best conditions for the movement of capital from Moscow and St. Petersburg to Kaliningrad.
Kauno Diena, Lietuvos Rytas, Lietuvos Zinios

Advertising hindered profits of Sanitas
Sanitas, Lithuania's biggest pharmaceutical producer, posted a net profit of LTL 183,000 for January, down from LTL 398,000 in the same period a year ago. The company's revenues plunged by 36.7 percent year-on-year to LTL 1.925 million last month, despite increased orders. The pharmaceutical producer's annual net profit reached LTL 4.579 million in 2004, seven times as high as in the previous year. Its annual revenues soared by 40.1 percent to LTL 43.297 million.
"The profits dropped on weaker sales. Besides, the spending for advertising was higher than it was in the previous year, and so were the operational costs, which climbed due to an ongoing investment project," Saulius Jurgelenas, the chief executive of Sanitas, said.
Lietuvos Zinios, Respublika

Friday, 18th of February

Grigiskes started the year successfully
Grigiskes, the largest manufacturer of hardboard and hygienic paper in Lithuania, earned pre-tax profits of LTL 802,500 in January, 23.5 percent higher than this figure in same month last year. The sales of the company increased 2.6 percent, from LTL 8.1 million to LTL 8.3 million. In 2005, the sales estimate of Grigiskes stands at LTL 109.2 million. Last year, pre-tax profits of Grigiskes stood at LTL 8.1 million, while the income of the plant increased to LTL 96.5 million. Grigiskes exports around 50 percent of toilet paper to neighbouring countries.
Lietuvos Zinios, Verslo Zinios

Snoras posted profit of LTL 4 million in 2004
Snoras, Lithuania's fourth-biggest commercial bank by assets, posted a net profit of LTL 3.995 million for January, a rise of 2.6 times since the last January when it came in at LTL 1.532 million. Snoras has said it expects to double its annual net profit in 2005, from LTL 17.5 million in 2004. It has also unveiled plans to set up a branch or subsidiary bank in Latvia this year. The bank boosted its assets by 42.1 percent to LTL 1.931 billion during 2004. Deposits increased by 31.1 percent to LTL 1.42 billion but loans decreased by 3.1 percent to LTL 456.7 million.
Respublika, Verslo Zinios

It is possible to insure against AIDS
Life insurance company Color Bonum Publicim introduces a new service, insurance from AIDS. The company will offer the new insurance for medics first of all since they fall into the greatest risk group to get ill with HIV/AIDS. According to the data of Lithuanian AIDS Centre, there are over 980 HIV-infected people in the country. 135 new cases of HIV infection were registered in 2004.
Verslo Zinios

Thursday, 17th of February

The time of house constructions
Backed by strong demand, construction of new apartment houses surged by 40.6 percent, to 2,936 in Lithuania last year, while the number of new apartments on the market soared by 50.2 percent, year-on-year, to 6,800, the country's Statistics Department has reported. A total of 1,026 apartment houses with 4,410 apartments with the combined useful area of 378,490 square meters were fitted out in the region of Vilnius last year. New construction accounted for 40.6 percent of total construction works in 2004. Repairs constituted 28.7 percent, while restoration accounted for 27.4 percent of the total scope of works. In the region of Vilnius, new construction amounted to 38 percent, in Kaunas – 17 percent, Klaipeda – 14 percent.
Verslo Zinios

Merger
The Finnish metal product group Rautaruukki has announced that its three Lithuanian subsidiaries with combined 2004 revenues of LTL 79.8 million will merge under the brand name of Ruukki by the mid-summer of 2005. These are the steel roofing and facade cladding companies Rannila Lietuva and Gasell Profil, and the industrial metal supplier Asva Lietuva. Ruukki said in a statement that it expected to save around LTL 7 million in costs over three years as a result of the merger.
Lietuvos Rytas

Vilniaus Baldai eyes on Russia
Vilniaus Baldai (Vilnius Furniture), the leading Lithuania's furniture producer, intends to raise its manufacturing capacities by 50 percent and boost annual sales to some LTL 150 million by 2006. Vilniaus Baldai, which pins its growth hopes on expansion in Russia and Ukraine, has already launched cooperation with an unnamed Russia's partner. Moreover, the furniture maker kicked off the production of furniture samples for Russia's market, which would be unveiled at a furniture exhibition in Moscow.
"We hope that Russia will enter the list of our core partners in about three-to-four years. Following the accession to the World Trade Organization, Russia will have to remove trade barriers, eliminate duties and taxes that burden free trade," Viktoras Majauskas, Vilniaus Baldai CEO, said.
Lietuvos Zinios, Respublika, Verslo Zinios, Veidas

Tuesday, 15th of February

Ragutis starts producing light dark beer
Ragutis, one of the largest breweries in Lithuania, has begun producing a dark beer with a lower alcohol content called Horn Light. That is the first beer of this category produced in Lithuania. The new Horn Light dark beer has an alcohol content of only 4.2 percent.
"We noticed that Lithuanian consumers are becoming fonder of drinking beer with a lower content of alcohol. Since we have not had any dark beers containing less than 5 percent alcohol in Lithuania, we created a special lower alcohol dark beer for current and future lovers of dark beers," Vytautas Meistas, the CEO of Ragutis, said.
Verslo Zinios

US company will control IKI
The European Commission (EC) has granted clearance under the EU Merger Regulation to the acquisition of joint control of Palink, the operator of second largest Lithuania's retail chain IKI, by US Citigroup-controlled Citigroup Venture Capital International (CVC International) and real estate manager Baltisches Haus.
Palink will be controlled by Dutch-registered Beleggingsmaatschappij Smitho, which trades as CVC International Palink. CVC International, which owns Citigroup Alternative Investments and controls private capital investments by Citigroup in emerging markets, has acquired a new share issue of Palink for LTL 138.1 million. IKI has pledged to channel the funds into the expansion of its retail chain in Lithuania and other Baltic countries. Previously media reported that, following the purchase of issue of Palink shares, the majority holding in the company, which operates the chain of retail stores IKI, Ikiukas and Pigiau Grybo, remained in the hands of its current owners, the Ortiz family, which also controls Baltisches Haus.
Lietuvos Rytas

Sales of Rubicon Group increased
Pre-tax profits of the fast growing Rubicon Group went up 18 percent to LTL 21.2 million in 2004. The gross sales of the companies under the control of Rubicon Group increased 1.5 times to LTL 302.3 million last year.
"The group admitted six new companies, managed to implement some rather ambitious plans and built the most modern arena in the Baltic countries," Andrius Janukonis, the board chairman of the group, said.
Last year, Rubicon Group absorbed six companies: Limatika, Reline Apsauga, Vienituras, Balosa, and Tiketa, and Vilniaus Televizija, which is now known as Penktasis Kanalas.
In 2005, the group expects sales to go up to LTL 310 million and profits to amount to LTL 24 million. Rubicon Group includes over 30 companies.
Verslo Zinios, Verslo Zinios

Monday, 14th of February

SBA targeted at wide Russian market
SBA Furniture Group, a company within the Lithuanian concern SBA, has announced that, at the end of last year, it acquired a small furniture factory Novo Mebel near Moscow, the capital of Russia. The company revealed that presently it is busy upgrading the facility, which will soon manufacture new production. The investments in the acquisition of the Russian company and equipment equal LTL 10 million. Prior to the latest acquisition, SBA had prospected the Russian market for a couple of years but had not owned any plant outside Lithuania. SBA Furniture Group was only running a representative office in Russia to handle its furniture exports.
Arunas Martinkevicius, the president of SBA, revealed that moving production to Russia would help avoid large customs duties for import of produce.
The new factory of SBA, to produce frame furniture, will employ 300 people but expects to enlarge the workforce if sales grow.
Lietuvos Rytas, Verslo Zinios

Exports grew by 20 percent
Lithuania's exports surged by 21 percent, year-on-year, to reach LTL 25.728 billion in 2004, the country's Statistics Department reported on Friday. Imports, based on preliminary data from the customs authorities and Intrastat reports, totalled LTL 34.096 billion last year, a rise of 15.8 percent from the year-earlier figure. Foreign trade deficit widened by 2.4 percent from 2003, to LTL 8.368 billion last year.
In December 2004, exports surged by 42.5 percent, year-on-year, to LTL 2.399 billion, while imports increased 9.3 percent, to LTL 3.104 billion in the reporting period. Intermediate goods accounted for 53,2 percent of total exports and 58.6 percent of total imports in 2004. Consumer goods made up 26.8 percent and 17.8 percent, respectively. Gasoline accounted for 8.7 percent of total exports, investment products - 8.1 percent, and passenger cars - 3.2 percent of total exports.
Lithuania's main export partners included Germany with 10.2 percent of total exports, Latvia with 10.1 percent, Russia with 9.1 percent, France with 6.3 percent and the United Kingdom with 5.3 percent.
Verslo Zinios, Respublika

Sales of Lithuanian energy down
Exports of electricity by Lietuvos Energija (Lithuanian Energy), the state-run power utility, plunged by 61 percent, to 389.6 million kWh in January, from 1 billion kWh in the first month of 2004. Exports to Russia made up 370.4 million kWh, while shipments to Latvia and Estonia totalled 13.2 million kWh and 6 million kWh, respectively.
"Lithuania's energy system has retained its power generation and consumption balance following the shutdown of the first unit of Ignalina Nuclear Power Plant (INPP), which is in line with our forecasts," said Rymantas Juozaitis, Lietuvos Energija CEO.
In February exports should total some 393 million kWh, including 387 million kWh to be supplied to Russia, and 5.6 million kWh to Estonia.
Verslo Zinios

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