Observer "Lietuva"

Lithuania Business News: Archive 2003-

WEEK 41.2008

Saturday, 11th of October

Lithuania’s fiscal deficit should total LTL 2,688 billion
Lithuania's fiscal deficit should total LTL 2.688 billion this year, i.e. 2.35 percent of projected full-year Gross Domestic Product (GDP) the Finance Ministry projects. Last year the authorities planned the 2008 deficit to reach just 0.5 percent of GDP. The deficits of social security fund (Sodra) and Mandatory Health Insurance Fund would account for the largest chunk of overall deficit. As estimated late in September, the expenditures of those two funds would exceed the revenues by LTL 1.112 billion this year. The central government would run a deficit of LTL 1.289 billion, local authorities – LTL 287 million. The Finance Ministry made the estimations based on the data available as of September 30 and submitted the figures to the Directorate General for Economic and Financial Affairs of the European Commission.
Lietuvos Rytas, Kauno Diena, Lietuvos Zinios, Respublika

AirBaltic and flyLAL wars
Latvia's Airbaltic restored the lead over Lithuania's flagship carrier FlyLAL-Lithuanian Airlines at the Vilnius International Airport, the largest in Lithuania, in terms of passenger flow in September. Airbaltic carried some 73,000 passengers and held a 35.9 percent market share at the Vilnius Airport last month. FlyLAL-Lithuanian Airlines serviced 72,381 passengers and accounted for 35.6 percent of passenger traffic at the airport. Separately FlyLAL-Lithuanian Airlines said that it carried 659,527 passengers in the first nine months of this year, up 71 percent year-on-year, and remained the leader at Vilnius Airport in terms of passenger flow.

Negotiations between Latvia and Lithuania
After a year of infighting between Lithuania and Latvia over a power link with Sweden, Latvian Prime Minister Ivars Godmanis has agreed that the proposed electricity cable be built to Lithuania. "The head of the Latvian government has come to see the strong sides of the Lithuanian proposal regarding the electricity connection with Sweden due to the financial and infrastructure possibilities that Lithuania can ensure. Therefore, Godmanis has agreed that the electricity connection with Sweden should be built to Lithuania," the Lithuanian government's press office said on Friday. Godmanis, on a visit to Vilnius, and his Lithuanian counterpart, Gediminas Kirkilas, continued their discussions on energy issues during their working lunch, it said. The prime ministers asked Rymantas Juozaitis, the CEO of the Lithuanian national energy company Leo LT, and Karlis Mikelsons, the board chairman of the Latvian energy company Latvenergo, to work out proposals for the creation of a common electricity market and a joint system operator in the Baltics.

Friday, 10th of October

Special plan is necessary for Lithuania
Lithuania will close its Ignalina Nuclear Power Plant (INPP) in 2012 unless the European Union works out a special plan for dealing with the consequences of the shutdown without jeopardizing the essential interests of the country. Lithuanian Economy Minister Vytas Navickas intends to say this during Friday's meeting of the EU's energy ministers in Luxembourg. "Unless the energy security problems Lithuania would face after closing the Ignalina plant in [late] 2009 are solved, we will not approve the climate change program," Navickas said. "If our proposals are approved, the energy ministers will ask the European Commission to prepare until the European Council [meeting] in December a plan of actions to cope with the critical situation that would arise if we closed the Ignalina NPP in late 2009. According to preliminary information, the European Commission agrees to work out such a plan," he said.
Respublika, Lietuvos Rytas, Verslo Zinios

Average annual inflation rate reaches 10.8 percent
Lithuania's average annual inflation rate, as measured by the EU Harmonized Index of Consumer Prices (HICP), reached 10.8 percent in September, the Statistics Department reported on Thursday. The HICP-measured average 12-month inflation rate is one of the key indicators for countries wishing to join the euro zone. The monthly inflation rate, as measured by the HICP, stood at 0.5 percent and the annual inflation rate was 11.3 percent, the statistics office said. The average 12-month inflation rate as measured by the national consumer price index was 10.6 percent last month. The monthly inflation rate was 0.5 percent and the annual inflation rate was 11 percent.
Lietuvos Rytas, Verslo Zinios

SEB Bank reports figures
The group of SEB Bank, the largest Lithuania's commercial bank controlled by Scandinavia's SEB, reported LTL 320.9 million in unaudited net profit for the first nine months of 2008, up 2.4 percent versus the year-earlier figure of LTL 313.4 million. The net profit of the bank alone increased by 5.8 percent, to LTL 342 million, from LTL 323.1 million in January-September 2007, the bank said in a statement to the Vilnius Stock Exchange (VSE). In 2007 the net profit of Lithuania's SEB Group, as estimated under international financial accounting standards, soared by 77 percent versus 2006, to LTL 510 million. The net profit of SEB bank alone soared by 74 percent, year-on-year, to LTL 496 million last year.
Lietuvos Rytas, Verslo Zinios

Thursday, 9th of October

SEB’s predictions for Lithuania
The Scandinavian financial group SEB predicts that Lithuania will avoid a technical recession but its economic growth next year will be weak. SEB forecasts that the economic stagnation in the Baltics will continue at least until 2010. In its latest Eastern European Outlook report, the bank forecasts that Lithuania's GDP growth will reach 5.5 percent this year and decelerate to 2 percent next year. This is down from SEB's 2009 growth estimate of 4 percent published in mid-September. However, the outlook for Lithuania is brighter than for Latvia and Estonia. SEB predicts that Latvia's economy will shrink by 0.5 percent this year and 2 percent in 2009. Estonia's economic will probably contract by 1.5 percent this year and 2.2 percent next year.
Verslo Zinios, Respublika

Discussion of next year’s budget
The Lithuanian Cabinet of Ministers on Wednesday started discussing a draft budget for next year. Finance Minister Rimantas Sadzius said that with several days left until Sunday's general election, he could not comment on the key budget targets, including the projected deficit. "I don't want the budget and other very serious economic issues to be used as instruments in the political struggle," he said. Along with the draft budget for 2009, the government will propose to raise the excise tax rate on tobacco twice next year, in March and in late December, as well as to introduce tax relief on investment in technological renovations and to eliminate tax relief on interest paid on mortgages, the minister said. He said that the Cabinet was likely to continue discussing the draft budget next Tuesday.
Verslo Zinios, Kauno Diena

Gap between ages in Lithuania and UK or Ireland narrows
The gap between wages of skilled employees in Lithuania and UK or Ireland has narrowed this year; the wages survey of international consultancy Hay Group has shown. The wages of skilled employees in Lithuania are three times less than those in the UK and four times less than the wages in Ireland. Last year the difference was 4 times and 4.75 times, respectively. "The comparison of wages in Lithuania and abroad shall also include living costs. In countries, which are chosen for emigration by our compatriots the most often, life is more expensive than in Lithuania. When considering that, the situation is way more different - the gap between wages in Lithuania and Ireland narrows to 2 times, in Lithuania and the UK - to 1.5 times," Neda Songinaite, Hay Group CEO for the Baltic countries, said at a news conference on Wednesday. As shown by the survey, the wages of employees at Lithuanian companies controlled by local investors were 18 percent below those paid at international companies. Last year that gap was 20 percent, in 2006 - 26 percent. Respublika, Lietuvos Rytas, Verslo Zinios

Wednesday, 8th of October

Producer prices go down
Lithuania's producer prices edged down by 0.4 percent in September from August, but were up 23.4 percent compared with a year ago, the Statistics Department reported on Tuesday. Excluding the impact of oil product price changes, producer prices rose by 0.7 percent on a monthly basis and were up 18.6 percent year-on-year, it said. Rimantas Rudzkis, the chief analyst at DnB Nord Bankas, said that producer prices were driven lower by a fall in prices of oil products of Mazeikiu Nafta (Mazeikiai Oil), the country's sole oil refinery, which have a large impact on the overall index. "I think that the price growth will slow down. The bulk of production is sold on the domestic market whose purchasing power has been on the decline recently. With oil prices on the global market falling, producer prices will go down as well," the analyst said.
Lietuvos Rytas, Respublika, Lietuvos Rytas

Stressful gossip
The Lithuanian central bank governor acknowledged on Tuesday that panic-spreading rumours and SMS messages had scared some people into withdrawing part of their deposits from banks. "A part of deposits have been cancelled. I think that it will be those people who panicked and lost interest [on their deposits] who will suffer from this," Reinoldijus Sarkinas, the chairman of the Bank of Lithuania's board, said during a meeting of the Industrialists' Confederation. Sarkinas said that special services were searching for the authors of the panic-spreading messages. "Our services are working to find the sources of these messages. I think it is just a matter of time," he said. Despite the withdrawal of deposits by some people, the latest data from the central bank show that on October 1 through 3, the total amount of private individuals' deposits at the country's banks increased by LTL 57 million and business customers' deposits rose by LTL 15 million. Sarkinas noted that the banking system's capital adequacy was 12 percent in early September, compared with the required 8 percent.
Verslo Zinios, Lietuvos Rytas, Lietuvos Zinios, Kauno Diena, Respublika

Commercial banks provide aggregate assets
The aggregate assets of eleven Lithuanian commercial banks and foreign bank branches reached LTL 89.924 billion as of late August, up LTL 9.048 billion or 11.2 percent from the start of the year. SEB Bankas remained the largest bank with assets of LTL 25.496 billion, the Lithuanian Banks' Association reported. The banks' total loan portfolio grew by 16 percent over the eight-month period, to LTL 69.622 billion. Retail loan portfolio expanded by 16.8 percent, to LTL 27.648 billion in the reporting period. The total amount of deposits increased by 2.9 percent in January-August, to reach LTL 41.27 billion. The amount of residential deposits rose by 7.5 percent, to LTL 24.38 billion. The capital of the banks totalled LTL 3.351 billion as of late August, up 7 percent from the start of the year.
Verslo Zinios

Tuesday, 7th of October

Achema sets of equipment at its nitric acid plant
Lithuania's nitrogen fertilizer manufacturer Achema on Friday launched a new set of equipment at its nitric acid plant. "The new set marks yet another stage in our second investment program. This project, in which we have invested LTL 30 million, is the basis for an increase in liquefied fertilizer production in 2009, after our new urea unit comes online in the first half," Achema CEO Jonas Sirvydis said in a press release. The new equipment will add 350 tons to the plant's current daily nitric acid production capacity of 3,800 tons. The total value of Achema's investment program, slated for completion in 2009, is around LTL 500 million. Achema posted revenue of LTL 1.023 billion in revenue for the first half of this year, a rise of 51.6 percent from LTL 675 million a year ago. The fertilizer manufacturer, which is based in Jonava, in central Lithuania, is part of the Achema Group, one of Lithuania's largest business conglomerates.
Lietuvos Zinios

IKEA wishes to buy shares of Giriu Bizonas
Ingka Beheer, a Dutch subsidiary of Sweden's furniture giant Ikea, has applied to the Lithuanian Competition Council for permission to buy shares in the Lithuanian chipboard and furniture manufacturer Giriu Bizonas. Ingka Beheer is seeking regulatory approval to purchase up to 100 percent of shares in the company, which is now controlled by Vakaru Medienos Grupe (Western Timber Group, or VMG) and Vilniaus Baldai (Vilnius Furniture). Sigitas Paulauskas, one of the owners of VMG, which works solely to orders provided by Ikea, said that this week they would continue to work on finalizing the details of the deal. Paulauskas, who is also the board chairman of VMG, said that he could not say at the moment what stake in Giriu Bizonas the Swedes were going to buy.
Verslo Zinios

Rokiskis Cheese reports figures
Rokiskio Suris (Rokiskis Cheese), one of the biggest dairy groups in Lithuania, on Monday reported LTL 510.825 million in consolidated sales for the first nine months of this year, down 0.44 percent from LTL 513.082 million a year earlier. The group's sales for September fell by 4.4 percent year-on-year to LTL 61.414 million, based on preliminary data. The group is projecting consolidated sales of around LTL 700 million for the full year 2008. It does not anticipate an annual profit this year, but has not announced its lost forecast either. Rokiskio Suris posted LTL 15.55 million in losses for the first half of this year, compared with LTL 13.2 million in net profits a year ago.
Verslo Zinios

Monday, 6th of October

Unemployment rate edges down
Lithuania's unemployment rate edged down by 0.2 percentage points versus August, to 4.5 percent in September, the Labor Exchange reported on Friday. Compared with September 2007, the unemployment rate climbed by 0.2 points. The number of jobless exceeded 65,100 as of late September, down 9.8 percent versus August. A total of 95,500 jobseekers were registered with the exchange as of Oct. 1, down 0.2 points month-on-month. The number of vacancies rose by 26.4 percent compared with August, to 20,400 last month.
Kauno Diena, Respublika

Offer to buy shares
Lithuania's financial brokerage firm Finhill has issued Buy recommendations on the building company Panevezio Statybos Trestas (PST) and on Vilkyskiu Pienine (Vilkyskiai Dairy), saying that the shares of both companies are undervalued.
Finhill set target prices of LTL 9.11 for PST shares and of LTL 3.96 for Vilkyskiu Pienine shares, based on the discount cash flow method. "These shares are definitely worth being included into the portfolios of many serious long-term investors, particularly those who view the present market situation as an opportunity to buy cheapened stocks at a time of downturn," Marius Buivydas, the director of Finhill's Analysis and Valuation Department, said. The readers’ comments on this topic are presented in the today’s issue also.
Verslo Zinios

Control over Chinese products
The State Food and Veterinary Department continues its strict control on any of food products brought from China to Lithuania, which could contain milk powder in them. The European Food Safety Authority has made some risk tests and determined that milk powder used in confectionary products is not harmful for people if its quantity does not exceed 2.5 milligram per kilogram. The EU reacted to the case when thousands of children in China got sick or even died due to melamine in food products. The inspectors of the State Food and Veterinary Department sustained 2 tons of marshmallows and a couple tons of other confectionary products, which were imported to Lithuania by the company Angolita during the weekend. The products are going to be tested in the Food Laboratory of the State Food and Veterinary Department.

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