Observer "Lietuva"

Lithuania Business News: Archive 2003-


WEEK 40/2009

Saturday, 3rd of September

Will manage asset which is taken over
Swedbank established a company of real estate management. Swedbank group has already announced that such companies are necessary in order to manage various assets that are returned during recession period in the most efficient way.
Lietuvos Rytas

Constructing a storage building
Lithuania's financially-troubled building company Ranga IV has launched work on the construction of a spent nuclear fuel storage facility for the Ignalina Nuclear Power Plant (INPP). The total value of project is estimated at over EUR 190 million. Ranga IV is to build within 14 months the main storage building for interim storage if 201 casks with spent nuclear fuel. Auxiliary structures for casks reception control, site physical protection and personnel service will be also constructed.
Lietuvos Zinios

One more cut from Russia
One more milk processing company will not be able to export its production temporarily to Russia. Pasvalio Surine (Pasvalys Creamery), the subsidiary of the company Pieno Zvaigzdes (Milk Stars), will not be able to import its products from October 5. Cheese produced by Pasvalio Surine constitutes 20 percent of turnover of the whole group and all cheese is exported to Russia. Linas Sasnauskas, the executive director of Pieno Zvaigzdes, states that prohibition of Russia will not have significant influence on results of the company because prices in EU markets they can export to are reviving. Only 7 out of 16 companies exporting their production to Russia are allowed to bring products. Russians’ main argument for prohibition is remains of antibiotics found in Lithuanian products.
Lietuvos Rytas

Friday, 2nd of September

It has been agreed regarding investments
The Lithuanian government has signed an agreement with the UK bank Barclays on the establishment of an information technology center in Vilnius. The government approved of investment agreement, according to which it committed to provide grant to Barclays as compensation for expenses related with establishment and activity of the center. Barclays has to invest not less than LTL 20 million in five years and to create not less than 250 places of work. The information technology center will be opened in Vilnius at the beginning of next year.
Lietuvos Zinios, Lietuvos Rytas

Price of debt
Lithuania's public debt servicing costs will grow by LTL 800 million next year compared with this year, Prime Minister Andrius Kubilius said on Thursday. "The public debt servicing in 2010 will cost LTL 1.8 billion," the prime minister told the Seimas. "If we do nothing, there is a probability that the state debt will reach 60 percent of the gross domestic product in about three years' time. Therefore, we must radically reduce the deficit and the borrowing needs," he said. Kubilius said that the public debt this year accounts for 30 percent of GDP, up from 18 percent in 2008. The public debt servicing costs this year amount to around LTL 1 billion, compared with LTL 824 million in 2008 and LTL 611 million in 2006, he said.
Lietuvos Zinios

Companies promise rain of good and bad news
Lithuania's Siauliu Bankas (Siauliai bank) will end this year in the red, a senior executive Donatas Savickas stated. "We think that a negative result is obvious in this [crisis] environment," Savickas claimed. Siauliu Bankas experienced LTL 2.420 million of non-audited losses in the first half-year. Lithuania's City Service has set itself the goal of increasing the total area of buildings it services. City Service expects that the companies it has purchased in Russia will end this year with a zero profit and will turn a profit next year. The company maintained that its Russian companies in 2010 could achieve a profit margin of around 3 percent. City Service expects to raise its share of Russia's apartment block maintenance market to 10-15 percent and is looking to expand into other cities and regions of that country. Gintautas Pagonis, the general director of the company Grigiskes, is glad that the results of company activity are improving and forecasts that the company will earn “symbolic LTL 1 million of net profit”, whereas its income will decrease by 22.6% up to LTL 146 million.
Verslo Zinios

Thursday, 1st of September

Counting investor
A strategic investor into future Lithuania's nuclear power plant could be a large energy company, which could guarantee loans with its assets, and such companies are only present in the European Union (EU), the head of Visagino Atomine Elektrine (Visaginas Nuclear Power Plant, or VNPP) and the new N-facility project Sarunas Vasiliauskas has said. Such a conclusion had been made by the consulting group led by UK investment bank N M Rothschild & Sons and working out the business model of the new facility. Vasiliauskas indicated that the list of the most potential strategic investors included seven companies, namely, EDF, E.ON, GDF Suez, Enel, Iberdrola, RWE, and Vattenfall. According to Vasiliauskas, investments into one reactor would reach EUR 3-5 billion. Energy Minister Arvydas Sekmokas said that the new facility could operate two or three reactors. The consultants are now only speaking about one unit. According to the minister, the strategic investor, which "should seek to acquire the controlling interest", might get 50-60 percent in a company to be established for the management of the nuclear power facility. The rest would be shared by Lithuanian, Latvian, Estonian and Polish companies.
Lietuvos Zinios, Respublika

Number of loans was declining but more slowly
Loan portfolio of Lithuanian commercial banks decreased by LTL 45.4 million in August but it has been the slowest decline from the beginning of the year. According to the data of the Association of Lithuanian Banks, portfolio loans for government institutions declined by LTL 58.56 million up to LTL 1.32 billion from the beginning of the year till the end of August. Companies put almost LTL 1 billion to bank accounts in August. However, the Association of Lithuanian Banks does not try to guess reasons of this phenomenon. Residents used their savings more than usually. This change can be explained by summer season as most people have holidays in August, thus sums of their finances reduce.
Lietuvos Rytas, Verslo Zinios

Signs of optimism
According to the data of the Statistics Department, demand of provided services in Lithuania in the nearest months is more optimistic. 13 percent of the heads of the companies state that demand of services will increase, whereas 27 percent think that it will decline. Demand of services decreased by 42 percent in August and by 37 percent in September.
Verslo Zinios

Wednesday, 30th of September

Will have to return support
The European Commission has decided to reclaim LTL 8.177 million of EU farm money unduly spent by Lithuania. A total of EUR 214.6 million of farm money unduly spent by member states will return to the Community budget because of non-compliance with EU rules or inadequate control procedures on agricultural expenditure, the EU's executive body said.
Lietuvos Rytas

Kaunas Airport will remain
Minister of Transport and Communications Eligijus Masiulis states that Kaunas Airport will not be closed. Moreover, it is intended to allocate LTL 60 million for development of this airport in investment program in 2009-2011. Masiulis has emphasized that it is constantly invested into infrastructure of Kaunas Airport and this process will be continued in order to ensure its fluent work and development. The business daily Verslo Zinios wrote that activity of Kaunas Airport may be stopped in several years, whereas Palanga Airport would work only during tourism season. These variants were suggested by the Vice-minister of Transport and Communications Rimvydas Vastakas.
Verslo Zinios

Resolution of Alita
Shareholders of Lithuania's largest alcohol production and distribution company Alita decided on Tuesday to split its assets and liabilities between two publicly traded companies. Following the reorganization, Alita will manage the group's foreign holdings and a spin-off company, Alita Group, will be in charge of its Lithuanian operations. The latter company will apply for listing on the Secondary List of the NASDAQ OMX Vilnius stock exchange, on which Alita's shares are already quoted. Alita will take over the shareholding in the Serbian brewery Beogradska Industrija Piva.
Verslo Zinios

Tuesday, 29th of September

Economy is becoming black
Lithuania's gross domestic product (GDP) this year is expected to contract by 16.5 percent and the country's unemployment rate will likely reach 15 percent, a survey conducted by the Lithuanian Free Market Institute (LFMI) in September. It is predicted that next year the economy will shrink by 4.5 percent and unemployment will rise to 15.3 percent. LFMI President Ruta Vainiene noted a sharp deterioration in market participants' expectations about the economy compared with the beginning of the year. "These expectations were quite optimistic at the start of the year, and we expected a small economic decline, 2.8 percent. Market participants have grown so pessimistic over the half-year that they predict a 16.5 percent GDP contraction," she said. Market participants think that this year the Lithuanian economy has returned to the level it was in 2005 and next year it will be at the 2006 level. The LFMI forecasts that the country's exports will drop by 14 percent this year.
Verslo Zinios, Respublika

From a decade to insurance
Darius Nedzinskas, a former banker who has recently left VP Grupe (VP Group) following the latter's unsuccessful investment in the energy holding company Leo LT, has become the head of the Business Customers Department at Lithuania's biggest non-life insurance company Lietuvos Draudimas (Lithuanian Insurance). Lietuvos Draudimas maintained that Nedzinskas would be also offered a seat on the company's management board. Nedzinskas joined VP Grupe in February 2004 when he took over the helm of VST, an electricity distribution company purchased from the state by NDX Energija, a company owned by shareholders of VP Market. Before that, he was the chairman of the management board at Lithuania's second-biggest bank Hansabankas (now Swedbank). Nedzinskas was also appointed chairman and CEO of VP Grupe's pharmacy chain Euroapotheca, a post he resigned from in late July of this year.
Verslo Zinios

Got frightened by competitors
Big milk suppliers decided to establish a new cooperative milk processing company. The new company would buy up 1,000-1,200 tons of milk per day, which would constitute a third of all milk supplied in Lithuania. However, the present companies are attempting to resist establishment of this new company. 9 employees of the company Pieno Zvaigzdes (Milk Stars), which is the subsidiary of Kauno Pienas (Kaunas Milk), protested in the Minister of Agriculture Kazys Starkevicius’ presence-chamber. Starkevicius is encouraged to resist establishment of new milk processor. The success of this project mostly depends on EU officials’ decision i.e. size of EU support. Starkevicius states that creation of a new company is farmers’ decision and that the Minister cannot prohibit or influence such processes.
Lietuvos Rytas

Monday, 28th of September

Holidays in saving mode
Economic crisis has adjusted people’s plans for holidays. This summer they paid for holidays by several tens percent less than last year, saved being abroad and were glad about good quality of services provided by travel agencies. Danute Mazeikaite, the President of Lithuanian Tourism Association, claimed that the dominating feature of tourism this year has been saving. Turkey, Egypt, Greece and Bulgaria have remained the most popular countries. This year tourists have bought travels 5-10 days before departure, whereas earlier people used to plan their holidays and bought them 2-3 months before. According to Mazeikaite, during summer season a number of travels by bus decreased by a third. Aleksandras Sukovas, the head of the travel agency Tez Tour Lietuva, maintained that tourism market has declined by 30 percent in Lithuania.
Lietuvos Zinios

GDP – minus 2.8 percent
The Finance Ministry reported that the public sector deficit for the second quarter stood at LTL 2.559 billion, or 2.8 percent of GDP. The sector's revenues for the three months came to LTL 7.873 billion, expenditures to LTL 10.342 billion, and transactions in non-financial assets to LTL 90.1 million. The public sector revenues for the first half totaled LTL 15.655 billion. Expenditures amounted to LTL 19.947 billion.
Verslo Zinios

Export has become cheaper
The Statistics Department informs that prices for goods exported by Lithuania declined by 2.6 percent in July compared with June, while prices for imported products went down by 1.3 percent over the month. General change of exported goods was mostly influenced by price of refined oil products which decreased by 3.3 percent, computer, electronic and optical products became cheaper by 8.1 percent and chemicals and products of chemical industry became cheaper by 4.5 percent. Change of imported goods was mostly influenced by price of raw oil and natural gas which declined by 4.4 percent, mining and other quarry exploitation products became cheaper by 8.8 percent and price of agricultural products declined by 2.6 percent.
Verslo Zinios

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