Observer "Lietuva"
WEEK 35th

Saturday 30th of August, 2003

Mazeikiu Nafta posted a record output in July
Lithuanian oil refinery Mazeikiu Nafta (Mazeikiai Oil) raised volumes of crude processing by 36.5 percent, year-on-year, to 726,000 tons in July. Processing of crude reached 3.58 million tons in the January-to-July period of 2003, shrinking by 2.9 percent versus the same period of last year.
Giedrius Karkosas, head of communications department of the oil concern, says that the company managed to hit a new monthly processing record of several years.
In July 2002 Mazeikiu Nafta processed 532,000 tons of crude, with seven-month processing coming in at 3.686 million tons. This year the seven-month result lags behind the last year figure due to a temporary shutdown of the refinery for turnaround in the first half of 2003.
After several years of losses, Mazeikiu Nafta posted net earnings of LTL 74.068 million under US GAAP in the first half of 2003. Net earnings under Lithuanian accounting principles reached LTL 146.4 million in the reporting period.
(Lietuvos Zinios)

Businesspeople are urged to improve their activities
It will be difficult for Lithuanian companies to compete with EU companies, representatives of the North Ireland Competition Centre (NOCC) and European Fund of Quality Management stated after their visit in Lithuania last week.
Lithuania should make stronger efforts to increase competitiveness while businesspeople should take a great concern about productivity and effective management, they say.
NOCC evaluated timber, textile and machinery companies: 30 best Lithuanian companies in each sector were chosen and their indices were compared to those of 200 best European companies thus evaluating possibilities of Lithuanian companies to compete in the European market.
The research showed that profitability of textile companies is very low; as is their capital returns. NOCC also noted that Lithuanian companies should increase surplus value of their production by producing more complex goods. Machinery companies are recommended to pay more attention to researches and marketing.
(Lietuvos Rytas)

Investments into construction
In the second quarter of this year, LTL 2.071 billion were invested in the territory of Lithuania, an increase of 3.7 percent if compared to the respective period last year. "The growth was predetermined by the increase in the construction market: investments into construction and reconstruction of buildings rose by 20.1 percent. Meanwhile, investments into long-term property declined by 15.6 percent", the Statistics Department has reported.
The largest part of investments – 21.2 percent – went to the manufacturing industry; 18.5 percent were allotted into transportation, logistics and remote communications.
(Lietuvos Zinios)

Friday 29th of August, 2003

Pension reform to start on Monday
Yesterday, Vilniaus Bankas, Hansabankas, the finance brokerage company Finasta and two insurance companies were given licences for the establishment of private pension funds. Hansa Investicij? Valdymas, Finasta Investicij? Valdymas and Lietuvos Draudimo Gyvyb?s Draudimas will each have three pension funds while VB Investicij? Valdymas and Commercial Union Gyvyb?s Draudimas will have two.
Some 200 thousand Lithuania's residents are expected to insure themselves in private pension funds during the first year of the pension reform.
The state social insurance fund Sodra forecasts that some 5-6 percent of working people will participate in pension funds activities during the first year of the pension reform and they will transfer some LTL 21 million to the funds. In 2005, number of participants will reach 10 percent and their contributions to pension accumulation funds will account for LTL 53 million; in 2006 the figures are expected to make 13 percent and LTL 95.9 million respectively.
(Respublika, Kauno Diena, Lietuvos Zinios)

Latvias Balzams to allot LTL 28 million for consolidation in the Lithuanian market
Latvian alcohol producer Latvijas Balzams that has unsuccessfully participated in the privatisation of the Lithuanian vodka producer Stumbras is ready to invest LTL 28 million in Lithuania in order to consolidate its positions in the Lithuanian market. The investments will be used for the establishment of a new retail chain, introduction of new products to the market and consolidation of those that have already entered the market.
Latvias Balzams presently represents 12 products in 6 categories of alcohol drinks in Lithuania. Last year, the company posted turnover of LVL 47.956 million. This year, Latvijas Balzams expects to earn profit of LVL 2.016 million.
(Verslo Zinios)

Big fines for non-insured
Beginning April 2003, sums of the mandatory motor third partly liability insurance (MTPLI) might grow several times up to EUR 100 thousand (LTL 345 thousand) for property and EUR 500 thousand (LTL 1.725 million) for harm on human health. These are the sums that meet directives of the European Union and are to be legitimated by the MTPLI law. Presently, the sums of LTL 30 thousand for property and LTL 30 thousand for health are set in Lithuania.
Fines of EUR 12 thousand (LTL 41.4 thousand) might be stipulated for nonobservance of the law.
There are 1.1 million vehicles in Lithuania. As of the end of July, 867.5 thousand vehicles were insured under the regular MTPLI agreements, 83.8 thousand – under group agreements and 39.4 thousand – under border insurance agreements.
(Lietuvos Rytas)

Omnitel will also provide fixed line services
Lithuanian mobile operator Omnitel plans to offer fixed telephony services through the infrastructure of Lietuvos Telekomas.
Omnitel placed the winning bid of LTL 50,000 for the right to use the code 1010 for the provision of fixed telephony services at Wednesday's auction, the Communications Regulatory Authority has reported. Lithuania's Radio and TV centre was among the bidders.
TeliaSonera holds a 55 percent stake in Omnitel and a 60 percent holding in Lietuvos Telekomas. On Tuesday TeliaSonera announced that having received permission of the Competition Council, it will acquire another 35 percent of shares in UAB Omnitel for USD 117 million.
Apart Lietuvos Telekomas, fixed telephony services in Lithuania are provided by the telecommunications operator Eurocom, associated with the leading Lithuania's retail chain VP Market. At the end of June Eurocom had some 4,000 fixed line business customers, generating revenues of LTL 2.5 million in the first six months of this year.
Tele2 has also announced its plans to enter the Lithuanian fixed-line market.
Lietuvos Zinios, Verslo Zinios, Lietuvos Rytas, Respublika

Thursday 28th of August, 2003

Average wages are growing
Average monthly gross earnings in Lithuanian economy rose by 4.5 percent to LTL 1,164 in the second quarter of 2003 versus the same period of last year. Monthly real wages, adjusted for inflation, rose 7.1 percent over the year.
Average earnings in the public and private sectors climbed by 4.7 percent up to LTL 1,193 and 4.5 percent to LTL 1,138 respectively in April-June, year-on-year.
Monthly wages of manual workers (excluding sole proprietorships) averaged LTL 842.3 in the second quarter of 2003, up by 2.2 percent year-on-year, while average monthly earnings of white-collar workers reached LTL 1,455, a 6.4 percent increase, year-on-year.
Women's average earnings amounted to LTL 1,047 in the second quarter, rising by 3.9 percent versus the second quarter of 2002. Men's earnings, however, increased by 4.4 percent to LTL 1,291.
(Lietuvos Zinios, Respublika, Lietuvos Rytas)

Aibe grows at a rapid pace
Baltic retail chain Aibe, which operates over 700 retail outlets in Lithuania and Latvia, reported sales of LTL 352.5 million for the first seven months of 2003, a surge of 47.5 percent from January-July in 2002.
Sales of the Aibe chain in Lithuania rose by 7.3 percent, year-on-year, to LTL 256.5 million in the first seven months of 2003.
"Aibe has succeeded to come closer to the leading trade chains in Latvia in terms of sales. Meanwhile, in Lithuania small and medium trade outlets of the chain have managed to withstand competitive pressure from large retail chains and lift the sales gradually", Egidijus Aleinikovas, director of Aibes Mazmena, the Aibe chain representative, says.
As of July 31, the Aibe chain operated 425 shops (including 378 grocery shops) in Lithuania and 292 grocery shops and cafes in Latvia.
(Lietuvos Zinios, Verslo Zinios)

ERGO Lietuva Gyvybes Draudimas signed more premiums
Over the seven first months of this year, ERGO Lietuva Gyvybes Draudimas wrote LTL 20.183 million in premiums, 78 percent more from the same period in 2002.
Life insurance contributions made the largest part of the company's portfolio – LTL 19.011 million while non-life insurance agreements accounted for LTL 1.172 million.
ERGO Lietuva Gyvybes Draudimas has consolidated its position in the rapidly growing life insurance market; as of the end of July, the company controlled 16.8 percent of the insurance market while last year it had 16.2 percent.
(Verslo Zinios)

Wednesday 27th of August, 2003

More advertisement in television and magazines this year
Television and magazine advertising grew by one-fifth in the first seven months this year if compared to 2002. Newspaper advertising remained almost intact, while radio advertising shrank by 5.6 percent in the reporting period. The total time reserved for advertising by TV channels, broadcasting in Lithuania, grew by 20.67 percent to 3.94 million seconds, the Lithuanian market research company TNS Gallup has reported.
Advertising space in magazines totaled 3.3 million square centimeters, rising by 22.78 percent if compared to the first seven months of 2002. Advertising space in newspapers, however, shrank by 0.46 percent, to 14 million square centimeters.
Radio advertising narrowed by 5.57 percent to 1.202 million seconds, if compared to January-July in 2002.
Outdoor advertising declined by 17.28 percent, year-on-year, to 115,000 square meters in the first seven months of 2003.

Great rise in GDP is forecasted
Lithuanian Ministry of Economy forecasts that in 2001-2015 Lithuania's GDP will make LTL 39.5 thousand or EUR 11.44 thousand per capita, a rise of 2.7 times from 2002 when the figure made LTL 14.6 thousand (EUR 4.2 thousand)
Over the 25 years from 1990 to 2015, the GDP per capita would increase 1,100 times (considering current prices).
It is expected that in 2015, Lithuania's GDP will account for LTL 135.56 billion (EUR 39.3 billion) while the real annual GDP growth will make 6.5 percent in 2011-2015. However, the largest GDP growth is forecasted for the period of 2005-2010 – 6.8 percent.
In 2002, the country's GDP grew by 6.7 percent.
(Lietuvos Zinios, Verslo Zinios)

Icelanders are moving to Siauliai by purchasing their competitors
The Island company Hampidjan is going to move production of industrial ledger-tackles from Reykjavik to the northern Lithuanian town Siauliai. Before settling in Lithuania, the Islanders decided to buy their competitors – the Danish company Utzon, which had moved its production department to ?iauliai two years before.
The Island company has been looking for a possibility to move production to the Baltic States and decided that buying their competitors that have already settled there is the best way to do it.
Utzon had invested some LTL 20 million and created more than 100 working places. Hjortur Erlendsson, the CEO of Hampidjan, says that they are planning investments of LTL 10 million in Siauliai.
In is forecasted that in 2004, turnover of the Siauliai-based company will make LTL 20 million.
(Verslo Zinios)

Tuesday 26th of August, 2003

EBRD will participate in the construction of the electric bridge to West
European Bank for Reconstruction and Development (EBRD) has reaffirmed its intentions to contribute to the project on connection of Lithuania's and Polish power grids.
"The bank agrees to contribute to the financing of the project and may be one of the shareowners of the new venture. The precise amount of the contribution will be set forth during negotiations," Jonas Kazlauskas, Deputy Director of Lithuanian Energy Agency, has reported.
Lithuania's and Polish power companies Lietuvos Energija (Lithuanian Energy) and Polskie Sieci Elektroenergettyczne (PSE) have already agreed to draft a business plan for the future joint venture Project Development Company, with an EBRD support.
Pursuant to the assessments of foreign experts, the power bridge project will be economically viable should the European Union earmark a grant of LTL 949.5 million to the project, valued at LTL 1.498 billion. The power bridge project is expected to be wrapped up in 5-7 years. Poland and Lithuania will be connected with a 1,000 MW power transmission line within the framework of the project. Moreover, the project envisions upgrading of Latvia's and Estonia's power plants.
(Respublika, Lietuvos Zinios, Verslo Zinios)

The life insurance boom continues
The life insurance boom, which overwhelmed Lithuania at the end of 2003, has geared up considerably this year, with life insurance premiums soaring by 72.7 percent to LTL 117.7 million in the first seven months of 2003. The share of life insurance within the structure of the total Lithuania's insurance market rose from 18.38 percent at the end of 2002 to 23.89 percent at the end of July this year. Analysts attribute a rise of the market to a fast growth in aggregate volume of investment life insurance premiums.
Lithuania overtook Latvia and Estonia considerably in terms of life insurance premiums signed in the first seven months of this year. Life insurance premiums, signed in Latvia in January-July period of 2003, constituted LTL 22.1 million, in Estonia – LTL 66.7 million. However, Estonia retained strong lead in terms of life insurance premiums per capita.
Lietuvos Draudimas remained the leading player in Lithuania's life insurance segment this year.
(Lietuvos Zinios, Kauno Diena, Lietuvos Rytas)

Fermentas gets quality management system certificates
The Lithuanian bio-technology company UAB Fermentas has been given certificates confirming that the company has established quality management system, which meets the new LST EN ISO 9001:2001 standard and the environment protection management system, which goes in line with the LST EN ISO 14001:1999 standard requirements.
"We believe that the strict control of activity processes will help us to consolidate the company's competitiveness when presenting Lithuanian biotechnology products to the world market", Viktoras Butkus, the CEO of Fermentas, says.
Fermentas posted turnover of LTL 15.1 million in January-June this year; last year, the figure made LTL 14.7 million.
(Verslo Zinios)

Monday 25th of August, 2003

Cider sales volume grows at a rapid pace
Sales volume of cider that was presented to the Lithuanian market two years ago is growing at a rapid pace. Alita, the largest producer of sparkling wine in Lithuania, sold 157.22 thousand litres of Golden and Woodpecker cider over the first half of this year, an increase of 2.5 times from last year.
"The increase in sales was mostly predetermined by introduction of PET containers", Vilmantas Peciura, the head of finance and administration at Alita, says.
In January-June, Alita controlled 26 percent of the cider market in Lithuania (excluding import) while last year it had only 17 percent.
Anyksciu Vynas, the largest wine producer in Lithuania, sold 39 thousand litres of Cool Drink cider in the first half of the year, 62.5 percent more than in January-June 2002.
Svyturys-Utenos Alus that imports Kiss cider from Estonia as well as Kaunas-based Ragutis brewery that produces Fizz cider do not provide information about their cider sales.
(Lietuvos Zinios, Verslo Zinios, Respublika)

Industry sales rose by 12.2 percent
In the first half of this year, sales of industry production (excluding VAT and excises) made LTL 14.367 billion. If compared to the respective period last year, sales volume rose by 12.2 percent, the Department of Statistics reported.
In January-June, Lithuanian industry companies sold 40.4 percent of their production and services in the local market; last year, the figure made 39.4 percent. 59.6 percent of the production and services were exported.
Lithuanian companies exported refined oil products (26.1 percent), chemicals (8.3 percent), timber (7.5 percent), furniture (5.8 percent) and radio, TV and communications equipment and appliances (5.3 percent).
In the local market, sales of food and drinks made the largest share (39.2 percent) and were followed by refined oil products (13 percent), other non-metal mineral products (5.8 percent), rubber and plastic products (4.6 percent) and timber (3.9 percent).
(Verslo Zinios)

Foreign tourists are looking for untraditional entertainments
According to the statistics, number of foreigners visiting Lithuania shrank by 6.7 percent in the first half of this year if compared to last year. However, representatives of the tourism business say the opposite – number of real tourists has increased.
Although there were fewer guests from Russia and Belarus, number of tourists from wealthier countries has increased: number of visitors from the United Kingdom rose by 64.7 percent, Spain – 41.1 percent, Germany – 14.6 percent. Number of tourists from Poland has also grown by 19 percent.
More and more foreigners are interested in Lithuanian rivers and country houses, too. There are 670 country houses offered for tourists in Lithuania; last year, some 120 thousand people had a rest there.
(Lietuvos Rytas)

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