Observer "Lietuva"
WEEK 46th

Saturday 15th of November, 2003

Snavesta seeks approval for takeover of Lithuania's Rokiskio dairy
Snavesta, a subsidiary of the fund manager Hermis Fondu Valdymas, has applied to the Lithuanian Competition Council for permission to purchase up to 100 percent of shares in Rokiskio Suris, Lithuania's largest dairy producer.
Representatives of Hermis Fondu Valdymas, who are now on vacation abroad, would not comment on their plans on Friday, but promised to do so in a week.
It is believed that the European Bank for Reconstruction of Development (EBRD), the largest single shareholder of Rokiskio Suris with a 27.15 percent stake, and Antanas Trumpa, CEO of the company, who holds a 22.92 percent stake, could sell their holdings in the dairy producer.
The press has reported that the local distribution and logistics operator Sanitex is eyeing Rokiskio Suris as well. Aleksandras Jakiunas, head of the Concentration Division at the Competition Council, however, said that Sanitex was not among the parties to this transaction.
Rokiskio Suris, one of Lithuania's biggest dairy groups, announced a consolidated net profit of LTL 8.3 million for the first nine months of 2003.
(Respublika, Lietuvos Zinios, Lietuvos Rytas)

VP Market may move its headquarters out of Lithuania
VP Market retail chain complains about the problems on the Lithuanian-Latvian boarder, unsuccessful expansion in Poland and does not dismiss a possibility to move to another country.
Lithuanian president Rolandas Paksas met leaders of VP Market at discussed the possibilities of the Lithuanian business after the country joins the European Union next year.
Ignas Staskevicius, CEO of VP Market, says VP Market will pursue the status of the European company, which allows coordinating the operations of the company in the EU countries better. Staskevicius said the headquarters of the company would probably stay in Lithuania, although VP Market would move the headquarters if it received an attractive offer from another country.
Lithuanian state officials fear that the state budget will lose significant income if Lithuanian companies leave the country.
Staskevicius also admitted that the expansion of VP Market in Poland had hit problems as well. The main reason is that the company cannot complete negotiations on the purchase of one of the Polish retail chains.
(Lietuvos Zinios)

Bankruptcies
According to the statistics, 442 enterprises went bankrupt this year in Lithuania. 39.6 percent of these companies worked in the field of retail or wholesale trade.
Gediminas Zizys, director of Lithuanian Association of Trade Undertakings, says the main reason for bankruptcies are lack of knowledge and qualification. The leaders of the German Association of Trade Undertaking mentioned this reason as well. However, Lithuanian businessmen often fail to admit that. They usually claim that the bankruptcy was caused by the lack of circulating asset or by impediments from aside.
(Lietuvos Rytas)

Friday 14th of November, 2003

Decision on Alita will be made next week
The Lithuanian Privatization Commission on Thursday postponed making a decision on whether to approve the deal on the sale of 83.77 percent stake in Alita, one of the largest alcoholic beverage producers in Lithuania. The commission requested certain additional information.
The public tender commission and a consortium set up by Alita's senior executives initialled the agreement on the sale and acquisition shares in the company on Monday.
The Privatization Commission is now waiting for the confirmation that all privatization procedures have been carried out according to the Lithuanian laws. The Commission also wants to know, how the candidate that presented the fourth best offer managed to became the winner of the tender.
Seimas Commission on Anticorruption thinks the privatisation of Alita should have been stopped after the company that offered the second best offer withdrew from the privatisation.
(Verslo Zinios, Lietuvos Rytas, Respublika, Lietuvos Zinios)

Stop sign for privatisation of power grid operators
Doubts of German power giant E.ON Energie over expediency of investments into Lithuania's power grid operators may protract the process of privatization of the two companies, country's Prime Minister Algirdas Brazauskas has said.
Government leader confirmed that he had received a letter from E.ON Energie, one of the bidders for Rytu Skirstomieji Tinklai, Eastern Lithuania's power grid operator, expressing doubts over expediency of purchase of the Lithuania's power company.
Brazauskas said E.ON Energie did not refuse to participate in the tender, however, the company had generated certain questions. The Germans had doubts over tariffs and their stability, stated Brazauskas.
According to press reports, E.ON Energy, one of the bidders for RST, had allegedly not submitted its financial offer to the State Property Fund.
Meanwhile, the Estonia's energy utility Eesti Energia has good chances of winning the public tender for privatization of Rytu Skirstomieji Tinklai. However, some state officials sound sceptical about the Estonian company's prospects in Lithuania.
(Verslo Zinios, Lietuvos Rytas, Respublika, Lietuvos Zinios)

Courier services rapidly gain popularity in Lithuania
Statistics show that 80 percent of companies are using the services of courier. The data provided by Baltic Data House shows that 56 percent of the companies use the courier services more than once a week, 35 percent – once a week, 9 percent - once in 2-3 months.
The survey that was carried out in four other countries revealed that the most famous names in the market are Lietuvos Pastas (Lithuanian Post) and Bizpak. The two companies were known to 94 percent of surveyed companies. The name of DHL was known for 92 percent of the respondents.
Gintaras Bingelis, sales and marketing director at UAB Baltic Logistic System Vilnius, says the results of the survey mean that the companies tend to refuse from the secondary activities not related to their main business.
(Verslo Zinios)

Thursday 13th of November, 2003

Foreign trade increased current account deficit
Lithuania's current account deficit plunged to LTL 363.1 million on growth in foreign trade deficit, the Bank of Lithuania has reported.
Current account balance was negative in six out of first nine months of 2003.
In September, current account deficit rose by LTL 326.1 million from September 2002.
According to the data of the Statistics Department, exports of goods climbed 1.2 percent in September from August and rose 4.3 percent from September 2002. Imports of goods soared 17.7 percent, month-on-month, and was 7.8 percent, in year-on-year terms.
In the first six months of 2003 current account deficit reached LTL 1.519 billion, coming in at 5.9 percent of projected gross domestic product.
(Respublika)

Ignalina NP reports profit of LTL 20 million
Lithuania's Ignalina nuclear power plant (INPP) reported unaudited net earnings of LTL 20.686 million for the first nine months of 2003, a decline of 37.8 percent over the first three quarters of 2002. The company had a loss-making third quarter of 2003, when the second reactor of the plant was being repaired.
For the first six months of this year net earnings reached LTL 28.4 million, including LTL 23.2 million in operating profit and LTL 4.9 million in earnings on financial and investment transactions.
Eugenijus Grumskas, INPP director of economy and finances, says the most profitable for the plant are usually the first and fourth quarters of the year.
(Verslo Zinios)

Furniture industry grows the fastest
The production, sales and export of furniture in Lithuania exceed the growth rates of the rest industries. The influence of furniture manufacturers for the country's economy has been growing over the past several years as well.
Lithuanian industry grew 15 percent over the first nine months of 2003 in year-on-year terms, while the furniture production volumes soared 27.7 percent over the compared period.
The leader of furniture sales in Lithuania is Dalios Baldai, manufacturer of sleeping-room and kitchen furniture. The nine-month sales of the company amounted to LTL 12.312 million. The company is followed by Narbutas ir KO with sales of LTL 10.865 million. Klaipedos Baldai is in third, with the company's sales amounting to LTL 7.714 million. The other companies in the top five are Voke III and Kauno Baldai.
(Lietuvos Zinios)

Wednesday 12th of November, 2003

Americans can try Lithuanian cheese
The production of Rokiskio Suris (Rokiskis Cheese), one of the largest milk processing companies in Lithuania, can be found on the shelves of the US retail chain Costco in Illinois and Ohio. The wholesale company Wiscon Corporation exports the production of Rokiskio Suris.
Ingrida Bubliene, Lithuanian honorary consul in the United States, says it is only the start that should help Rokiskio Suris to establish itself in the US market. Lithuanian cheese lines up right next to the Italian, Danish and Dutch cheese, rejoices Bubliene.
Costco chain has over 300 stores in the United States and has branches in Canada, Great Britain, Japan and Taiwan.
Darius Norkus, sales and marketing director at Rokiskio Suris, says the company sells its production to the wholesalers that are looking for potential customers afterwards.
Rokiskio Suris posted LTL 8.3 million profit for the first nine months of the year. The profit compares to the loss of LTL 3.5 million registered over the same period last year.
(Lietuvos Zinios)

Production results of Alytaus Tekstile are improving
The sales of Lithuania's largest spinning, weaving and finishing company Alytaus Tekstile (Alytaus Textile) climbed over LTL 11 million in October. The result is the best since April, because the company had serious problems in summer due to its complicated financial situation.
The company produced 1.5 million metres of ready-made fabric in October. It is much more than the average of 1.1 metres over the previous months. The representatives of the company say the production of the read-made fabric is the most profitable, thus the production volumes should remain the same in November and December.
Alytaus Tekstile is climbing from the financial pit as well. It managed to pay its employees part of the owed salary and plans to continue doing so in the coming months. The company is cutting the debts to its other creditors as well.
The state is currently trying to repurchase 47.31 percent of shares in Alytaus Tekstile from the Hong Kong company Asean Interests. If the deal works out, the State Property Fund would control 59.12 percent of shares in Alytaus Tekstile.
(Verslo Zinios)

8,289 new cars have been sold in Lithuania so far
Lithuania's new car sales reached 8,289 units in the first ten months of 2003, a 2.3 percent drop from 8,481 cars in the same period a year ago. 7,164 of all new cars sold during the ten-month period were registered in Lithuania.
French manufacturers are consolidating their position in the Lithuanian market. Peugeot leads other carmakers in terms of Lithuanian sales this year with 1,253 new cars sold during the first ten months, including 139 cars in October. Renault ranks second with 705 cars sold, followed by Volkswagen with 691 cards sold.
However, Toyota was the leader of the sales in October excluding commercial cars. Toyota dealers sold 98 cars and were ahead of Peugeot dealers, who sold 83 new cars.
(Verslo Zinios)

Tuesday 11th of November, 2003

Baltic hotels in integrated system
Lithuanian Association of Hotels and Restaurants plans to create an integrated system for reservation of hotels in the Baltic countries. The value of the project is estimated at LTL 1 million.
Evalda Siskauskien?, president of the Association, says the system would be accessible for the accommodation establishments of Latvia and Estonia as well. It would be the only system of the kind in the Baltic countries. The system would cover the whole process of the reservation – from the initial order to the payment with a credit card.
The Association expects to receive the funding for the creating of the system from the EU PHARE program.
According to Siskauskiene, even after joining forces of the three Baltic countries, the market will still be a rather small one. There are 11,100 beds in the Lithuanian accommodation establishments, 13,140 beds in Latvia and 17,400 in Estonia. The aggregate number cannot compare with 1.6 million beds in the German accommodation establishments or 1.9 million beds in Italy.
(Verslo Zinios)

Inflation in October, deflation for the year
Consumer prices in Lithuania notched higher by 0.1 percent in October. However, in the first ten months of 2003 deflation of 1.8 percent was registered, the Statistics Department has reported. Analysts predicted zero deflation for October.
A rise in consumer prices in October followed three consecutive months of deflation. Apart from October, consumer price index (CPI) inched higher in March and June, and stood unchanged for another two months. However, consumer prices slid lower in remaining months of 2003. In 12 months from October 2002 to October 2003 CPI slipped by 1.4 percent.
Vidmantas ?aferis, analyst at Hansabankas, says this year's deflation might exceed the predictions of the bank. He claims the deflation processes should end in Lithuania over the coming 3-5 months. According to ?aferis, inflation will be registered in Lithuania next year. It will be influence by the growing internal consumption, declining unemployment level and rising salaries. Analysts of Vilniaus Bankas also think that more factors stimulating inflation should appear in Lithuania next year.
(Verslo Zinios, Lietuvos Zinios, Kauno Diena)

Law boosted tire sales
Personal firm Egzotika increased winter tire sales by 50 percent, while the winter tire sales at UAB Melga grew 20 percent in the period of September-November in year-on-year terms. The tire retailers admit that the new law, which obligates drivers to drive only on winter tires from November 1, boosted the sales.
Egzotika sold more than 90,000 tires from September till November. It is a significant increase from last year, but the owner of the company doubts if the sales will continue to grow on such a rapid basis in the future.
Erlandas Gintneris, head of UAB Melga, says there is no magic in growing sales. He thinks those, who want to drive safely and get insurance in case of an accident, buy winter tires. Gintneris thinks people, who do not care about the law, have never bought the winter tires and never will.
Sales of Michelin Group, Bridgestone, Yokohama and Toyo tires account for 80 percent of sold tires at UAB Melga.
(Verslo Zinios)

Monday 10th of November, 2003

Lithuania – the safe port for Russian investments
Russian investments in Lithuania totalled LTL 862.4 million over the first half of the year and accounted for 6.2 percent of all direct foreign investments. The volumes of Russian investments have increased by 25 percent since the beginning of the year.
Gitanas Naus?da, advisor of Vilniaus Bankas council chairman, says it is obvious that Russia consolidated its position as the seventh largest investor in Lithuania and is getting closer to the United States and Finland. Naus?da notes that most of the Russian investments are coming into the energetics field, where Yukos has invested into Ma?eiki? Nafta.
K?stutis Kudzmanas, advisor at the Lithuanian embassy in Russia, says the current situation in Russia caused by the arrest of Michail Chodorkovsky may result in the increased flow of investments from Russia. Thus, Lithuania, as well as other countries in Central Europe, can expect Russian investments to come their way.
Naus?da says Russian businessmen take into the account Lithuania's membership in the European Union as well. They find Lithuania a safe place for investment, as the legal base of the European Union is being implemented here.
(Verslo Zinios)

Milk companies count profits
Lithuanian milk processing companies have received financial support from the state this year and are already counting millions in profit.
Rokiskio Suris is the leading milk processing company in Lithuania this year. According to the consolidated pre-audit data, the company's nine-month profit is LTL 8.3 million. Rokiskio Suris suffered the loss of LTL 3.5 million over the same period last year.
Pieno Zvaigzdes reported the pre-audit nine-month profit of LTL 6.405 million. Panevezio Pienas, milk processing company controlled by Pieno Zvaigzdes announced the nine-month profit of LTL 3.365 million.
Zemaitijos Pienas is operating profitably as well. Its nine-month profit stands at LTL 4.3 million this year. It is the increase of 29.5 percent compared to the same period last year.
(Lietuvos Zinios)

Western power distribution network predicted for VP Group
Privatisation Commission will open the envelopes containing offers of potential investors into the Lithuania's Eastern and Western power distribution networks this week.
Consortium of VP Group is already predicted as the most likely winner in the privatisation of the Western power distribution network. Most market analysts say VP Market group is financially stronger and economically more rational than Achema group, which is its main and only competitor.
VP Market group is ready to pay LTL 200 million from its own resources and has the financing agreement with five Lithuanian banks. The Western power distribution network is expected to be sold for more than LTL 600 million.
(Verslo Zinios, Respublika)

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