Observer "Lietuva"
WEEK 47th

Saturday 22nd of November, 2003

12 hotels will be awarded quality stars
Further 12 Lithuania's hotels will be decorated with quality stars shortly. So far class ratings have been granted to 23 Lithuania's hotels and one guest house.
The Palanga-based hotels Alanga and Meduza, the guest house Vasgena in Mazeikiai, the Utena-based Utrana and another 8 hotels would be class rated.
Neither Lithuania's hotel has qualified for the five star category yet. However, unofficial sources have said that the hotels Crown Plaza Vilnius, Le Meridien Villon and Stikliai aspire to get into the highest class rating.
Pursuant to the Law on Tourism, hotels that were opened in Lithuania by April 1, 2003, shall be classified by April 1, 2004. Hotels opened after April 1, 2003, shall be classified within three months from the opening.
Classification of Lithuania's holiday centres, the majority of which are concentrated at country's resorts, and campsites will be launched from April 1, 2004.
(Kauno Diena)

Retreat beneficial for the Germans
Estonia's state-run power utility Eesti Energia has remained the sole bidder in a public tender on privatization of Eastern Lithuania's power grid operator. Technical bid of German concern E.ON Energie has been rejected as non conforming to the tender requirements.
In the light of the withdrawal of E.ON Energie, the agreement of the government and the German company on the trade of the shares in four Lithuanian energy companies can be considered disadvantageous for Lithuania. Fnancial analyst Vaidas Jonutis thinks it would have made more sense to sell the shares for the shareholders of VP Market, who won the privatisation tender of Western Lithuania's power grid operator.
In July, the government traded its shares in the privatised companies in exchange for the shares in Lietuvos Energija and Lithuanian power plant held by E.ON Energie.
(Lietuvos Zinios, Respublika, Lietuvos Rytas)

Turnover of VP Market grows 18.7 percent this year
Sales by VP Market, operator of the biggest Baltic retail network, reached LTL 2.907 billion in the first ten months of 2003, rising by 18.7 percent in year-on-year terms.
VP Market sees full-year turnover in the Baltic states reaching LTL 3.453 billion, an increase of 13.5 percent from 2002 sales, which totalled LTL 3.043 billion.
The retail chain of VP Market in three Baltic states embraces 250 trade centres, including 181 shops in Lithuania, 68 - in Latvia and 1 in Estonia.

Friday 21st of November, 2003

Mantinga conquers Germany
Marijampole-based Mantinga, the largest bakery in the Baltic countries, bought and assembled the new line for production of puff-pastry. The capacity of the new production line is 1 ton of pastry.
The company plans to launch the new spiral freezing equipment, which will deep-freeze the produced pastry products.
Klemencas Agentas, CEO of Mantinga, says the production of Mantinga is popular abroad, thus the company must grow and modernize its equipment. Mantinga sells 60 percent of its products in Lithuania, while the rest is exported to Estonia, Latvia, Russia, Ukraine, Sweden, Finland, Ireland and the United States. The company plans to increase its export share to 70 percent in the future.
Mantinga took part in the world foodstuffs exhibition in Germany recently, where it received a lot of attention. The products of Mantinga are up to the European standards, while their prices are lower compared with the similar products produced by the European companies.
Mantinga has 8 bakeries in Germany already and plans to open another four by the end of the year. The bakeries are known as Mantinga Family Bake in Germany.
(Lietuvos Rytas)

Electricity price will match its quality
State Property Fund confirmed yesterday that the winner of Western Lithuania's power grid operator privatisation tender is a consortium of nine natural persons. The consortium includes owners of the largest Baltic retailer VP Market. The only competitor of the consortium was the consortium of Achema Group.
According to unofficial data, the consortium will pay more than LTL 539 million for the 77 percent stake in the power grid operator. Taking into account the fact that other shareholders will have to sell their shares to the new owner, the price of the operator will climb over LTL 700 million.
Representative of the consortium Zilvinas Marcinkevicius says that experience of the consortium members will be used in the management of the power grid operator. Marcinkevicius claims the price of the electricity will match its quality. The consortium plans to modernize the Western Lithuania's power grid operator, so that the quality of the provided services matches the needs of every customer.
(Lietuvos Zinios, Verslo Zinios, Respublika, Lietuvos Rytas)

Construction volumes grow
Lithuanian builders carried out construction work for a total of LTL 1.288 billion during the third quarter of 2003, a 25 percent increase over the same period last year, the Statistics Department has reported.
According to preliminary data, total investments into Lithuania's construction sector rose by 9 percent, year-on-year, to LTL 2.231 billion in the third quarter. Investments into construction and reconstruction of building and engineering structures rose by 13 percent, year-on-year, to LTL 1.339 billion, of which investments in residential buildings came to LTL 163 million.
In the third quarter, new construction accounted for 38 percent of the total volume of construction activities, reconstruction for 28 percent, and repair and maintenance for 31 percent.
(Verslo Zinios)

Thursday 20th of November, 2003

Lidl chooses Lithuanian suppliers
The German retailer Lidl is coming to the Baltic market. It will choose the Lithuanian suppliers due to more attractive prices.
The Estonian business daily Aripaev reports that Lidl has found suppliers of juice, butter and artificial butter in Lithuania. VZ has already reported about the plans of Lidl to open trade centres in Lithuania, Latvia and Estonia next year.
Estonian producers claim that Lidl has chosen Lithuanian suppliers due to smaller prices and also because the Lithuanian products meet the strict price criteria of Lidl. On the other hand, it is most likely that local producers will supply perishables to Lidl in each of the Baltic countries.
Lidl is to open some 50 stores in Lithuania; it is forecasted that most of them will be opened in smaller towns. In terms of the segment, the retail chain would compete with Norfa and Saulute trade centres and small companies.
(Verslo Zinios)

Apetite of Dvarcioniu Keramika grows
JSC Dvarcioniu Keramika is the largest producer of ceramic tiles in the Baltic countries. The company has already won the respect of competitors all over the world.
The company announced recently about the purchase of the new production line worth LTL 21 million. The ceramic tile production line is the most modern in the world so far.
The purchase of Dvarcioniu Keramika surprised its competitors in Europe, as most of them are just looking for the possibility to purchase such equipment.
Dvarcioniu Keramika is exporting its production to the Scandinavian countries, the United States and Poland. However, most of its production is sold in the countries of the former Soviet Union.
Dvarcioniu Keramika plans to produce 3.2 million ceramic tiles per year.
(Lietuvos Rytas)

Vodka and juice raise turnover of Alita
AB Alita, one of the largest alcoholic beverage producers in Lithuania, reported a 10-month turnover of LTL 78.411 million. It is a 10 percent increase compared to the same period last year.
Vilmantas Peciura, director of finances at Alita, says the turnover was boosted by the sales of concentrated apple juice and vodka. The sales of cider grew have doubled as well. The sales of wine are at the same level as year, says Peciura.
Alita plans to post a turnover of LTL 90 million this year. Its profit plans for 2003 stand at LTL 6 million.
(Verslo Zinios)

Wednesday 19th of November, 2003

Shadow economy accounts for one sixth of Lithuania's GDP
Shadow economy accounted for 15.2-18.9 percent of Lithuania's gross domestic product (GDP) in 2002, a joint research of shadow economy by country's Statistics Department and Italian experts has revealed. Last year Lithuania's GDP totalled LTL 50.758 billion. In 1995-1996 shadow economy comprised 19.1 percent of Lithuania's GDP, earlier studies have showed.
The latest research has revealed that, on average, fishing companies concealed some 50 percent of income from tax authorities, forestry companies - 35.6 percent, companies engaged in provision of personal services - 32.9 percent, textile companies - 25.2 percent, publishing houses - 17.8 percent, furniture producers -15.4 percent, non-financial services companies - 14.3 percent, and energy companies - 1.8 percent of real income last year.
According to preliminary calculations, gross added-value, created by illegal businesses, made up some 0.9 percent of Lithuania's GDP in 2002. However, this index is not incorporated in the GDP result, to ensure comparison of the official figure at the global level.
(Respublika, Lietuvos Zinios, Lietuvos Rytas)

A halter for retail chains
Ministry of Economy is preparing a bill, which would establish a number of limitations for large retailers. For instance, they would not be allowed to sell the goods at a price lower than the purchase price or organize sales more than 2 times per year. Suppliers say there is a need for such a law, while retail chains claim the proposals contradict with the free market principles and limit competition.
Producers say that although the law would put more supervision over the activities of the retail chains, the retailers would still find ways to bypass the prohibitions, as everything in the retail market is based on the agreement between two sides.
Retailers agree with some of the proposals, but criticize the majority of other novelties. Inga Skisaker, director of finances at RIMI Lietuva, says some of the proposals contradict with the principles of economy. She thinks the law would hurt retailers, producers and customers. Although the law aims to create equal competition conditions, it would in fact limit the competition, claims Skisaker.
Ignas Staskevi?ius, CEO of VP Market retail chain, says the bill includes a number of populist goals and it is difficult to imagine how it would work in practice. Head of VP Market thinks the law aims to improve the situation of certain producers that find it hard to compete in their segment.
(Verslo Zinios)

Seifuva will work for Swedes
Utena-based company UAB Seifuva manufactures safes. Although the company cannot boast good results this year, the partnership with two Swedish companies promises more orders.
Gediminas Norkunas, director of Seifuva, says the possibility to work with Swedes occurred with the implementation of the environmental management system ISO 14000. One of the Scandinavian companies plans to move its production to Utena and leave only administration and sales departments in Sweden. Norkunas says the new safes will be sold under the name of the Swedish company.
The other Swedish company sent one of its certification experts to Seifuva and plans to certificate the safes of Utena-based company in Sweden. If the safes receive the Swedish certificate, Seifuva will export its production to Sweden.
(Verslo Zinios)

Tuesday 18th of November, 2003

Privatisation agreement of Alytaus Tekstile declared void
The Vilnius District Court has declared Lithuania's agreement on the sale of shares in Alytaus Tekstile (Alytus Textile) to Singapore-based Asean Interests null and void, in a lawsuit filed by the State Property Fund.
Asean Interests holds a 47.31 percent equity stake in the cotton textile manufacturer Alytaus Tekstile. The SPF and Asean Interests signed the agreement on the sale and purchase of shares in Alytaus Tekstile in 1998.
The Vilnius District Court ordered the Hong Kong company to turn all shares in Alytaus Tekstile back to SPF, thus the state will not have to buy the shares back from the Asian company. The state was ready to pay LTL 1 million.
The ruling of the court will come into effect within 20 days from passing. However, Asean Interests may still lodge an appeal against the verdict.
The privatization body filed the lawsuit earlier this year, asking the court to declare this agreement null and void and to order the investor to return the shares that were sold by the state, as well as to award the state interest and fines for overdue payment.
(Respublika, Verslo Zinios, Lietuvos Zinios, Lietuvos Rytas, Kauno Diena)

Coffee for American gourmands is grinded in Lithuania
UAB Gurmelitas started exporting coffee to the United States. The company is already exporting mushrooms to the United States.
The production of frozen mushrooms and their export was a seasonal business. Thus, the company hopes the production of coffee will help the company avoid the seasonality of the business.
Coffee produced by Gurmelitas is intended for gourmands. It is hand-picked in the highlands of Africa and is presented for the final customer freshly roasted. To keep the freshness, coffee is flown to the United States in the course of 2 days after its production.
The company plans to sell 80 percent of the coffee grinded in Lithuania at the stores of VP Market chain, while the remaining 20 percent will be exported to the United States.
Gurmelitas can produce up to 90 tons of coffee per year and expects the production of coffee to increase the company's turnover by LTL 5-6 million.
(Verslo Zinios)

Only crumbs of the pie left for small retailers
Lithuanian customers prefer large supermarkets. The statistics shows that although Lithuanians bought more this year, only large retailers managed to boost their turnover.
Retail market in Lithuania grew 9.9 percent up to LTL 4.73 billion this year in year-on-year terms. Large retail companies that have 50 employees or more managed to boost their nine-month sales by 17.3 percent up to LTL 3.657 billion. Meanwhile, the turnover of small retailers declined by 1.6 percent to LTL 459 million.
The situation is similar in food retail market as well. While the turnover of the segment's large retailers grew by 9.6 percent, small and medium companies reported drops of 0.9 percent and 14.9 percent respectively.
The results of the investigations carried out by the Competition Council in 2002 revealed that Lithuania's largest retail chains VP Market, Iki and RIMI Lietuva controlled 37.8 percent of the retail market and 59 percent of the food retail market.
(Lietuvos Rytas)

Monday 17th of November, 2003

Puzzle over dollar rate
Those, who took loans in US dollars more than a year ago, may be happy. The fall of the dollar rate means that their loan became much cheaper. On the other hand, depositors, who have their deposits in dollar, lost one fourth of their savings. They still cannot face this fact and expect the dollar rate to increase.
Vilniaus Bankas reports that the volume of deposits in dollars started to decline in November of last year. Meanwhile, the dollar is still popular among depositors. The deposits in dollars account for 39 percent of all deposits at Vilniaus Bankas. The situation at Hansabankas is quite different, where only 10 percent of deposits are in dollars.
The dollar is still quite popular among loan receivers as well. Vilniaus Bankas reports that almost 28 percent of loans issued in foreign currency were in dollars. The dollar is not so popular at Hansabankas. The dollar accounted only for 3.9 percent of the bank's loan portfolio in early November.
(Lietuvos Rytas)

Mazeikiu Nafta started selling arctic diesel fuel
Lithuania's oil refinery AB Mazeikiu Nafta started selling arctic diesel fuel of the high quality in the Baltic countries.
Paul Nelson English, CEO of Mazeikiu Nafta, believes the diesel fuel of the 2nd class will satisfy the customers' needs.
The diesel fuel, which is nonfreezing in the temperature up to minus 32 degrees will be sold from November 16 to March 15.
Mazeikiu Nafta first produced the trial amount of arctic diesel fuel in February.
(Verslo Zinios)

New owners, new winds
Stumbras and Vilniaus Degtine, the two recently privatized alcoholic beverage production companies, have new leaders, revise investment plans and the assortment.
The new head of AB Vilniaus Degtine is Darius Zaromskis, who is one of the owners of UAB Belvedere Baltic and UAB Belvedere Prekyba, wholesalers of alcoholic beverages. Zaromskis says that LTL 4-5 million will be invested into the company by the end of this year. According to Zaromskis, the company will adjust its assortment this year as well - AB Vilniaus Degtine will produce vodka of a better quality and wider range of tastes.
Meanwhile, the new head of Stumbras is Arturas Listavicius. He is also vice president of MG Baltic and chairman of Mineraliniai Vandenys board. He says the main goal of the company is to increase sales by paying more attention to the marketing of the products. Besides, the new owners of Stumbras want to complete the project of biofuel production in Silute alcohol factory. Stumbras will also start producing beverages of the Italian concern Stock.
(Verslo Zinios)

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