Ventspils Nafta Confirmed Substantial Profit in 2008
OREANDA-NEWS. July 30, 2009. Despite challenging global economic conditions, the public joint stock company Ventspils nafta has delivered successful financial results in 2008. Furthermore, the company has earned material profit through the successful sale of some assets, thereby implementing its core holding function – efficient management of investments.
According to the audited annual report of JSC Ventspils nafta for 2008, consolidated net turnover of JSC Ventspils nafta was 63.1 million lats in 2008, with the Group’s consolidated profit after tax constituting 29.7 million lats. However, profit of the Group parent company of JSC Ventspils nafta in 2008 was more than 40 million lats according to audited results, due to the sale of assets outside the transit business area. Consolidated profit of JSC Ventspils nafta Group in 2008 exceeded the 2007 results (5.3 million lats) by almost six times and the Group’s consolidated net turnover is 3.1 million lats larger than planned for in the 2008 budget .
Preparation of audited reports of JSC Ventspils nafta for 2008 required extra time due to the substantial sale transactions that took place at the end of 2008, which positioned JSC Ventspils nafta to focus on its core historical business, the transit business in 2009. According to recommendations given by auditors and experts, as well as the latest changes and requirements of the International Financial Reporting Standards, a comprehensive and in-depth approach was necessary to draw up consolidated report of JSC Ventspils nafta for 2008 in order to provide a scrupulous reflection of those assets that were sold, in annual reports, in full compliance with Latvian and international standards.
This detailed and accurate approach to the audit of annual reports has fully justified itself, as the audited consolidated net profit of JSC Ventspils nafta Group has grown by 8.9 million lats as compared with the amount of unaudited profit published in February 2009 , in accordance with requirements of laws and regulations. Also consolidated net turnover of JSC Ventspils nafta Group has changed by 15.4 million lats as against the unaudited result, to reflect turnover of investment sectors concluded (sold) by JSC Ventspils nafta in another position and demonstrating the financial results from activity of exactly the retained transit area companies in key figures of the report in the course of the audit.
“Due to global and national economic turmoil, 2008 presented numerous challenges and complicated issues for JSC Ventspils nafta Group. This led to an immediate assessment and reevaluation of the company’s future plans to allow for a rapid response and to deliver maximum efficiency and effectiveness – resulting in sustainable and optimal future plans,” emphasized the Chairperson of the Management Board for JSC Ventspils nafta, Olga Pзtersone. “However, the first six months of 2009 have proved that this will be a tough year for many companies and only the most competitive will survive,”
As a result of a comprehensive risk analysis, the Supervisory Council for JSC Ventspils nafta approved the sale of JSC Ventspils nafta assets in several operating areas in December 2008, to enable a clear focus on the development of transit industry assets as opposed to a broader diversification strategy previously pursued by the JSC Ventspils nafta Group. Success was achieved by optimizing, reorganizing and focusing the core business of JSC Ventspils nafta Group at the start of 2009 , into the key transit areas – transportation, storage, transshipment of crude oil and petroleum products (subsidiaries Ventspils nafta terminвls Ltd and LatRosTrans Ltd) as well as the international shipping business (associated company JSC Latvian Shipping Company).
This decision was made after recommendations made by local and international experts to ensure adequate return on investments for all shareholders in JSC Ventspils nafta, despite the conditions of global economic turmoil. This strategy enabled JSC Ventspils nafta to focus on one core area, focusing on the growth and improvement of its assets. This process was helped by the involvement and experience of the international shareholder – oil and gas transport and trade conglomerate, the Vitol Group.
The JSC Ventspils nafta subsidiary Ventspils nafta terminвls Ltd maintained stable cargo volume level in the reporting period by transshipping in total more than 11.6 million tons of crude oil and petroleum products. Events in the global economy, the difficult global oil market in the last months of the reporting period and the international competition in the transit area have had and will continue to have a significant impact on the operating results of Ventspils nafta terminвls Ltd, which were also affected for several months in the reporting period a by the repair works of the main petroleum products pipeline Polotsk-Ventspils in the territory of Belarus, which resulted in a reduced diesel fuel flow to Ventspils.
Ventspils nafta terminвls Ltd continued its active modernization plan in 2008, by optimizing company’s operational processes and procedures, increasing workforce efficiency and introducing higher requirements in terms of environment protection,. This helped the company to perform in tough economic conditions and strengthened its position in international market. The aim of modernization is to position Ventspils nafta terminвls Ltd as the major crude oil and petroleum products transshipment complex in the Baltic region Much of the learning has come from the Vitol Group and the work done to improve its terminals in Rotterdam and Amsterdam. The most significant contribution that Ventspils nafta terminвls Ltd made towards improving its environmental performance was the launch of a new, modern wastewater treatment plant that is unique in the Baltic region.
Compared with previous forecasts of JSC Ventspils nafta, in the reporting period, external circumstances substantially affected another Group’s company LatRosTrans Ltd, which is working in the sensitive transit area. Oil transportation in the direction of Lithuania via the pipeline owned by LatRosTrans Ltd has still not started due to both the geopolitical situation, and technical reasons These include repair works at the pipeline sections in the territory of Belarus and the corresponding decrease in its capacity, which influenced transportation volumes of petroleum products in direction of Ventspils.
In line with the approved schedule, LatRosTrans Ltd continued the renovation and repair works of the petroleum products pipeline in the reporting period. LatRosTrans Ltd has continued to help eliminate the significant loss of petroleum products resulting from illegal activities, through the hiring of a security company, regular pipeline inspection ,collaborating with the police and allocating considerable resources to manage the environmental impact, as well as informing and involving other state authorities in dealing with this issue.
In the reporting period, the JSC Ventspils nafta associated company JSC Latvian Shipping Company has been continuing to pursue its strategic goal – increasing the Group’s value and retaining its position among the top ten medium range tanker owners in the world. JSC Latvian Shipping Company Group delivered a net profit of 58.7 million US dollars in the reporting period. In comparison with the 2007 results this is 8.3 million US dollars or 12% lower, reflecting general unfavorable shipping market trends in the reporting period, especially towards the end.
In the tough circumstances of global financial and economic turmoil, JSC Ventspils nafta is taking the appropriate actions to reduce risk and ensure profit, by careful, focused and purposeful management of assets as well as careful planning, to achieve the goals set by shareholders.
According to 2009 budget forecasts for JSC Ventspils nafta Group, consolidated net turnover this year is expected to be not less than 60 million lats and net profit in excess of 2 million lats.