OREANDA-NEWS. December 21, 2010. Gross profit of the JSC „Latvijas kugnieciba” (LK) Group’s holding company in 2009 reached LVL 4.5 million, the net turnover amounted to LVL 7.4 million.

In the same time net losses of the LK Group’s holding company in 2009 reached LVL 17.6 million, and the only reason of these losses is the impairment of the holding company given in the balance sheet in amount of LVL 20.3 million that were made for investments in segments unrelated to core operation, in particular – the real estate field. The purposeful efforts of the LK management to ensure stable financial situation of the company in the difficult global shipping market conditions and financial crisis is proved by the fact that the LK administrative costs in 2009 if comparing with 2008 were reduced by 38%.

Unfortunately we have to point out that the necessity to make impairment for investments in the real estate field is directly related with the LK largest shareholder’s JSC “Ventspils nafta” (VN) unwillingness to find a solution to the situation caused by itself, when it at the end of 2008 initiated conclusion of a real estate object purchase deal with the LK subsidiary company “LASCO Investment” (LI) at prices that protractedly did not comply with the actual situation in the real estate market. Upon receipt of the largest part of the payment from the LK subsidiary company LI, VN paid dividends to its shareholders in amount of LVL 50 million, the largest part of which was transferred to a Cyprus company “Euromin Holdings (Cyprus) Limited”, who publicly is called the company of the “Vitol” Group. In fact, by withdrawing money from the LK subsidiary company, VN shareholders received dividends thus disregarding possibilities of other LK shareholders to gain profit from their investment in LK.

LK has already repeatedly informed its investors and supervisors of the securities market about endeavours to reduce the potential losses, trying to commence constructive and business-like negotiations with VN about restructuring of the real estate deal, with the aim to ensure solvency and operation in the long-term of the LK subsidiary company, as well as considering interests of all LK and VN shareholders. The LK and LI written proposals to VN included an appeal to refuse from claiming of the remaining payment sum in amount of almost EUR 40 million taking into account the difficult situation in the real estate market and the actual prices, as well as a request to find other ways to participate in stabilisation of the situation, for example, asking the VN or its largest shareholder “Euromin”, that publicly calls itself a company of the “Vitol” Group, to become the investors of LK by financial contributions. Against any principles of good practice LK still has not received any response to its written proposals regarding the above mentioned. The irresponsible avoidance of VN to find a solution to the situation that partly has been caused by it is the reason why drawing up of the audited financial statements for 2009 was delayed.

Due to deliberate inactivity of VN, ignoring the fact that only the money received from LI allowed payment of dividends to VN shareholders, LI was forced to apply to court for out-of-court legal protection process that was approved on 7 October 2010 on the term of 2 years.

Considering the above-mentioned and the information headlined in mass media about the VN plans to pump out oil from a pipeline that belongs to other VN Group’s company, LK has ascertained about the actual aims of VN that obviously are related to acquisition of maximum of financial resources from the Group’s companies disregarding their operation in the long-term, as well as the necessity to stabilise the financial situation.

LK would like to repeatedly emphasize that it has done everything possible to optimise the LK Group’s operation and improve its financial performance. VN has actually kept from its shareholders the fact that by payment of dividends on the LK account and refusing to restructure the real estate deal it will later have to record substantial losses. At the moment LK actively works to finalise the consolidated audited annual report 2009.

At the end of 2009, Latvian Shipping Company had a fleet of 28 tankers (2 of them chartered from other ship owners). Older ships were sold off in order to increase the fleet’s competitiveness in the international market for shipping. Two gas tankers were among the ships to be sold during the reporting period.

All Latvian Shipping Company shares are traded publicly on the Official list of the NASDAQ OMX Riga exchange. Negative macroeconomic trends in Baltic securities markets led to a drop in the price of Latvian Shipping Company shares from LVL 0.66 at the beginning of 2009 to LVL 0.40 at the end of the year, even though in mid-year, when the mood of the market improved a bit, the price rose to LVL 0.69. Latvian Shipping Company shares were the focus of much attention, with 2,591 transactions at the exchange during the year involving 3.96 million shares worth LVL 1.91 million. These liquidity indicators, however, do not show the real value of shares in Latvian Shipping Company, given that the number of transactions was really quite low, and fewer than 100 transactions involved more than two-thirds of the total number and value of shares that were traded. On December 31, 2009, the capitalisation of Latvian Shipping Company shares at the NASDAQ OMX Riga exchange was LVL 80 million in comparison to the equity capital value LVL 222 million.