Management report

Field of activity

The enterprise was founded in 1900, but the actual name it has got in 1970. AS
“Latvijas balzams” is a leading producer of alcoholic beverages in the Baltic
States that produces more than 130 different kinds of alcoholic drinks. AS
“Latvijas balzams” major shareholder is “SPI Regional Business Unit BV” which
owns 89.53% of the company's equity capital. 

The activity of enterprise in 1st half year of 2010 

AS “Latvijas balzams” is the biggest producer of alcoholic beverages in Latvia,
as well as one of the largest taxpayers in Latvia. During first six months of
2010 AS “Latvijas balzams” paid 16.5 millions lats to the state budget,
including excise tax amounting to 12.2 million lats. 

The unaudited turnover of the company in the first six months of year 2010 was
35.3 million lats, which is by 10.2% less than during first six months of 2009.
The decrease in turnover at local market was 21.3% or 4 789 thousands lats as
compared to the same period in 2009. In comparison with 2009, the export market
sales has decreased by 22.0% or 720 thousands lats while export from S.P.I.
Group orders increased by 10.6%. During the first six months of year 2010, the
sales to the EU countries decreased by 5.1% in comparison with the same period
in 2009. Sales to Lithuania decreased by 33.7%, sales to Estonia decreased by
53.1% as compared to the same period in 2009. Decrease of sales is related to
the increase of excise tax, illegal alcohol trade and decrease of economical
activity in the main markets. During first six months of year 2010 the top
focus sales markets were Baltic States, Russia, Scandinavia and Poland
meanwhile new export markets such as Bulgaria, Cyprus and China are being
acquired. 

The Company has paid great attention to production cost control and improvement
of productivity, thus maintaining the positive profit rate. Despite the fact
that company's unaudited turnover has decreased by 10.2%, the profit for the
reporting period was 1 198 thousands lats, that is only 4.8% less than in the
first six months of year 2009 (1 258 thousands lats). 

Future perspectives of activity 

The economic situation in country has started to stabilize, however purchasing
capacity of citizens is still very low, therefore company aims to hold existing
market share as well as to continue export business development by improving
existing products portfolio. In the second half of year 2010 AS “Latvijas
balzams” priorities will be control of production and logistics costs,
optimization and increase of production effectiveness, rise of company's
competitiveness. 



AS Latvijas balzams
Chairman of the Board                                           Karlis Andersons


Riga, 31 August, 2010