Management report

 
Field of activity

 The Company was founded in 1900, but received its current name in 1970. JSC “Latvijas balzams” is the leading producer of alcoholic beverages in the Baltic States, and produces more than 100 different kinds of alcoholic drinks. 75% of our products can be found in more than 160 countries via SPI Group exports and in more than 30 markets as the direct export of JSC “Latvijas balzams”. The major shareholder of JSC “Latvijas balzams” is “SPI Regional Business Unit BV” which owns 89.53% of the Company’s equity capital.

Company`s activity in 2013

JSC “Latvijas balzams” is the leading producer of alcoholic beverages in Latvia, as well as one of the largest local taxpayers. During 2013, JSC “Latvijas balzams” paid 41.3 million lats (58.7 million euro) to the state budget, including excise tax, amounting to 30.5 million lats (43.4 million euro).

The unaudited turnover of the Company in 2013 was 71.1 million lats (101.1 million euro), which is 1.5% more than in 2012. The growth of the turnover achieved by implementation of new products in production, establishing a cooperation with new partners and solid teamwork.

 In 2013 the turnover in domestic market has remained practically unchanged comparing to 2012, though the turnover in the Baltic States totally has decreased due to planned beverage portfolio changes.

 The Company`s sales in export market has increased by 14.7%, except the Baltic States market, thereby the total turnover of export markets increased by 2.8%. The most significant increase in sales was achieved in such important markets as Russia (+5.5%), Travel Retail channel (18.2%) and Ukraine (+38.3%). The main focus markets in 2013 were the Baltic countries, Russia, Germany and Scandinavia. Meanwhile, new export markets, such as China, were actively acquired. Also the export by the orders of SPI Group has increased by 4.4%.

The unaudited profit for the reporting period reached 4.0 million lats (5.7 million euro), which represents 3.8% decrease versus 2012. The decrease in profit involves the rise of price for raw materials and different total sales split between product categories.

 JSC "Latvijas balzams" achieved a significant growth of 16 positions and ranked 29^th place in TOP 101 company assessment, conducted annually by the NASDAQ OMX, investment banking company IBS Prudentia and the business magazine “Kapitals”, considering the largest Latvian enterprise business value (enterprise value). The company was acknowledged as one the 25 best Latvian exporters who received the symbolic “The Red Jacket” award of the best exporting brands from Latvia.

 Also in the Annual Sustainability Index assessment JSC "Latvijas balzams" maintained the Silver Medal and raised the growth rate in the number of sections of the evaluation, including communication with the public.

 In order to facilitate staff training and education, the Company realizes long - term Talents and New Heads Development programs, as well as started to implement Competency model as the base for employee`s individual development pl

Outlook of future activities

 The Company will continue to focus on the production of new and competitive products for domestic and export markets by continuing to implement targeted export strategy.

 As one of the leading enterprises in food industry JSC "Latvijas balzams" will continue to invest into training and managerial programs, increasing the level of professional competences and production efficiency, project management skills and sales proficiency.

 By thinking about sustainable development, the Company will continue increase the efficiency of production processes and logistics cost control and optimization. The Company's priorities will include environmental and safety aspects.

 The Company will continue to develop community support program, including the Company`s launched    scholarship fund project, granting scholarships to students from universities.

 JSC "Latvijas balzams" will focus on significant issues of corporate social responsibility - environmental protection, public education about the dangers of alcohol and non-commercial implications, as well as educating young people about addiction issues in collaboration with other social partners.

 As the member of Latvian Alcoholic Beverages Association and one of the leading companies of industry JSC "Latvijas balzams" will continue the dialogue with legislators and law enforcement institutions to adjust processes of legal alcoholic beverages business and combat distribution of non-commercial alcoholic beverages in Latvia.

JSC „Latvijas balzams” 

Chairman of the Board                                                                Guntis Āboltiņš - Āboliņš

Riga, 28th February, 2014