Management report

Field of activity

The Enterprise 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.

Enterprise activity in the first quarter of 2013

JSC “Latvijas balzams” is the leading producer of alcoholic beverages in Latvia, as well as one of the largest local taxpayers. During the first quarter of 2013, JSC “Latvijas balzams” paid 11.3 millions lats to the state budget, including excise tax, amounting to 8.4 millions lats.

The unaudited turnover of the Company in the first quarter of 2013 was 15.2 million lats, which is 0.6% less than in the same period of 2012.  Domestic turnover in the first quarter has increased by 1.1%. Export turnover in the Baltic States showed a decline, but increased significantly in other direct export countries. JSC “Latvijas balzams” continued implementation of the pre-defined export strategy in the key markets and maintained the previous sales volumes to our core customers. The most significant increase in sales was achieved in such important markets as Russia – 39%, Germany – 38% and retail travel channel – 21%. During the first quarter of 2013 the main focus sales markets were the Baltic States, Russia, Germany and Scandinavia. Meanwhile, new export markets were actively acquired, for example, China.

The unaudited profit for the reporting period reached 449 thousands lats, which represents 43% growth versus the first quarter of 2012. The result was achieved through focused development of the beverage portfolio.

JSC “Latvijas balzams” has launched long - term talents and new heads development programs, as well as started to implement Competency model as the base for employees’ individual development plans.

Outlook of future activities

As one of the priorities of this year the Company will focus on the production of new and competitive products for domestic and export markets. JSC “Latvijas balzams” will continue to implement targeted export strategy based on the growth in our defined key markets. Our priorities for 2013 also including further control of production and logistics costs, optimization and improvement of production efficiency, increasing the competitiveness of the Company.

The Enterprise will continue to support nature-friendly solutions, persistently implementing activities that decrease Company's negative impact on the environment, establishing high requirements for itself and Company’s partners and following the principles of sustainable business.

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.

In collaboration with industry enterprises and NGO’s 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, 31 May, 2013

Riga

31.05.2013.