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.

Enterprise activity in the first half 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 half of 2013, JSC “Latvijas balzams” paid 21.4 millions lats to the state budget, including excise tax, amounting to 15.9 millions lats.

 The unaudited turnover of the Company in the first half of 2013 was 32.5 million lats, which is 2.6% more than in the same period of 2012. The increase of the turnover is based on successful   performance in core export markets and commencement of new business. The most significant increase in sales was achieved in such important markets as Russia (41%) and Travel Retail channel (19%). The main focus markets in the first half of 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 10.7%.

 Sales in domestic and Baltic market have faced some decline in the first half of 2013 due to the amendments of beverage portfolio. The turnover in the other direct export markets has increased by 9.4%.

 The unaudited profit for the reporting period reached 1.4 million lats, which represents 30% growth versus the first half of 2012. The result was achieved due to focused development of the beverage portfolio and progress in export markets.

 The Company has realized purposeful cooperation and communication with clients and business partners and improved its position in annual Reputation TOP - ranked 15^th among TOP 150 Latvian companies with the best reputation.

 JSC "Latvijas balzams" was acknowledged as one the 25 best Latvian exporters who received the symbolic Red Jacket award of the best exporting brands from Latvia, selected on the base of the research.

 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 for the second half of 2013 the Company will focus on the production of new and competitive products for domestic and export markets by continuing to implement targeted export strategy. JSC “Latvijas balzams” will continue to improve production efficiency and further control of logistic costs by implementing innovative and nature-friendly solutions that will promote competitiveness.

 Our priorities for 2013 also include environmental, safety and sustainability aspects, and measures that can help to reduce Society`s negative impact on environment, establishing high requirements for itself and the 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, 23 August, 2013