OREANDA-NEWS  On 19 December was announced, that the Council of the stock enterprise Latvijas kugnieciba (Latvian Shipping Company – LASCO) approved a decision on supplementing the company’s development strategy with a new direction – long-term investments in various assets which will allow the company to reduce its business risks.

The decision was taken in light of the fact that the company currently has access to substantial financial resources, and the efficient use of those funds in the firm’s basic business processes is not possible at this time because of global economic conditions – among them the decline in oil prices and, accordingly, the earnings that can be received from tankers.  Free resources are available because the company has pursued a successful growth strategy over the course of the last several years.  The placement of those resources in financial institutions, however, is seen as a risky thing right now, given the substantial decline in the global financial market and the doubts which exist about the ability of those institutions to guarantee safe deposits during a global economic crisis.  For these reasons, the Latvian Shipping Company must choose investments which will facilitate its further development and, at the same time, reduce its business risks.

The first step in risk diversification involves an investment of some of the company’s free resources in projects which are not related to its basic area of operations – first and foremost in liquid and exclusive real estate projects in the most valuable developmental territories in Latvia, as well as in the publishing and printing industries.  That is why the Latvian Shipping Company has agreed to purchase real estate and capital shares from the stock company Ventspils Nafta in a process that will be mutually advantageous:

• The real estate management company SIA Nekustamais Ipasums VN (100%);

• The real estate management company SIA Rigas Licis VN (100%);

• Real estate in Riga at Briana Street 3, in Ventspils at Talsu Street 75d, in Jurmala at Dubultu Prospect 51, and the conference and leisure centre “Lejastiezumi” in the Renda Parish of the Kuldiga District;

• The printing company Preses Nams (95.4%) and the publishing house SIA Mediju Nams (95.63%).  The former of these companies owns several valuable real estate properties, and that is a key element in the Latvian Shipping Company’s interest in this transaction.  Mediju Nams, for its part, represents a substantial share of the Preses Nams’ value because of work orders which it submits to that company, and that means that the investments in the two companies really cannot be split apart.

The management and development of these new investments will be handled by a wholly owned Latvian Shipping Company subsidiary, SIA LASCO Investment.  The company has equity capital of LVL 19 million.

“The Latvian Shipping Company has pursued a successful business development strategy for the last several years, and modernisation of the company’s fleet has been and always will be its most fundamental element.  This is seen in our financial results and in the finances which we have been able to save up over the last few years.  A long process of analysing our prospects for development in future, the situation in the international transport market, and the amount of money which our company has set aside – all of this shows that it is in the interests of the Latvian Shipping Company to pursue investment projects which will reduce the firm’s business risks.  Investments in liquid properties will ensure a better return than can be received at this time from the money market or from the company’s basic area of operations – one which, according to experts, can expect a greater or lesser level of stagnation over the next several years.  Of course, if the situation were to change, we would react appropriately and act in accordance with the new circumstances,” says Imants Sarmulis, board chairman of the Latvian Shipping Company.

The payment is to be made in three tranches – up to 25% of the sum will be received immediately after the purchase-and-sale agreement is concluded today, another 25% will be paid by the end of February 2009, with a gradual re-registration of ownership rights to the properties, and the remaining 50% will be paid by the end of the first quarter of 2010. The total amount of the transaction is LVL 82,7 million.

“The results of the Latvian Shipping Company’s concern show that over the last several years there have been stable profits of several tens of millions of lats each year, and that shows that the company’s strategy of investing in a fleet of medium-sized tankers was the right one.  Today the Latvian Shipping Company is a world leader in the segment of so-called ‘handy’ tankers.  Specialists in the sector believe, however, that shipping volumes will reduce in accordance with the global recession.  Under such circumstances, the Latvian Shipping Company will continue to upgrade its fleet, but not as intensively as we have done over the last two years.  We have decided to make profitable and secure long-term investments in order to strengthen the company’s asset structure,” says the firm’s vice president, Raivis Veckagans.

Highly qualified and independent professionals were brought in to prepare and evaluate the transaction.  Among them were a certified real estate assessment company SIA Biznesa Konsultantu Grupa, SIA „Colliers International”, member of the internationally recognized organization integrating professional qualified financial experts Institute of Charted Accountant of England and Wales Kelvin Hooke (BSc ACAI), financial consultants KPMG Corporate Finance, and the law firms of Eversheds Bitans and Skudra & Udris.

The Latvian Shipping Company’s fleet consists of 37 ships – 34 tankers, two gas transport ships, and one ship for dry cargo.  In the segment of medium-sized tankers, the Latvian Shipping Company is among the world’s top 10 owners of ships, as well as the leader in the Northern European market.  The company earned profits of USD 65.6 million during the first nine months of this year.