OREANDA-NEWS. March 2, 2011. 2010 was a turbulent year for the joint stock company "Latvijas kugnieciba"(hereafter-Latvian Shipping Company or LSC). Starting in January the largest shareholder, joint stock company "Ventspils nafta", and other shareholders repeatedly requested the holding of an extraordinary shareholders meeting. The purpose was to make changes to the supervisory council and replace the management board in order to ensure that in the future these bodies acted in the best interests of all shareholders of the company. After many requests, and after several scheduled meetings were cancelled, a shareholders meeting finally took place on December 17th; this was followed by a further shareholders meeting on January 28th 2011. Currently supervisory council represents all the shareholders of Latvian Shipping Company and consists of eleven members: chairman Simon Boddy, deputy chairman Mikhail Dvorak and members Christophe Theophanis Matsacos, Rubil Yilmaz, Vladimir Egger, Javed Ahmed, Mark Morrell Ware, Olga Petersone, Olegs Stepanovs, Martins Kveps and Serguei Choutov. The newly elected supervisory board has also made substantial changes in the management board of Latvian Shipping Company and it now consists of four members: chairman Paul Thomas and members Michael Main King, Ashley John Neale and Christopher James Kernon.

The extraordinary shareholders’ meeting of December17, 2010 and the extraordinary shareholders’ meeting of January 28, 2011 adopted resolutions to pursue claim against the former members of the Supervisory Council of JSC “Latvijas kugnieciba” Maris Gailis, Karlis Boldisevics, Guntis Locmelis, Uldis Pumpurs, Olga Petersone, Vladimirs Solomatins, Ansis Sormulis, Normunds Stanevics, Andris Vilcmeiers, Svens Zalitis, Miks Ekbaums and Volodymyr Koshkul for compensation for losses caused to JSC “Latvijas kugnieciba”, as well as resolutions on pursuing claims against the former members of the Management Board of JSC “Latvijas kugnieciba” Imants Sarmulis, Edvins Berzins, Andris Linuzs and Raivis Veckagans for compensation of losses caused to JSC “Latvijas kugnieciba”. Intense work on preparing the claims is now taking place.

In 2010 Latvian Shipping Company Group suffered losses in the amount of 123.92 million USD, which is greater than in 2009, when the losses were 90.26 million USD. The largest losses relates to impairments which are made according to the International Financial Reporting Standards: (1) for four new ship buildings with “Hyundai Mipo Dockyard Ltd.” in the amount of 48.52 million USD, (2) for debt of SIA “LASCO Investment” in the amount of 45.43 million USD (3) for acquisition of SIA “NAFTA Invest” in the amount of 5 million USD and (4) for old vessel “Indra” in the amount of 4.48 million USD. Administration expenses decreased from 28.49 million USD in 2009 to 21.46 million USD in 2010. But despite the improvements in world shipping markets in the second half of the year the income from shipping was not nearly enough to cover all the administrative expenses of LSC and it was one of the key reasons why changes to the supervisory and management boards were necessary.

The total value of the LSC Group assets has decreased from 964.41 million USD in 2009 to 699.72 million USD in 2010 and this significant decrease is due to (1) impairments mentioned in the paragraph above (2) deconsolidation of daughter company SIA “LASCO Investment” in the amount of 114.91 million USD which is recognized insolvent with decision of the court as of January 3, 2011, (3) considerable decrease of cash and deposits (88.61 million USD) which were used to acquire SIA “NAFTA Invest” and to finance company’s cash flow as well as (4) depreciation of shipping assets in the amount of 26.61 million USD. Consequently, the LSC Group’s equity capital has reduced significantly from 454.77 million USD in 2009 to 334.16 million USD at the December 31, 2010. The major decrease was in liabilities as they reduced from 509.64 million USD to 365.56 million USD at the end of 2010. Decrease of the liabilities is significantly affected by deconsolidation of SIA “LASCO Investment”. As of the 31 December 2010 equity comprises 48% and liabilities 52% of the total assets. A year before this proportion was 47% and 53%.

The Latvian Shipping Company’s shares were among the most actively traded during the reporting period – 2 462 transactions involving 5.06 million shares worth 2.03 LVL million were conducted, representing 48% of all share transactions on the NASDAQ OMX Riga official list during the reporting period. On December 31, 2010, capitalisation of Latvian Shipping Company shares at NASDAQ OMX Riga was 75.8 million LVL.

At the end of the year the fleet under commercial management of the Latvian Shipping Company consisted of 21 tankers, 18 of which are owned by the Latvian Shipping Company Group, but 3 vessels belong to other ship owners. As of the 31 December, 2010 the total deadweight of the fleet was 0.96 million DWT and the average age 5 years. During 2010 LSC sold seven old product tankers and returned one chartered in vessel to the owner.

During 2010 tankers of the JSC Latvian Shipping Company fleet were mainly employed on time charter. Even though the result from vessel operation was positive and reached 12.69 million USD, the net voyage result of Latvian Shipping Company Group’s vessels during 2010 substantially fell behind the previous year’s result (148.91 million USD) and reached 88.31 million USD, showing the overall decline in global shipping markets.

Although there are some signs for optimism for the future, at the present time the shipping industry continues to be affected by the general worldwide economic situation and this directly influences ship values. Therefore Latvian Shipping Company has made impairments for the four new ship new buildings with “Hyundai Mipo Dockyard Ltd.” LSC will put all its efforts into managing the new ship building programme in the best interests of the company and its shareholders.