JSC Ventspils nafta gains considerable profit in 2008 in difficult economic circumstances

By selling in an advantageous transaction the JSC Ventspils nafta assets in the
areas not related to transit business, the company's long-term assets were
transformed in assets of high liquidity, whereas the shareholders of JSC
Ventspils nafta have gained significant profit, as the JSC Ventspils nafta
parent company's profit after tax reached 40.2 million lats in 2008 according
to the results of unaudited report of JSC Ventspils nafta for 2008. The
shareholders of JSC Ventspils nafta will decide at the general shareholders'
meeting about utilization of this profit, which also reflects the profit gained
from the transaction implemented as a result of reorganization of JSC Ventspils
nafta Group. 

Whereas according to the unaudited report of JSC Ventspils nafta for 2008, the
JSC Ventspils nafta Group's consolidated profit after tax in the reporting
period amounts to 20.8 million lats, which is almost four times more than was
planned in the JSC Ventspils nafta Group's consolidated budget for 2008, which
was 5.3 million lats. According to the unaudited report for 2008, consolidated
net turnover of JSC Ventspils nafta Group in the reporting period has reached
78.5 million lats, which is 18.5 million lats more than in the planned
consolidated budget of JSC Ventspils nafta for 2008. 

 “Due to global and national economic turmoil, year 2008 presented numerous
challenges and complicated issues for JSC Ventspils nafta Group meanwhile
forcing for immediate assessment and reevaluation of the company's further
development scenarios for timely response and maximum efficiency and
effectiveness - resulting in sustainable and optimal future growth model. Of
course, considering the current financial and economic situation worldwide, the
year 2009 will clearly be more difficult and only the most competitive ones
will endure in this situation,” emphasizes the Chairperson of the Management
Board for JSC Ventspils nafta Olga Pētersone. 

As a result of a comprehensive risk analysis, Supervisory Council for JSC
Ventspils nafta approved the company's development strategy in December 2008
focusing specialization on development on transit industry related assets as
oppose to functions previously pursued by the holding in wider industry range
that JSC Ventspils nafta Group implemented for several years as a result of
active business industry risk diversification policy. By optimizing and
reorganizing core business focus JSC Ventspils nafta Group as of beginning of
2009 following end of previous reporting period, the parent company manages
investments into the transit area - transportation, storage, transshipment of
crude oil and petroleum products and international shipping business. 

The decision to refocus all attention to development of the historical core
business of JSC Ventspils nafta in transit industry was made in accordance with
recommendations and based on local and international experts and advisers with
the main intention to ensure adequate return on investments in the interests of
all shareholders of JSC Ventspils nafta in the conditions of global economic
turmoil. The selected strategy enables JSC Ventspils nafta to focus on one
industry area, focusing on growth and improvement of its assets, especially
taking into account several decades of experience and success in this industry,
as well as the international know-how, which has been actively acquired
particularly in the recent years along with involvement of the international
shareholder - oil an gas transport and trade conglomerate Vitol Group. 

In the reporting period, JSC Ventspils nafta proved its ability of working also
in conditions of the global economic downturn that has notably affected several
JSC Ventspils nafta subsidiaries working in international markets. At the same
time, the economic processes in 2008 globally and in Latvia have confirmed that
the conservative planning of JSC Ventspils nafta has been prudent and adequate
by regularly assessing and planning potential influence of external factors on
the operations and financial results of holding companies. 

The JSC Ventspils nafta subsidiary Ventspils nafta termināls Ltd ensured stable
cargo volume level in the reporting period by transshipping in total more than
11.6 million tons of crude oil and petroleum products. Events in the global
economy, the unfavorable global oil market situation in the last months of the
reporting period and the international competition in the transit area have had
and after the end of the reporting period still have a significant impact on
operating results of Ventspils nafta termināls Ltd, which were affected several
months in the reporting period also by the repair works of the main petroleum
products pipeline Polotsk-Ventspils in the territory of Belarus, which resulted
in a reduced diesel fuel flow in the direction of Ventspils. 

At the same time, Ventspils nafta termināls Ltd continued active implementation
of modernization in 2008, by optimizing company's operational processes and
procedures, increasing workforce efficiency and introducing higher requirements
in terms of environment protection, thereby adapting to the new economic
conditions and strengthening its positions in international market. The aim of
modernization is to strengthen the positions of Ventspils nafta termināls Ltd
as the major crude oil and petroleum products transshipment complex in the
Baltic region, by developing its work by following similar principles as in
other companies under the Vitol Group worldwide, such as EuroTank in Rotterdam
and Amsterdam. The most remarkable contribution that Ventspils nafta termināls
Ltd made into improvement of environment protection in the reporting period was
launching the new, modern wastewater treatment plant that is unique in the
Baltic region. 

According to the previous forecasts of JSC Ventspils nafta, in the reporting
period, external circumstances still substantially affected another Group's
company LatRosTrans Ltd, which is working in the sensitive transit area. Oil
transportation in the direction of Lithuania via the pipeline owned by
LatRosTrans Ltd is still not resumed due to the geopolitical situation, and
technical reasons, such as repair works at the pipeline sections in the
territory of Belarus and corresponding decrease in its capacity, influenced
also transportation volumes of petroleum products in direction of Ventspils, as
its total transshipment volume has reached 5 million tons in 2008. 

According to the approved schedule, LatRosTrans Ltd continued renovation and
repair works of the petroleum products pipeline in the reporting period. As
before, LatRosTrans Ltd has actively worked on elimination of supernormative
loss of petroleum products resulting from illegal activities by hiring a
security company, regularly inspecting the pipeline, collaborating with the
police, allocating considerable resources in recovery of the environment, as
well as informing and trying to involve other state authorities in dealing with
this issue. 

In the reporting period, the JSC Ventspils nafta associated company JSC Latvian
Shipping Company has been continuing to pursue its strategic goal - ensuring
increase of the Group's value and retaining its position among the top ten
medium range tanker owners in the world. According to the unaudited report for
2008, JSC Latvian Shipping Company Group worked with net profit of 58.6 million
US dollars in the reporting period. In comparison with the result of analogue
period in 2007, the last year's profit is 8.4 million US dollars or 13% lower,
reflecting general unfavorable shipping market trends in the reporting period,
especially in the end of it. 

In the circumstances of global financial and economic turmoil, JSC Ventspils
nafta is taking appropriate actions to reduce risks and ensure profit, by
careful, focused and purposeful managing of assets owned by it as well as
resourcefully planning to achieve goals set by shareholders. According to
budget forecasts of JSC Ventspils nafta Group for 2009, consolidated net
turnover this year is planned to be not les than 60 million lats and net profit
- not less than 2 million lats. 


JSC Ventspils nafta
For further information -
Gundega Vārpa,
tel.: +371 67229182;
e-mail: gundega.varpa@vnafta.lv