AS "Latvijas balzams" unaudited Financial Statemen

Type of operations

The Company was established in 1900 as the Riga`s first state alcohol warehouse and operates under the current name since 1970. Due to SPI Group internal reorganization the major shareholder of Latvijas balzams AS from October 2014 is Amber Beverage Group SIA, which owns 89.99% of the Company’s equity capital.

Nowadays Latvijas balzams operates two alcohol production facilities in Riga – production plant for strong alcohol beverages and a production plant for sparkling wines and light alcohol beverages. We use ingredients from around the world and have retained our traditional beverage production technologies. The recipes for some of our signature products date back hundreds of years, for example the recipe o Riga Black Balsam is rotated back in 1752, but our renown Moskovskaya Vodka dates back to the end of the 19th century.

The company keeps the leading presence in all key spirits segments, as well as in sparkling wines, ciders, and RTDs, in the Baltic region. The newest generation of spirits, including Riga Black Vodka and Amber Gold Vodka, are produced using innovative filtration technologies that results in particular character profiles for beverage connoisseurs.

We are proud for our ability to produce high quality liquids consistently, and develop new products driven by consumer insights. On the same time we are able to maintain high-quality international standards required by SPI Group, so that sales of Stolichnaya are possible around the world, including sales to Japan.

Latvijas balzams AS is the largest producer of alcoholic beverages in the Baltic States with a range of more than 100 different brands. Our products are exported to more than 170 export markets as mediated by SPI Group, and to 42 markets via the Company`s direct export route.

The Company`s Activity in the first nine months of 2017

The unaudited turnover of the Company in the first nine months of 2017 reached 55.5 million euro, which is 1.7% more than in the first nine months of Year 2016. Increase in turnover was mainly achieved by increase of orders from our biggest Private Label customer SPI Cyprus, although the overall profitability level is lower than selling Latvijas Balzams brands. Additional positive effect on turnover come from increased level of warehouse and logistics services provided to both 3rd part and Group companies.

From beginning of 2016, the Company is providing a number of warehouse and logistics services, mostly to beverage companies – like transit assurance services, bonded warehouse services, 3-rd party logistic services, value added services, picking, etc. Actions taken, has allowed to utilize the available resources and assets in more efficient way. Latvijas balzams AS has been performing as European hub for group distributed brands in Europe, including Scandinavia and Russia (KAH, Bayou, Arinzano, Achaval Ferrer). From third quarter Latvijas balzams Customer service center has also overtaken customer service and inventory management service for those brands.

The unaudited profit for the reporting period is 4.59 million euro that represents 8% decrease versus the first nine months of 2016. Profit decrease is mainly due to the fact that 2016 numbers include income from one–off transactions like compensation received from insurance company for fire case in 2014 in amount of 280 thousand EUR and profit from sale of real estate in amount of 594 thousand EUR.

Latvijas balzams AS is one of the largest local taxpayers. During the reporting period, the Company paid 43.5 million euro to the state budget, including excise tax, amounting to 34.8 million euro.

Future prospects

In the last quarter of 2017 the Company will keep focusing on investment opportunities in existing and new export markets with strong growth potential and accelerating sales. We’ll keep the strong focus on our core brands - Riga Black Balsam and Cosmopolitan Diva - investing into international recognition, brand equity and increasing market share.

The Company will also continue to improve the efficiency of production with focus on purchasing, planning and infrastructure improvements to support our goal - to deliver quality products with a competitive cost advantage.

Company has developed large-scale plant modernization and reconstruction project with aim to merge both production plants into one territory. Project will allow to improve company`s competitive positions among the region producers by decreasing labour, logistics and production costs. Total costs of project estimated at amount of 23 million euro. Latvian government supported project by granting CIT discount after fulfillment of the project. At this moment Company finalizing technical project works and is going to present project to shareholders to obtain their final approval on investment during regular shareholder meeting.

Latvijas balsams AS is an active member of Latvian Alcohol Industry Association and cooperates with core non-governmental organizations, representing the interests of industry in any dialogue with legislators and law enforcement institutions. The Company supports development of well - considered industry policy in Latvia and promotes responsible consumption and public education on these issues, as well as continues to combat the illegal production and distribution of non-commercial alcohol.