Baltic Morning News
Ventspils Nafta reports transhipment volumes. The Latvian seaport operator / conglomerate handled 5.7m tons of crude oil and oil products in 2006, down from ca 8m tons in 2005. However, on the positive side, volumes transported by the sea have increased (1.24m tons in 2006, which is ca 1m tons more than 2005). Vitol, the new 35% owner of Ventspils Nafta has been helping to supply the volumes delivered by sea and the cooperation is also expected to continue in 2007. In the last quarter of 2006, the total volumes handled by Ventspils were quite stable at 0.4m tons per month.
Beer market stabilizing. According to the Association of Estonian Breweries, beer market growth in 2006 was just 3% yoy. The market leader was Saku (Acc) with 46.5% market share. Second biggest was A.Le Coq with 37.1% share, followed by Puls Brewery (increased sales 6x in 2006), and Viru Brewery. The average beer consumption was 96.5 litres per capita in 2006 (around 80 litres per capita when adjusted for exports). Main beer industry trends in 2006: 1) beer market becoming stabile; 2) focus on premium-products; 3) small breweries closing doors. We believe the growth will slow down even more in 2007 to annual growth of around 1.5%. However, when looking for growth in beverage industry, one should look at other segments of beverages such as ciders, long drinks, and mineral waters.
Loan growth slowing down. According to Erkki Raasuke, CEO of Hansabank Group, loan growth in the three Baltic States is expected to lose its pace this year as banks move to cut credit risk. He also added that expectations are more managed and regulators have been showing where they stand. Banks are more conservative and selective in where they want to take risk. In addition, central banks in Estonia and Latvia have raised the refinancing rate and also reserve requirements. This is good news from the CEO of Baltic largest bank, especially in terms of the need to cool down the Baltic overheating economies.
Lithuania’s construction prices up 11% in 2006. According to Statistics Lithuania, the construction price index rose 10.6% last year, a year earlier the increase was 8.7%. The strongest growth of construction prices was in residential sector (12.4%), while non-residential construction prices rose somewhat less (9.8%). Not a surprise, the highest growing cost item was labour (19.8%), followed by machinery (9.1%), and building materials (5.6%).
94% of Latvian buildings need renovation. BBN writes that 94% of apartment buildings in Latvia built before 1990 are in need of renovation. Andris Ozolis, CEO of DnB NORD, said the crisis could start in 2020 when the first buildings would be in critical condition. The situation is similar in Estonia. The majority of Estonian dwelling stock has been built between 1950 and 1990, and today are in need and soon in critical need for renovation. Although we have been little sceptical on Estonian residential real estate (overheating), the long term view is still quite positive (low quality dwelling needs to be replaced).
Additional shares of Tallink (Neutral) will start trading today (shortname - TAL4T)