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Profit of SOEs soared 3.5 times in 2011

Date

2012 07 03

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The results of state-owned enterprises (SOEs) keep improving: the net profit of SOEs (including special taxes to the State) amounted to LTL 246.6 million in 2011, which was 3.5 times more than the previous year (this sum excludes losses of LTL 182 million due to the bankruptcy of the Bank Snoras).

“SOE reform has already brought tangible results: the transparency of SOEs is increasing, they operate more efficiently and pay higher dividends. Moreover, the attitude towards SOEs has been changing, and SOEs are increasingly expected to follow the best practice of corporate governance and performance efficiency rather than remain a tool for policy implementation. We therefore expect that the future Governments will continue to follow the enterprise management principles which are acknowledged world-wide,” Minister of Economy Rimantas Žylius said when presenting the third Government report on the SOEs.

In 2011, AB Lietuvos Geležinkeliai demonstrated the best results among SOEs and increased its profit from LTL 69 million to LTL 150 million as a result of higher revenue. In 2011, its return on equity (RoE) accounted for 5.6%. The net profit of one tonne cargo transportation for one km increased by 28.6% or by 0.9 cent due to increased freight and transportation tariffs. 

The profit of AB Klaipėdos Nafta surged 1.7 times to LTL 45 million. The RoE of this company increased from 5.8% to 9.5% in 2011.

In 2011, AB Lietuvos Paštas earned LTL 0.7 million for the first time in the four year period, while in 2010 its losses were as high as LTL 10 million. Despite the increasing volume of sales AB Lietuvos Paštas decreased the cost per service unit by 5.3%, to 87 cents.

The net loss of the Visaginas Nuclear Power Plant Group (VNPP Group) grew from LTL 39 million to LTL 109 million. The loss increased mainly due to revaluation costs of the emission allowances by AB Lietuvos Energija. The VNPP Group also generates losses due to the fact that the book values of Group subsidiaries AB LESTO and AB LITGRID assets might be lower than their fair values, thus, companies overstate their depreciation costs. The asset depreciation costs of these companies are three times higher than those included in the service tariffs by the performance regulator. In 2011, the difference between the depreciation costs which were included in the tariff and those included in the companies’ financial statements amounted to LTL 318 million. Disregarding the depreciation and revaluation costs, VNPP Group reduced its operating costs by 9.6%, to LTL 2.1 billion in 2011.

Forestry enterprises increased revenue from LTL 414 million to LTL 545.5 million because of increased sales volumes and wood prices. The amount of raw material tax paid by these enterprises to the State budget doubled and amounted to LTL 75.3 million. However, operating costs of forestry enterprises grew by 16% (before taxes on property and on raw materials, forest restoration, protection and management costs and excluding the amount of LTL 29.9 million which was written-off due to the bankruptcy of the Bank Snoras). 

The Ministry of Economy has calculated that as a result of the non-commercial functions – special obligations – the unearned profit of SOEs amounted to LTL 400 million. Compared with the companies of the private sector in Lithania, the SOEs should earn another LTL 360 million from commercial activities. AB Lietuvos Jūrų Laivininkystė, AB Lietuvos Paštas and a few smaller SOEs still need to considerably improve their performance.

SOE dividends

This year, SOEs must pay the all time high dividends and profit contributions of more than LTL 500 million. Before 12 June, SOEs have already allotted LTL 213 million of dividends and profit contributions to the national budget. 

In the second half of 2012, the VNPP Group plans to transfer dividends amounting to LTL 275 million. Besides, LTL 34 million of profit contributions has not yet been allotted by the Klaipėda State Seaport Authority. 

“As a result of the bankruptcy of the Bank Snoras the total amount of the SOE dividends and profit contributions will make LTL 65 million  less than previously planned. Nevertheless, this is a 12 times better result than in 2010, when the reform of the SOEs was not started yet. In 2010, the dividends only made LTL 42 million, “said Minister of Economy Rimantas Žylius.

Municipality-owned enterprises

For the first time, the 2011 Report on SOEs also covers the management results of 262 municipality-owned enterprises (MOEs). In 2011, the assets of MOEs amounted to LTL 8.5 billion, the revenue amounted to LTL 2.4 billion and the net loss made LTL 833 thousand. The highest value of assets of LTL 1.8 billion was owned by the Vilnius City Municipality and the highest turnover of LTL 503 million was achieved by the Kaunas MOE.

The worsening results of MOEs (the net result of the MOEs portfolio was LTL 29.5 million profit in 2010 and LTL 833 thousand loss in 2011) were determined by the falling profits of the centralized heat supply companies due to rising fuel prices. The RoE of MOEs was zero in 2011, and it accounted for 2.6% in 2009. The RoE of Kaunas ir Klaipėda MOEs accounted for 1.8% while in the other biggest towns of Lithuania the RoE did not reach 1%.

According to the Minister of Economy, the municipalities should follow the example of the Government and devote much more effort to increase the efficiency and transparency of MOEs. In the meantime, most municipalities do not devote sufficient attention to the transparency and accountability of MOEs and provide little data on their performance results to the public. Moreover, some MOEs do not comply to the provisions of the laws and are behind the schedule in presenting financial reports to the Register of Legal Entities.

Please visit http://vvi.ukmin.lt/publications for the 2011 Report on SOEs.