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CORRECTION: LSC publishes audited financial statements for 2010

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CORRECTION: LSC publishes audited financial statements for 2010

january 13, 2012 / Latvian Shipping Company

Attached PDF file with explanations to the JSC LSC Group's Parent company's Audited Financial Statements for 2010

In 2010 the Latvian Shipping Company Group suffered losses in the amount of USD142.44 million. The largest losses relate to a series of impairments, which are required to be made according to the International Financial Reporting Standards. These impairments are as follows: the debt owed by the SIA LASCO Investment Group companies, in the amount of USD79.64 million, the four new ship buildings with Hyundai Mipo Dockyard Ltd., in the amount of USD45.56 million, the investment in SIA NAFTA Invest in the amount of USD5.00 million and the vessel Indra in the amount of USD4.92 million.

Throughout 2010, the tankers of the LSC Group fleet were mainly employed on time charter. Even though the result from vessel operation was positive reaching USD12.69 million, the Group’s net voyage result during 2010 fell to USD88.31 million, substantially behind the previous year’s result (USD148.91 million). These results are largely attributable to the overall decline in global shipping markets.

The total value of the LSC Group assets has decreased from USD964.41 million in 2009 to USD680.47 million in 2010. There are a number of reasons for this significant decrease. In addition to the impairments mentioned in the paragraph above, the shipping assets were depreciated by USD26.70 million. More significantly, daughter company SIA LASCO Investment was deconsolidated, resulting in a loss of USD114.91 million. This was a consequence of steps taken by the then management to have SIA LASCO Investment declared insolvent, which was endorsed by a decision of the Latvian court on January 3, 2011. The legitimacy of these actions is being challenged by the current management. 

In addition, there was a considerable decrease in cash and deposits (USD88.61 million). These were used to repay a loan from Bank of Cyprus and to finance the Group’s operations and to acquire SIA NAFTA Invest. The circumstances surrounding this acquisition are part of an ongoing investigation into the activities of the previous management and related legal proceedings.

Starting in January 2010, shareholders lead by the largest shareholder, joint stock company Ventspils nafta, 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 these bodies acted in the best interests of all shareholders of the Latvian Shipping Company. 

After many requests, and after several scheduled meetings were cancelled, a shareholders meeting finally took place on December 17, 2010. This was the first shareholders meeting of Latvian Shipping Company to take place since the Annual General Shareholders Meeting which took place on 30th April, 2009. The meeting in December was promptly followed by a further shareholders meeting on January 28, 2011. As a consequence of these two shareholders’ meetings, the supervisory council and management board now represents all of the shareholders of Latvian Shipping Company.

The new management is committed to achieving greater efficiencies as demonstrated by the decision of both the Supervisory Council and Management Board to decline salaries at this time. It will continue to strive to maintain the integrity of the current fleet and expand it when economically viable. In 2011 LSC Group sold two unbuilt liquefied petroleum gas carriers with the intention to utilize the equity raised to finance two new build product tankers to be delivered in 2011. This transaction will enable the Group to grow the fleet without a negative impact on its cash position. In this respect there have been productive discussions with LSC lending banks over recent months and they have been fully supportive of LSC management actions so far to stabilize the Group in what is a difficult environment.

The new management is committed to raising standards of corporate governance to bring Latvian Shipping Company Group into line with accepted international standards.

The dissipation of funds and other assets during 2010, and before, is the subject of continuing investigation. A number of transactions are being challenged through the courts. Significant litigation is continuing in the UK Courts with regard to substantial losses suffered in previous years. These proceedings will be continued. Where additional legal actions are justified, they will be pursued and expanded.

Attachments:

Paskaidrojums_pie_2010_gada_parskata_EN.pdf