JOINT STOCK COMPANY “LATVIJAS VALSTS MEŽI”
(UNIFIED REGISTRATION NUMBER 40003466281)
ANNUAL REPORT 2009
(10th accounting year)
PREPARED IN ACCORDANCE WITH
THE ANNUAL ACCOUNTS LAW OF THE REPUBLIC OF LATVIA
AND INDEPENDENT AUDITORS’ REPORT
Riga, 2010
JSC “Latvijas valsts meži”
Annual Report 2009
Address: 30 Kristapa iela, Riga, LV-1046, Latvia
Unified registration number: 40003466281
General Information
Company’s name
Latvijas valsts meži
Legal status
Joint stock company
Registration number, place and date
40003466281
Riga, 28 October 1999
Re-registration in the Commercial Register
1 November 2004
Registered office
Kristapa iela 30
Riga, Latvia, LV-1046
Stockholder’s full name and address
Ministry of Agriculture
of the Republic of Latvia (100%)
2 Republikas laukums
Riga, Latvia, LV-1981
Stockholder’s representative
Arvīds Ozols
Executive official of the Ministry of Agriculture
Jānis Birģelis
Members of Board
Roberts Strīpnieks – Chairman of Board
Kārlis Boldiševics
Andrejs Brūvelis
Gints Bumbieris
Modris Grantiņš
Arnis Melnis
Aivars Tiesnesis
Members of Council
Anatolijs Gorbunovs – Chairman of Council (until 17.04.2009)
Roberts Dilba – Deputy Chairman of Council (until 17.04.2009)
Vents Balodis (until 17.04.2009)
Imants Baumanis (until 17.04.2009)
Jānis Esta (until 17.04.2009)
Ingūna Gulbe (until 17.04.2009)
Indulis Jankovskis (until 17.04.2009)
Māris Kreilis (until 17.04.2009)
Andris Liepiņš (until 17.04.2009)
Dainis Liepiņš (until 17.04.2009)
Edmunds Pētersons (until 17.04.2009)
Elmārs Švēde – Chairman of Council (17.04.2009-30.06.2009)
Mārtiņš Cimermanis – Deputy Chairman of Council (17.04.2009-30.06.2009)
Dagnis Dubrovskis (17.04.2009-30.06.2009)
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JSC “Latvijas valsts meži”
Annual Report 2009
Address: 30 Kristapa iela, Riga, LV-1046, Latvia
Unified registration number: 40003466281
Subsidiary company
SIA Jaunmoku pils (100%)
Tume Parish, Tukums Region, Latvia, LV-3139
Associated company
SIA Meža un koksnes produktu pētniecības un attīstības institūts [Forest and
Wood Products Research and Development Institute] (40%)
Dobeles iela 41, Jelgava, Latvia, LV-3001
Accounting year
1 January 2009 – 31 December 2009
Auditors
Iveta Vimba
Sworn Auditor of the
Republic of Latvia
Certificate No. 153
Ernst & Young Baltic Ltd.
Kronvalda bulvāris 3-5, Rīga
Latvia, LV – 1010
Licence No.17
3
JSC “Latvijas valsts meži”
Annual Report 2009
Address: 30 Kristapa iela, Riga, LV-1046, Latvia
Unified registration number: 40003466281
Management Report
28 April 2010
Course of Action
The purpose of activities of the joint stock company “Latvijas valsts meži” (hereinafter LVM or the Company) is administration of the
state-owned forest property and management of the public forest ensuring the preservation and increase of its value and generation of
revenue for its owner – the state.
The stockholder of LVM is the state represented by the Ministry of Agriculture of Republic of Latvia. The Company’s governing bodies
are the General Meeting and the Board. The highest decision-making body is the General Meeting representing the stockholder: the
Ministry of Agriculture. The highest executive body of LVM is the Board. As at 31 December 2009, the LVM Management Board
consisted of 7 members: the Chairman of Board and six Members of Board.
LVM ensures management and administration of 1.62 million ha of land including 1.59 million ha of forest land, which incorporates
1.40 million ha of forest. The territories in respect of which the main management goal set forth is production of high quality timber
comprise 80% (1.13) million ha of forest under the governance of LVM. Total areas of conservation of different nature and importance
on lands under the governance of LVM have considerably increased: from 13% (0.21 million ha) in 2000 to 28% (0.45 million ha) in
2010 including 0.27 million ha of forest areas where restrictions on commercial operations incompatible with the goal of producing high
quality timber have been set.
Company’s Activities in the Accounting Year
Largely due to the impact of the economic crisis, the year 2009 was special for both the Company and the industry as a whole. The
beginning of the year was marked by the loss of the sales outlet for a part of the Company’s marketed products – the pulpwood.
Another factor with a significant impact on the situation was the decision issued by the Cabinet of the Republic of Latvia regarding the
increase of the felling volume in 2009 and 2010 by a total of 4 million cubic metres. Within a short period of time, the Company had to
additionally prepare felling areas for sale, make the forecast for assortments and sell the same, as well as purchase logging and
transport services. While the monthly volume of timber sales increased gradually in the first half of the year and stabilized in the third
quarter, the highest score of the year was reached in October and November.
The pulpwood manufactured in the production process was stored at the roadside landing, therefore the stock balance increased
significantly. To solve this problem, an active search for direct contacts with customers outside Latvia was implemented, which
through use of a new type of sales from warehouses in ports resulted in finding new buyers, altering the chain of custody organization
and launching of the pulpwood exports (24% of the total sales volume of assortments).
In the course of the year, it was possible to solve the problems with marketing of the assortments, change the sales and logistics
system and increase levels of production, which generally permitted to increase the supplies of roundwood assortments to the
customers by 1.75 times compared with 2008.
Actual
Budget
implementation
mln LVL
mln LVL
Revenue, of which from
sales of roundwood assortments
standing sales
sales of wood chips for energy production
sales of seeds and forest planting stock
land lease and sales of the earth entrails
lease of the hunting grounds
recreation and hunting services
other revenue*
interest income
132.36
104.43
21.08
1.96
1.54
0.98
0.44
0.65
0.08
1.20
140.87
106.33
26.04
1.32
1.37
0.44
0.44
0.54
0.46
3.94
Total costs:
production costs
administration costs
119.98
117.11
2.87
100.98
98.60
2.38
1.67
1.66
10.71
38.23
Real estate tax
Profits before tax
4
JSC “Latvijas valsts meži”
Annual Report 2009
Address: 30 Kristapa iela, Riga, LV-1046, Latvia
Unified registration number: 40003466281
Company income tax
1.61
5.02
Profits after tax
9.11
33.21
* The difference between various revenues and costs that are not directly linked with the Company’s business activities
In 2009, the joint stock company “Latvijas valsts meži” fully met its commitments in relation to the owner, i.e., the state, by contributing
LVL 46.7 million (dividends from profits of 2008 in the amount of LVL 41.7 million and a payment in the amount of LVL 5 million
resulting from the equity capital reduction) to the government budget pursuant to the Law on Government Budget 2009, as well as all
taxes applicable to LVM (LVL 8.5 million).
Taking into consideration the deductions allowed under the Law on Corporate Income Tax and calculation the Company income tax,
LVM contributed LVL 2.05 million to charitable organizations during the reporting period in accordance with the stockholder’s basic
principles of donations (contributions).
Operations plan
Standing sales
Sales of roundwood assortments
Sales of energy chips
Unit
mln m3
mln
m3
mln loose
m3
Business
operations plan
Actual
implementation
2.62
2.66
5.20
4.77
0.33
0.23
Forest regeneration
thou ha
11.5
11.7
Forest (young stand) tending
thou ha
20.5
20.0
Forest inventory
thou ha
312.7
0.1
Registration of land in the Land Register
thou ha
200.0
119.7
373
376
Forest road construction
km
Given that during the first months of the year it was possible to increase the sales of assortments only gradually, failure regarding
implementation of the operations plan occurred, which was impossible to compensate in the remaining months of the year. Chip sales
volume fell behind the plan, as there was no demand for the product on the market in the 3rd quarter, and the selling price was below
the cost of production. Sales volume of the earth entrails was behind forecast because plans for implementation of large infrastructure
facilities were suspended in the country, which resulted in a substantial drop in demand for sand and gravel resources. The reduction
in recreation and hunting services was generally smaller than the reduction in this sector in the country on the whole.
In 2009, 11.720 ha of forest areas were restored using the tree species envisaged in the long-term forest capital management plan, as
well as regeneration methods and technologies in accordance with the volumes required for the environment. Tending of young
stands was carried out in the area of 20.012 ha with the frequency and intensity envisaged in the mentioned plan.
In 2009, 376 km of forest roads were commissioned and included in the Company’s balance sheet, the construction costs of which
reached LVL 10.6 million. Road facilities with a total length of 395 km are under construction, of which facilities with a total length of
144 km or for a total coast of LVL 6.4 million have been suspended, while facilities with a total length of 251 km are scheduled to be
commissioned in 2010.
Forest inventory set forth by the Law on Forests is under way in the forests of Vidusdaugava and Ziemeļlatgale Forestries that are
under the governance of the Company. In accordance with the concluded agreements, it is expected to receive the first data on 1 April
2010. Due to poor contractual performance, the inventory work of 2009 was not accepted in Dienvidkurzeme Forestry. The said work
is re-scheduled for completion in 2010.
In 2009, a total of 119.8 thousand hectares of the state-owned forest land were surveyed and registered in the Land Register, while
118.5 thousand hectares are still undergoing various survey and registration stages. A total of 531.8 thousand hectares of the area
managed by LVM have been surveyed and registered.
On 11 February 2009, the Competition Council instituted investigation proceedings on violation of the prohibitions under Section 13
Part one (1, 4 and 5) of the Competition Law encountered in activities of the joint stock company “Latvijas valsts meži”. The
investigation proceedings of the mentioned case were closed on 9 October 2009.
The most important LVM public relations projects of 2009:
5
JSC “Latvijas valsts meži”
Annual Report 2009
Address: 30 Kristapa iela, Riga, LV-1046, Latvia
Unified registration number: 40003466281



Don’t Litter in the Forest, aimed against polluting the forest, in the context of which the campaign Šķirolūcija was
implemented: every inhabitant of Latvia was asked to sort household waste and deliver it free of charge to waste containers.
In collaboration with the State Chancellery of the President, the National Great Cleanup Day was organized on 1 April, which
was attended by around 110.000 participants.
Project for youth as a target audience Izzini mežu [Get to the Back of Forest], in the context of which the Forest Contest was
organized. Its final was shown in the TV programme Vides fakti [Environmental Facts].
Mammadaba [Mother Nature] brand promotion campaign, calling for children to preserve and respect Latvia’s nature, in the
context of which contests for Mammadaba Masterclass title were held throughout the year. Nine winners were selected in
September, and Mammadaba Embassies were opened in their respective schools.
6
JSC “Latvijas valsts meži”
Annual Report 2009
Address: 30 Kristapa iela, Riga, LV-1046, Latvia
Unified registration number: 40003466281
Development of the Company
Pursuant to the Company’s new planning process and the results of the seminar on updating of strategic objectives, the strategic
objectives of LVM have been modified. In addition, the Company is developing a forestry strategic plan, formulating environmental
objectives and preparing an environmental plan, as well as developing a strategy for timber sales. These activities have been
organized under the updated mission and vision of LVM used as the basis for preparation of LVM balanced scorecard and
implementation of the new planning process.
To explore the possibilities for development of use of wood products for energy production, the feasibility project based on the Choren
gasification technology was started to justify the scope of the feasibility study specified in the previous discussions and clarified during
the elaboration of the project. The project examines alternatives for various energy products, production volumes and locations. The
project is scheduled to be completed in the first half of 2010.
According to LVM research priorities, the following studies were conducted and the results were published on the Company’s website:

Breeding trials for coniferous trees targeted at regeneration of productive, high quality and sustainable forest stands;

Monitoring and control of the root rot disease in coniferous forests;

Elaboration of assessment methods for forest fire impact on tree viability;

Approbation of mechanical protection methods (mix of glue and sand and cardboard containers) against the large pine
weevil and comparison thereof with the conventional methods of protecting the nursery stock against pests;

Development of a decision-making tool for forest road use (a complex forest road utilization index);

Updating of possibilities of production and intensification of consumption of fuels obtained from renewable resources in
Latvia.
International Participation
LVM took part in the activities of the European State Forest Association (EUSTAFOR), including the annual conference held in Czech
Republic. The main theme of the conference in 2009 was developing state forest managers’ dialogue with the public. The Board
meeting of the European State Forest Association (EUSTAFOR) was held within the above conference.
Financial Risk Management
LVM ensures its commercial operations in accordance with the long-term development plan on the basis of the Company’s own funds.
Financial management is implemented centrally within the Company, and the level of liquidity fully ensures a timely meeting of all
liabilities towards both the commercial partners and the government. Since almost all revenue (over 99%) within the destination
market is generated in Latvian lats or euros, whose exchange rate is anchored, the currency risk impact on the financial indicators of
the Company is negligent.
Over the reporting period, there has been a rise in accounts receivable, related to the rise in assortments sales. To improve the control
of accounts receivable, regular daily work is carried out with the customers regarding repayment of debts, however it will be
impossible to recover the frozen funds from all doubtful debtors. Provisions are made for high-risk accounts receivable as shown in the
statements below.
The accrued financial resources of the Company are placed with different low-risk financial instruments: deposits of the credit
institutions and SEB Money Market Fund where amortization of the fund units is carried out according to the request of the Company
with an aim of gaining stable return.
Conditions and Developments after the End of the Accounting Year
On 7 April 2010, the Company’s equity capital was increased by investing real estate in the amount of LVL 176,400. After the
increase, the Company’s equity capital is LVL 138,256,957.
Main Targets for 2010

To complete the development of LVM medium-term strategy and consultation with stakeholders, to obtain the stockholder’s
approval to the strategy, to launch its communication within the company and to start its implementation, updating the
Company's tactical plan for the 2011 – 2015, as well as to complete the development of LVM Forestry Strategic Plan.

To implement the project for modification of the sales and customer service processes in the Company.

To complete the feasibility project on the possibilities of using the wood biomass for energy production in Latvia, to analyze
the results and to prepare proposals for decisions on further action.
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JSC “Latvijas valsts meži”
Annual Report 2009
Address: 30 Kristapa iela, Riga, LV-1046, Latvia
Unified registration number: 40003466281

To start new and continue ongoing research and development projects in the planned scope and timing. To participate, to
the extent possible, in the establishment and launch of the Forest Sector Competency Centre.

To develop and launch a Competency Model and knowledge management implementation in LVM.
Distribution of Profits Recommended by the Board
LVL
Distributable profits
33 211 488
Recommended distribution of profits:
Calculate dividends to stockholders
Retained profits
20 000 000
13 211 488
The Board recommends channelling the retained profits in the amount of LVL 13 211 488 into increasing the equity capital and
fulfilling the concluded commitments for completion of construction of forest infrastructure facilities.
Roberts Strīpnieks
Chairman of Board
8
JSC “Latvijas valsts meži”
Annual Report 2009
Address: 30 Kristapa iela, Riga, LV-1046, Latvia
Unified registration number: 40003466281
Profit and Loss Account
Note
Net sales
Cost of sales
Gross profit
Selling expenses
Administrative expenses
Other operating income
Other interest income and similar income
Interest expenses and similar costs
Profit before taxes
Corporate income tax
Change in deferred tax
Other taxes
Net profit for the accounting year
3
4
5
6
7
8
9
2009
LVL
2008
LVL
136 551 297
(93 639 001)
148 043 900
(84 956 973)
42 912 296
63 086 927
(1 937 821)
(5 388 717)
75 171
4 259 293
(14 491)
39 905 731
10
10
26
(4 820 152)
(199 389)
(1 674 702)
33 211 488
(1 922 478)
(5 468 864)
314 063
6 725 016
(10 574)
62 724 090
(8 558 793)
(211 596)
(1 679 644)
52 274 057
The notes form an integral part of these financial statements.
Roberts Strīpnieks
Chairman of Board
9
JSC “Latvijas valsts meži”
Annual Report 2009
Address: 30 Kristapa iela, Riga, LV-1046, Latvia
Unified registration number: 40003466281
Balance Sheet
ASSETS
Note
LONG-TERM INVESTMENTS
Intangible Assets
Concessions, patents, licenses, trade marks and similar rights
12
TOTAL
Fixed assets
Land, buildings and structures
13
Equipment and machinery
13
Other fixed assets
13
Payments on account for fixed assets and fixed assets in the course of construction
13
Payments on account for fixed assets
TOTAL
Biological assets
14
Long-term financial investments
Participation in capital of affiliated companies
15
Participation in capital of associated companies
15
Loans to affiliated companies
16, 27
TOTAL
TOTAL LONG-TERM INVESTMENTS
CURRENT ASSETS
Stocks
Raw materials, basic materials and consumables
Finished products and goods for sale
Advance payments for goods
Draft animals
TOTAL
Accounts receivable
Accounts receivable from buyers and customers
Accounts receivable from affiliated companies
Other accounts receivable
Prepaid expenses
TOTAL
Securities and participation in capital
Other securities
TOTAL
17
18
16, 27
19
20
Cash and cash equivalents
21
TOTAL CURRENT ASSETS
TOTAL ASSETS
31.12.2009.
Ls
31.12.2008.
Ls
323 509
323 509
243 858
243 858
117 880 596
3 392 595
1 963 518
5 222 494
1 434 788
129 893 991
2 808 978
102 339 854
4 441 663
2 331 178
13 145 834
1 848 074
124 106 603
2 726 775
1 139 200
317 826
105 000
1 562 026
134 588 504
1 139 200
118 546
105 000
1 362 746
128 439 982
401 988
9 928 031
3 597
184
10 333 800
272 334
8 043 287
4 369
184
8 320 174
11 442 473
37 553
6 910 101
277 528
18 667 655
7 590 931
22 467
11 226 680
285 289
19 125 367
26 013 122
26 013 122
22 442 794
22 442 794
2 056 796
57 071 373
28 332 661
78 220 996
191 659 877
206 660 978
The notes form an integral part of these financial statements.
Roberts Strīpnieks
Chairman of Board
10
JSC “Latvijas valsts meži”
Annual Report 2009
Address: 30 Kristapa iela, Riga, LV-1046, Latvia
Unified registration number: 40003466281
Balance Sheet
LIABILITIES
31.12.2009.
LVL
138 080 557
33 211 488
31.12.2008.
LVL
132 501 258
52 274 057
33 211 488
171 292 045
52 274 057
184 775 315
23
9 806 421
9 806 421
8 852 998
8 852 998
10
1 330 769
22 854
1 353 623
1 131 380
22 854
1 154 234
1 525 180
4 434 487
287
7 556
428 072
1 320 939
1 491 267
9 207 788
10 561 411
1 648 222
8 128 266
268
13 764
1 353 837
734 074
11 878 431
13 032 665
191 659 877
206 660 978
Note
EQUITY
Stock capital
Retained profits
retained profis brought forward from previous years
retained profits of the current reporting year
22
TOTAL EQUITY
PROVISIONS
Other provisions
TOTAL PROVISIONS
ACCOUNTS PAYABLE
Long-term accounts payable
Deferred tax liabilities
Other accounts payable
TOTAL
Short-term accounts payable
Prepayments received from purchasers
Accounts payable to suppliers and contractors
Accounts payable to affiliated companies
Accounts payable to associated companies
Taxes and social insurance payments
Other accounts payable
Accrued obligations
TOTAL
27
26
24
25
TOTAL ACCOUNTS PAYABLE
TOTAL LIABILITIES
The notes form an integral part of these financial statements.
Roberts Strīpnieks
Chairman of Board
11