Energy, Financial Services, Legislation, Lithuania, Markets and Companies

Such information is provided in the twelve-month interim SOE report prepared by the Governance Coordination Center on 137 Lithuanian SOEs.

"We were extremely pleased with the results of Lietuvos Energija group, which, after three years of unprofitable activities, became profitable in 2013 and earned a net profit of as much as LTL 117 million (EUR 34 million). The results of this company had the biggest impact to the better performance of both the energy sector and the SOE portfolio as a whole," says Lithuanian Minister of Economy Evaldas Gustas.

The profitability of SOEs was boosted by growing sales revenue, which increased by 3.1% – or LTL 225 million (EUR 65 million) – in 2013 and grew at approximately the same rate as the costs of core activities. Energy sector was the one that lifted the sales revenue of the SOE portfolio the most, specifically – Lietuvos Energija and EPSO-G Groups. Lithuanian Railways was the company that had the highest negative impact to the level of sales revenue – the company's sales revenue was LTL 100 million (EUR 29 million) lower, down to LTL 1.6 billion (EUR 463 million), mainly due to lower international freight volume.

Acc. to the report, the return on equity (ROE) of SOE portfolio stood at 2.6% at the end of 2013 and was 0.2 pp higher than at the end of 2012. ROE increased in all the SOE sectors, except for the communications. Acc. to Marius Barys, acting head of the Governance Coordination Center, even though the average ROE of Lithuanian SOEs increased during 2013, it is still lower than that of comparable foreign enterprises. "A comparative analysis of Lithuanian SOEs of energy and communications sectors with similar foreign companies revealed that the ROE of these Lithuanian SOEs is two-three times lower than that of comparable enterprises, mostly due to relatively lower level of asset turnover," – says Barys.

The market value of SOE portfolio grew by 9.6% and reached LTL 15.1 billion (EUR 4.3 billion) by the end of 2013. The market value of SOEs' holdings traded on the NASDAQ OMX Vilnius Stock Exchange grew by 12.4% during 2013, but it was lower than the OMXV index, which increased by 18.7%. The market value of energy companies LESTO and Litgrid increased the most, by 29.4% and 13.2%, respectively. At the same time, the share value of the Lithuanian Shipping Company, which continued to increase its net losses, fell by as much as 42.3%. A comparison of listed Lithuanian SOEs with other companies from similar sectors revealed that most of them are relatively "cheap", i.e. their price to earnings (P/E) ratio is lower than that of comparable companies.

For the second year in a row the Governance Coordination Center has calculated the value added of SOEs in the twelve-month interim SOE report. The assessment of value added allows evaluating not only the financial profitability of these enterprises, but also the benefits they create for all the stakeholders: employees, creditors, State as a shareholder and as a tax collector, as well as for minority shareholders. Based on preliminary data, the total value added of SOEs in 2013 increased by 3.8% and amounted to more than LTL 3.5 billion (EUR 1 billion). A comparison of value added of SOEs with Lithuania's gross domestic product (GDP) shows that in 2013 the value added of all the SOEs contributed 2.97% of the entire Lithuanian economy. The most significant share of this contribution was created by several large SOEs – Lithuanian Railways (value added amounted to approx. LTL 1.1 billion (EUR 318 million)), Lietuvos Energija (LTL 880 million (EUR 255 million)) andEPSO-G (LTL 209 million (EUR 61 million)) Groups.