RIGA - Rigas Dzirnavnieks, one of Latvia's largest grain processors, has reported that first quarter sales nearly doubled year-on-year to reach 5.1 million lats (7.2 million euros) thanks to record high food prices.
CEO Sandis Jansons said in terms of volume the company's sales were up 19 percent in the first quarter compared to the same period in 2007.
Exports soared 93 percent for the period, he added. Exports to Lithuania alone more than doubled, and sales to Estonia and Russia also strengthened.
The numbers indicate the drastic changes taking place in the agricultural market. By comparison, Rigas Dzirnavnieks' sales in the first quarter of 2007 crept up only 3.8 percent compared to the same three months in 2006.
Flour prices began soaring in late 2007 due to soaring demand for grain throughout the world, leading to the severest global food crisis in many years.
Poor harvests and increased use of grain for biofuels were also blamed for the spike in prices, which in many poor countries sparked rioting.
According to the Agricultural Market Promotion Center, the grain-purchasing price in October 2007 grew by 75 percent on average compared to October 2006.
Grain prices in Lithuania soared 63 percent last year to 629 litas (182.3 euros) per ton on average, according to the Economy Ministry. In Estonia, the average grain purchase prices propelled 60 percent to 169 euros per ton.
Total grain purchases jumped 50 percent in Lithuania to 1.7 million tons, while in Estonia they were up 40 percent to nearly 500,000 tons.
Rigas Dziranvnieks' 2007 turnover reached 15.7 million lats, or 31 percent more than in 2006.
The company said earlier this year that it planned to boost sales to some 20 million lats, or up 27 percent year-on-year.
Still, Jansons said that profits would not grow substantially given the significant increase in expenditures for energy, labor and raw material.
He also said the company has drafted a plan to save energy, improve quality and develop new products and would invest 350,000 lats to accomplish these goals.
Rigas Dzirnavnieks and its sister company Rezeknes Dzirnavnieks manage 50 percent of Latvia's grain market.
The company's largest owner is Sweden-based Nord Mills.
Meanwhile, it was reported that Dobeles Dzirnavneiks is in merger talks with Tartu Veski, Estonia's largest flour maker.
Iveta Ozolina, a director at Dobeles Dzirnavnieks, said that the both companies are looking for ways to boost efficiency and survive in the current economic situation, with domestic demand falling dramatically.
She said it was unclear whether the transaction will take the form of a merger or takeover. Regardless, it will require approval of the Competition Council, she added.
Vitauts Paskauskas, chairman of Dobeles Dzirnavnieks, told the Dienas Bizness daily that the costs of raw materials and other resources have increased steeply, forcing competitors to seek opportunities to cooperate.
"It is not easy for anyone to survive now," he said. "[Sales] volumes are growing, while the profit declines, or disappear altogether."
As he said, "We are in the middle of this chain 's on the one side is the producer and on the other 's the seller and we have to cooperate with both. Now everyone has to find opportunities to work more effectively."
