Despite financial difficulties, Ventspils Nafta shareholders have voted to distribute 40 percent of last year's profits as dividend income, a move which analysts said amounted to image polishing at a time when private shareholders are trying to reconcile with the government and find a strategic investor.
The decision to pay dividends, the first in four years for Ventspils Nafta, of 1 million lats (1.5 million euros) was made at last week's shareholder meeting.
Hansabank broker Janis Ogsts said the fact that the company had decided to pay 40 percent of its profit in dividends should be seen as positive, though the decision caught markets off guard.
"Slight surprise that the dividends are paid at a time when the company experiences hardships," Ogsts said.
Latvijas Unibanka financial analyst Arnis Malbergs said the decision to distribute dividends after three years of not doing so was good news from the prospect of market players, as it increased return on investment in Ventspils Nafta shares.
Dividend payments were halted in 1999 when a controlling block in the strategic enterprise ended up in the hands of LNT as a result of privatization.
Since then all proposals of the state, another major VN shareholder, to pay a part of the profit in dividends were turned down.
Malbergs said he believed the decision to pay dividends should be seen in context of ongoing discussions regarding Ventspils Nafta's privatization and doubts about the legality of the company's privatization.
The 1 million lat dividend allotment amounts to 0.01 lat per share. According to the Riga Stock Exchange, the last time Ventspils Nafta paid dividends was for financial 1998 - at 0.03 lat per share.
A dividend of 0.13 lat per share was paid in 1996.
Ventspils Nafta last year posted a 2.7 million lat profit on sales of 28.1 million lats, which compares with a profit of 24.7 million lats and sales of 46.7 million lats in 2001.
Una Ulme-Sila, aide to Latvian Deputy Prime Minister Ainars Slesers, said that Slesers had voiced regret over LNT's proposal to pay dividends since profits in previous years were significantly higher. "Now that [Ventspils Nafta's] profit is low - not to say scanty - this noble step of theirs is more like a formality," Slesers is reported to have said.