AS AMBER LATVIJAS BALZAMS AS AMBER LATVIJAS BALZAMS
ANNUAL REPORT 2023
prepared in accordance with
IFRS Accounting Standards as adopted by the EU
AS Amber Latvijas balzams
ANNUAL REPORT
for the year ended 31 December 2023
CONTENTS | |
Non-financial performance and activities for the reporting year | |
REMUNERATION REPORT | 11 |
STATEMENT OF THE MANAGEMENTS' RESPONSIBILITY | 12 |
FINANCIAL STATEMENTS | 13 |
Income Statement | 13 |
Statement of Comprehensive Income | 14 |
Statement of Financial Position | 15 |
Statement of Changes in Equity | 17 |
Cash Flow Statement | 18 |
Notes to the Financial Statements | 19 |
INDEPENDENT AUDITOR'S REPORT | 50 |
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AS Amber Latvijas balzams
ANNUAL REPORT
for the year ended 31 December 2023
INFORMATION ON THE COMPANY
Name of the Company | Amber Latvijas balzams (until 30.04.2022 - |
Latvijas balzams) | |
Legal status of the Company | Joint stock company |
Number, place and date of registration | Companies register |
Nr. 40003031873 | |
Riga, 2 October 1991 | |
Re-registered on | |
20 October 1998 | |
Commercial register | |
Riga, 19 June 2004 | |
Address | A. Caka Street 160 |
Riga, LV- 1012 | |
Latvia |
Main business activities
Major shareholder
Names and positions of the Council members:
Production of alcoholic beverages
NACE2 11.01
Amber Beverage Group Holding S.à r.l. (89.99%)
Rolands Gulbis - Chairman of the Council Valizhan Abidov - Vice Chairman of the Council Velga Celmiņa - Member of the Council Boriss Ņešatajevs - Member of the Council Guntars Reidzāns - Member of the Council
Names and positions of the Board members: | Intars Geidāns - Chairman of the Board |
Guntars Betlers - Member of the Board | |
The auditor of the Company and certified | PricewaterhouseCoopers SIA |
auditor in charge | Licence No. 5 |
Kr. Valdemāra Street 21-21 | |
Riga, LV-1010 | |
Latvia | |
Certified auditor in charge: | |
Ilandra Lejina | |
Certified auditor | |
Certificate No. 168 | |
Statement of corporate governance | https://amberlb.lv/en/corporate-governance/ |
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AS Amber Latvijas balzams
ANNUAL REPORT
for the year ended 31 December 2023
REPORT OF THE MANAGEMENT
Type of operations
AS Amber Latvijas balzams (hereinafter also - the Company) is a leading producer of alcoholic beverages in the Baltic states. The Company was established in 1900 as Riga's 1st state alcohol warehouse; in the period from 1970 to 2022, it operated under the name AS Latvijas balzams, but since 2022, under the name AS Amber Latvijas balzams. Amber Beverage Group Holding S.à r.l., which owns 89.99% of the Company's share capital, has been the major shareholder of the Company.
Nowadays, the Company operates two production units of alcoholic drinks in Riga: a factory for the production of strong alcoholic beverages and a factory for the production of sparkling wines and light alcoholic beverages. These factories produce most types of alcoholic beverages, such as sparkling wines, fortified wines, ciders, RTDs (ready-to-drink beverages), vodka, liqueurs, brandy, strong alcoholic beverages, gin, etc. The recipes for some of AS Amber Latvijas balzams products date back hundreds of years; for example, the formula of Riga Black Balsam® was officially written down more than 270 years ago - in 1752.
Overall, the Company produces more than alcoholic beverages of more than 100 different brand names, which are sold almost in all regions of the world via Amber Beverage Group, Stoli Group, and direct export routes.
The Company cooperates with the largest suppliers of raw materials and consumables in the European Union. Ethyl spirt for the production of most of the products is supplied to the Company by producers working in the European Union. One of the key resources is water, which is derived from artesian wells located in territories of the Company.
Logistics services represent a small, but still significant, part of the Company's business. Logistic services are mainly rendered to related companies; however, the volume of services, such as transit assurance, bonded warehouse services, value-added services, picking, and other logistic services provided to other partners in the spirits industry, is growing. These activities allow to improve the utilisation of resources.
As a socially responsible and sustainable company, the Company publishes the legally prescribed information about its activities in the areas of sustainability and corporate social responsibility in accordance with the GRI (Global Reporting Initiative) principles. This information can be found in the Sustainability Report implemented by the Company's Parent company, which is available on the Company's website in the Corporate Social Responsibilitysection.
The Company has drafted and adheres to the following procedures: the Corporate Social Responsibility Policy, the Company Procurement Procedure, the Collective Bargaining Agreement, the Quality Management Handbook, the Ethical Marketing Communications Code, the Anti-Corruption Policy, the Data Protection Policy, the Risk Management Policy, the Remote Work Policy, and other internal documents. These documents, policies and procedures contained therein are reviewed regularly in accordance with the Quality Management System. The results of reviews and planned corrective measures are considered at the Company's management meetings.
Performance of the Company during the financial year
Financial performance
The Company's net turnover in 2023 reached 97.9 million euros, which is 9.4% less than in the corresponding period in 2022. Total sales volumes (in 9-liter cases) in 2023 were 18.4% less than in the corresponding period in 2022. A decrease in turnover is related to global trends in the reduction of working capital of wholesalers and importers in the context of rising inflation, as well as strategic decisions made by Stoli Group regarding the rebranding of Stoli products, affecting order volume.
01.01.2023- | 01.01.2022- | |
31.12.2023 | 31.12.2022 | |
9Lcs | 9Lcs | |
Sales volume, in 9-liter cases | 4 560 336 | 5 589 164 |
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AS Amber Latvijas balzams
ANNUAL REPORT
for the year ended 31 December 2023
REPORT OF THE MANAGEMENT (continued)
The gross profit in the reporting period was 14.4 million euros, which is a decrease of 4.9 million euros compared to the corresponding period in 2022. The gross profit indicator was affected both by the drop in sales volume and also by a significant increase in the costs of raw materials as well as costs related to production, which had a direct impact on the Company's results. The negative cost trends were observed starting in the second half of 2022 and therefore only partially affected the comparative indicators.
The operating profit for the year 2023 is 4.1 million euros (2022: profit of 6.4 million euros). The ratio of
operating profit to turnover in the reporting period of 2023 is 4.3% (2022: 5.9%), which was directly influenced by both the above-mentioned factors with an impact on gross profit and the proportion of fixed costs in the total amount of costs.
The Company's net profit for the reporting period is 5.2 million euros, which is a decrease compared to the corresponding period in 2022. The Company's management believes that the financial situation and profitability will improve in the future, taking into account the fixed price contracts for the purchase of energy resources switched in 2023, which provide for significantly lower resource prices, positive trends in sales volume dynamics in export markets, as well as the main raw materials (ethyl alcohol, glass bottles, cardboard packaging, etc.) gradual reduction of costs.
The Company's alternative performance metrics for the reporting period and their comparative figures for previous reporting periods are as follows:
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AS Amber Latvijas balzams
ANNUAL REPORT
for the year ended 31 December 2023
REPORT OF THE MANAGEMENT (continued)
The Company's return on equity (ROE) and return on assets (ROA):
2023 | 2022 | 2021 | |
ROA* | 2.6% | 3.4% | 5.1% |
ROE** | 3.7% | 4.5% | 6.4% |
- ROA = Net profit / average asset value x 100%.
- ROE = Net profit / average equity x 100%.
The Company's EBIT* and EBITDA** ratios:
2023 | 2022 | 2021 | |
EUR 000 | EUR 000 | EUR 000 | |
EBITDA* | 6 383 | 8 504 | 9 747 |
EBIT ** | 4 162 | 6 382 | 7 375 |
- EBIT = Earnings before interest and taxes.
- EBITDA = Earnings before interest and taxes, depreciation, and amortization.
The Company's management uses the aforementioned alternative performance metrics in assessing the financial performance for a particular financial period and in making decisions.
AS Amber Latvijas balzams is one of the largest local taxpayers. During the reporting period, the Company paid taxes of EUR 69.3 million to the state budget, including excise tax amounting to EUR 56.4 million.
Non-financial performance and activities for the reporting year
Similar to net revenue, during the year 2023, the production volume also decreased by 22% compared with the year 2022.
Taking into account the drop in production volumes and the overall decrease in profitability, the Company has taken a series of measures to promote the efficiency of production processes and reduce costs:
- By the middle of the year, a 30% improvement in the utilization efficiency (OEE) of the finished product filling equipment had been achieved.
- Completed several investment projects (such as an automated line for filling Stoli Elit vodka and purchased palletizing equipment), which allowed not only to increase production capacity but also to reduce labour costs per unit of production.
- Switched fixed-price contracts for the purchase of energy resources.
- The adaptation of workforce resources and other costs to current production volumes has been carried out.
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AS Amber Latvijas balzams
ANNUAL REPORT
for the year ended 31 December 2023
REPORT OF THE MANAGEMENT (continued)
AS Amber Latvijas balzams has been successfully operating as a European logistics hub for the distribution of the Group's brands (Rooster Rojo Tequila, KAH Tequila, Bayou Rum, Arinzano, Achaval Ferrer, Se Busca, Cenote, and Kentucky Owl) in Europe, Scandinavia, and other countries.
In 2023, the Company continued the installation and implementation of efficiency and adaptability equipment/projects and the preservation of a low-cost base. The main implemented projects were:
- Investments in production infrastructure, promoting the reduction of energy resource consumption.
- Installation of automatic palletizing equipment in the finished product warehouse at Čaka Street distillery on the next production lines.
- Updating the carbonated beverage production line and filtering equipment of the Briāna Street factory.
- Installation of a new, more productive ultra-premium vodka Stoli Elit production line.
During the reporting period, AS Amber Latvijas balzams has certified the quality management system at the Čaka Street production facility in accordance with the FSSC 22000 standard, while the monitoring audit in Briāna Street has been successfully completed in accordance with the ISO 9001:2015 version. FSSC certification made it possible to acquire new customers, their volume reaching 10,000 9Lcs in 2023.
Apart from the financial indicators referred to in these financial statements, the Company is using the following comparative indicators for the purposes of operational analysis: RFT (right first time), and OTIF (on time in full), and quality. RFT shows the share of products manufactured right on the first time. In 2023, this indicator reached 94.9%, which shows a slight improvement compared to almost the same indicator in 2022 (94.5%). The OTIF indicator indicates the Company's ability to fulfil customer orders within the specified time and volume. The corresponding indicator reached 95% in 2023, which, compared to the 2022 indicator of 94.9%, is also a slight improvement.
In 2023, a wide range of new products were developed and introduced to markets including: Lucky Dog® Passionfruit, Black® Limoncello Spritz, LB Black Currant RTD, Rīgas® Prestige Cuvee sparkling wine Semi Seco, Svetskoje Zolotoje sparkling wine, Cosmopolitan Diva® Berry Limited Edition, Kazna vodka for Austrian market, Moka Caramel&Cream, Hektors Hex on the Beach, and start of implementing new design of Moskovskaya® Vodka for international markets.
Sustainability report
In 2023, the Company's Parent company, Amber Beverage Group Holding S.à r.l., has prepared a Sustainability Report in accordance with GRI (Global Reporting Initiative) principles, including information about the Company. Thus, the Company has used the opportunity not to publish a separate sustainability report. ABG Group level Sustainability Report includes information on environmentally sustainable economic activity in line with EU Taxonomy requirements. The ABG Sustainability Report is published together with the ABG Group Annual Report and is available on the ABG website under the section ESG Reporting.
In accordance with European Commission Regulation (EC) No. 2020/852 and No. 2021/2178, the Company presents qualitative and quantitative information for economic activities related to taxonomy and non-related to the taxonomy for each of the three indicators: turnover, capital expenditures, operating expenses.
According to the classification included in the taxonomy compass (EU Taxonomy Compass), the economic activity of the Company is fully considered to be as non-related to taxonomy economic activity.
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AS Amber Latvijas balzams
ANNUAL REPORT
for the year ended 31 December 2023
REPORT OF THE MANAGEMENT (continued)
Risk assessment and management
When evaluating external and internal environmental factors that may affect the Company's operation and production processes, the Company's management pays increased attention to the following aspects:
- The timely identification and compliance with statutory requirements by taking into account timely information and education of staff.
- The ensuring of production continuity by timely planning production capacity and load, as well as compliance with epidemiological requirements.
- The creation of adequate jobs by investing in the development of production, services and human resources by means of training.
In the course of business, the Company strictly complies with the legislation of the Republic of Latvia. Considering the industry, the Company is devoting a great deal of attention to the assessment of transactions and their conformity with laws.
The biggest challenges in 2023 for the Company have been:
- Reduce the cost base.
- To implement the planned investment projects and new products on time and in full.
- Ensure fulfilment of orders in times of increased demand, especially in the second half of the year.
Stock and fund market
During the year 2023, the Company's share price fluctuated from EUR 8.80 to EUR 10.20 per share (Nasdaq Baltic indicator BAL1R; ISIN: LV0000100808).
The members of the Management Board and the Council of the Company do not own shares of AS Amber Latvijas balzams.
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AS Amber Latvijas balzams
ANNUAL REPORT
for the year ended 31 December 2023
REPORT OF THE MANAGEMENT (continued)
The dynamics of share prices for the previous three reporting periods is presented as follows:
Average price, EUR | Minimum price, EUR | Maximum price, EUR | |
2023 | 9.58 | 8.80 | 10.20 |
2022 | 10.00 | 8.93 | 11.92 |
2021 | 11.80 | 8.97 | 11.98 |
Financial risk management
In the ordinary course of business, AS Amber Latvijas balzams is exposed to a variety of financial risks, including credit risk, liquidity risk, and interest rate risk. The Company's management handles financial risks on an ongoing basis to minimize their potential adverse effects on the financial performance of the Company.
The Company's borrowings have variable interest rates. The Company's management is considering the use of hedging instruments to minimize the effect of variable interest rates.
Financial assets that potentially expose the Company to a certain degree of credit risk concentration are primarily trade receivables, receivables from related companies, and loans. The Company has introduced and pursued a credit policy whereby goods are sold on credit only to customers with sound credit histories. The Company also complies with sanctions regimes based on the information published on the website of the Ministry of Foreign Affairs of the Republic of Latvia for international transactions.
The Company pursues a prudent liquidity risk management policy, according to which adequate credit resources are ensured to settle liabilities when they fall due. The Company's management handles liquidity and cash flow risks by maintaining adequate cash reserves and securing sufficient financing by means of loans, credit lines, finance leases, etc., by monitoring forecasted and actual cash flows, and by matching the maturities of financial assets and liabilities on an ongoing basis.
On 31 December 2023, the Company's current assets exceeded its current liabilities by 94 million euros (on 31.12.2022, by 89 million euros). The Company has a strong ability to meet its current liabilities as they fall due. The Company's liquidity ratio (current ratio) and short-term liquidity ratio (quick ratio) for the last three years are as follows:
31.12.2023. | 31.12.2022. | 31.12.2021. | |
Current ratio* | 2.61 | 2.70 | 4.56 |
Quick ratio** | 2.01 | 2.08 | 3.83 |
- Current ratio = Current assets / current liabilities.
- Quick ratio = (Trade receivables + receivables from related companies + cash and cash equivalents) / current liabilities.
Financial risk management is disclosed in Note 28.
Events after the reporting date
There were no subsequent events since the last date of the financial year until the date of the signing of these financial statements, which would have a significant effect on the financial position of the Company as of 31 December 2023.
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AS Amber Latvijas balzams
ANNUAL REPORT
for the year ended 31 December 2023
REPORT OF THE MANAGEMENT (continued)
Future prospects
In 2024, AS Amber Latvijas balzams will keep focusing on the following:
- Investments in core brands to build international recognition.
- The efficiency improvement program.
The planned volumes of Stoli's orders, together with the achieved productivity growth, allow the volumes of 2024 to be fulfilled by working in one shift. This will be one of the main goals for 2024, thus achieving a significant saving of resources.
The company will continue to increase production efficiency, emphasizing procurement, planning and infrastructure improvements to ensure its goal: to deliver quality products at a competitive price.
For the implementation of this goal, work on the following projects will be continued in 2024:
- Further increase in productivity at the amount of 15%.
- Launch of the 'Value Engineering' project to gather more effective solutions for raw materials with lower costs and less environmental impact.
- Reduction of losses in production stages.
- Implementation of the SUP (EU Single-Use Plastics Directive) regulation, promoting the production of more environmentally friendly PET botles with an integral cap.
- Implementation of a new personnel management system within the Group, etc.
On behalf of the Board:
_______________________
Intars Geidāns
Chairman of the Board
Riga, 30 April 2024
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Amber Latvijas Balzams AS published this content on 30 April 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 30 April 2024 17:26:03 UTC.
