VITA LLP (Kazakhstan): Comments of Listing commission and risks description

/IRBIS, Dec.7, 00/ - Below is a comment of KASE listing commission on VITA LLP. The description is published due to inclusion of the company's bonds into category "B" of KASE securities. The major activities of the company are processing, production and selling of fat-and-oil products. The major products are unrefined, refined and sweet sunflower oil (Extra), butter oil (Irtish) and Kretsyanskoye. Government regulation. The legislation does not create any government restrictions for VITA LLP activity. The activity is not regulated by licenses and anti trust government bodies. Macroeconomic risks. According to the managers, macroeconomic risks are not of a prime concern for the company as fat-and-oil products are the essential commodities. There is no tight relationship between demand and income level of population. Production process of the primary goods could be changed in respect of refinement ratio, thus making it possible to change the costs of goods (yet still damaging their quality). This fact decreases the exposure to macroeconomic risks. Supply risks. There is a probability of bad harvest and consecutive increase in cost of raw materials. The company also depends on foreign suppliers. The share of Ukraine and Russia in vegetable oil supplies take 80%, New Zealand and Lithuania take the same share for butter oil inputs. Presently, the company developed project on complete production process that would evaluate dependence from suppliers and seasonal fluctuations. Competition. The major competitors of VITA LLP are importers of the vegetable oil. About 65% of total consumed oil in Kazakhstan is imported. The company has some advantages because of value added tax and duties.