Last update: 28.11.2020 01:18 (GMT+2)

Baltika: Commentary to the financial results 12/98

31.03.1999, Baltika, TLN
AS BALTIKA
ANNOUNCEMENT
31.03.99

COMMENTARY TO THE FINANCIAL RESULTS OF 1998

The goals of the financial activities of AS Baltika in 1998 included
increasing the sales volumes on the existing markets, moving to new
export markets, increasing the production efficiency, and development
of the group. The activities during the II half of the year were
directed towards softening of the effects of the Russian crisis and
preparation of the company for operating in the new economic
environment.

The 1998 consolidated net sales of AS Baltika amounted to 280.3 million
EEK, which is 11% (27.9 million EEK) more than in the previous year
(1997 net sales 252.4 million EEK). The turnover of export markets
accounted for 67.8% (190.1 million EEK) of total sales. There was a
substantial increase in the sales of goods produced (211,2 million EEK
in 1998, vs. 189.0 million EEK in 1997) on the aforementioned markets.
The most significant increase occurred on the Latvian and Lithuanian
markets (increase 16.0 million EEK, or 33%), and Finnish and Swedish
markets (increase 14.1 million EEK, or 84%). Russian crisis brought
along negative impact on turnovers, as a result of which the sales
turnover on the Russian and Ukrainian markets declined by 8.3 million
EEK, accounting for 77% of the respective figures of 1997. Compared
with the results of 1997, the sales of subcontracting works increased
in 1998 by 6%, or 3.7 million EEK (62.2 million EEK in 1998; 58.6
million EEK in 1997). However, the relative importance of
subcontracting sales decreased by 1% (22.2% in 1998).

The 1998 consolidated net profit of AS Baltika 1998 amounted to 1.4
million EEK, where the parent company’s share amounted to 1.9 million
EEK, and minority interests share –0.5 million EEK, In comparison with
the results of 1997, the group’s net profit decreased by 9.7 million
EEK. The profit forecast of AS Baltika for year 1998 anticipated 16
million EEK of net profit. During the first half year, the company was
able to meet 39 % (6.3 million EEK) of the annual profit forecast,
which was in accordance with the plans. In its 10.09.98 Exchange
announcement, AS Baltika evaluated the direct effect of the Russian
financial crisis (started in August 1998), respectively to decline in
the sales volumes, to amount to up to 33%. As of August, Baltika began
to make provisions on the positions related to the crisis, and increase
reserves on the account of expenditures. Regional extent of the Russian
financial crisis and impact on markets was specified at the end of 1998
and in January-February of 1999. According to the evaluations of AS
Baltika, the direct loss from the 1998 Russian crisis totaled 7.8
million EEK, which is also reflected in full amount on the 1998
consolidated balance sheet and income statement. The indirect effect in
the form of unearned profit due to decrease in the sales volume
amounted to 5.3 million EEK.

The company’s profit in 1998 was also affected by the loss proceeding
from the currency exchange differences, which exceeded the profit
earned from the exchange differences by 1.9 million EEK, whereas the
loss occurred mainly due to unfavorable exchange rates of USD, GBP and
SEK. Increase in the bank loans in 1998 occurred mainly due to the
reflection of bank loan residues of subsidiary AS Virulane (purchased
in October 1998) in the year-end consolidated balance sheet in the
amount of 10.7 million EEK.


Avo Reiska
Financial director

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