SAKU ÕLLETEHAS

COMMENTARY TO FINANCIAL RESULTS



COMMENTARY ON THE AUDITED RESULTS OF 2001



Sales and revenues



Saku  Brewery Ltd ended 2001 with net sales of EEK 745.9m

(EUR  47.7m), a 2 per cent or EEK 16.3m increase  on  the

previous year.

The  largest  increase occurred in sales of self-produced

beers.  Sales of canned products improved as  well,  with

about one half of the increase resulting from exports.

In quantitative terms, Saku Brewery Ltd sold 54.8m litres

of beverages, a 7 per cent increase on 2000, and exported

8 per cent of the output.

Despite stiff competition the company managed to increase

its  market share by 0.5 percentage points and, according

to  the  Estonian Breweries Association, by the  year-end

controlled  49  per  cent of the  market,  maintaining  a

strong leading position.

According  to market research company EMOR, in  2001  the

best-known beer brand in Estonia was Saku Brewery’s  Saku

Originaal.   The  latter  was  followed  by  Rock,   Saku

Brewery’s   swiftest  rising  beer  brand,  whose   sales

increased by an outstanding 24 per cent.



As  regards  other sectors of the beverages market,  Saku

Brewery Ltd launched a new cider line called Kiss,  which

acquired  19  per cent of the local cider  market  within

nine  months.  The  company’s premium  water  line  Vichy

Classique  attained a 13 per cent share in  the  Estonian

mineral  water market and became the first domestic  line

and overall third after Bon Aqua and Everest.



Performance and result of operations

In 2001 Saku Brewery Ltd earned a net profit of EEK 55.6m

(EUR  3.5m),  a  decline of 25 per cent on the  preceding

year. Earnings per share amounted to EEK 6.95.

Cash  flows  were positive, amounting to  EEK  9.0m  (EUR

0.6m) and resulted in an 80 per cent increase in the cash

balance.  On 31 December 2001 total assets stood  at  EEK

401.0m (EUR 25.6m), a 4 per cent increase on 2000.

In  2001,  the  whole Estonian beer market was  adversely

affected by a steep increase in the world market price of

malt,  the principal raw material, which occurred at  the

beginning  of  the  year.  Local  sales  prices  did  not

increase  simultaneously  with the  increase  in  product

costs  but were adjusted over the year. In addition,  the

domestic beer market remained relatively price sensitive.

Use  of  discounting campaigns increased and the strategy

was extended to the sale of premium beers and multipacks.

Another reason for the decline in profits was an increase

in  sales,  marketing and production-related investments,

which  were  directed  at maintaining  a  strong  leading

position  in  the local beer market - the main  objective

set  by the shareholders for 2001. A leading position  in

the  local market ensures long-term profitability,  which

is the company’s overall objective.





After  the year-end a cost analysis was conducted with  a

view to identifying measures for increasing profitability

in  the  new  market situation. Plans foresee  activities

aimed  at  improving the product portfolio and production

efficiency  and  reducing  administration  and  operating

expenses.

The  main  financial ratios of Saku  Brewery  Ltd  at  31

December 2001

Operating profit to net sales                7.6 %

Profit before taxes to net sales             7.5 %

Return on equity                             15.7 %

Return on assets                             14.2 %

Current ratio                           3.9 %

Debt ratio                                   11.1 %



Investment



In  2001  Saku  Brewery Ltd continued active  investment.

Investments in new tangible and intangible assets,  which

were  acquired  to  increase capacity, improve  operating

efficiency and maintain production quality, totalled  EEK

53m. Major purchases included production, warehousing and

IT  equipment as well as software. Financial  investments

in  AS  Rocca al Mare Suurhall amounted to EEK 6.8m  (EUR

0.4m). All investments were internally funded.



Major events



-  Reinforcement of market leader’s position in a  highly

competitive environment.

-  Investment  in  increasing capacities and  maintaining

production  quality: purchase of fermenting tanks  and  a

filling line, pasteurizer and labeller for kegs.

-  Product development: launch of the first domestic low-

alcohol  and low-calorie light beer Saku Originaal  Light

and   a   new  extra  strong  beer  brand  called  Sorts.

Penetration of the local cider market with the Kiss line.

-  Acquisition  of the exclusive right to  distribute  in

Estonia such internationally recognised premium brands as

Carlsberg, Guinness and Kilkenny.



Profit allocation proposal



The  management board of Saku Brewery Ltd  proposes  that

the  company declare a net dividend (the share of  profit

payable  to  shareholders) of EEK 40m,  i.e.  EEK  5  per

share,  and  that  the dividend be distributed  from  the

accumulated profits of 1994-1999.



1EUR =15,6 EEK





Kristina Seimann

PR manager

6 508 303