RAKVERE LIHAKOMBINAAT GROUP      FINANCIAL RESULTS          02.05.2005



COMMENT ON FINANCIAL RESULTS



Financial year 2005, 3 months



1.  Preface



AS Rakvere Lihakombinaat is the largest meat processing company in 

the Baltics. As of 31 March 2005 Rakvere Lihakombinaat Group had 

1,191 employees (1,248 employees as of 31 March 2004).

The parent company is located and registered in Estonia, County of 

Lääne-Virumaa, Sõmeru , Roodevälja Village.



The Group companies as at 31 March 2005:

                            Country      Participation  Participation 

                         of location        31.03.05       31.12.04

AS Rakvere Lihakombinaat 

(the parent company)            Estonia	

AS Ekseko                       Estonia       99,05%         98.75%

     AS Ekseko’s subsidiaries:

     OÜ Kurika Seafarm          Estonia         100%           100%

     OÜ Põlva Peekon            Estonia         100%           100%

AS Linnulihatooted              Estonia          76%            76%

AS Rigas Miesnieks               Latvia       93.82%         93,82%

     AS Rigas Miesnieks subsidiaries:

	AS Tallat                Latvia         100%           100%

OÜ Klaipedos maisto mesos produktai Lithuania   100%           100%

   OÜ Klaipedos maisto mesos produktai subsidiary:

   OÜ Klaipedos Maisto Produktai  Lithuania     100%           100%

   OÜ Klaipedos Maisto Produktai subsidiaries:

      OÜ Pentinuotis               Lithuania    100%           100%

      OÜ Klaipedos Maisto Prekyba  Lithuania    100%           100%





2. The overall economic environment and its effect on the company



The beginning of 2005 did not mark any significant changes for the 

company since the last year. Compared to the same period a year ago, 

company’s turnover increased 19.5%. The growth in turnover was mainly 

based on the growth of retail volumes due to an increase in private 

consumption seen in all of the Baltic States, but especially in 

Estonia. 



The costs of the company’s raw materials, pork and beef, were 

significantly higher than those for the same period last year. While 

the price rise for pork was moderate, the average price of beef is 

nearly twice as high as in the comparable period. There were two main 

reasons for the costlier beef. Firstly, the state subsidies are paid 

seasonally in the first quarter to beef farmers, which temporarily 

complicated cattle supply and raised the purchase costs. Secondly, 

while the consumption of beef has grown, production volumes have 

remained on the previous level in Estonia, which in turn increases 

competition in purchasing livestock. The European Union generally is 

able to produce about 85% of the beef consumed. The same trend is 

also developing in the Baltic States, where local production is not 

able to cover consumption. The increased cost of raw material also 

has an important input in the growth of the company’s turnover. At 

higher pork prices, the role of Ekseko within the Rakvere Group in 

forming turnover and profits will grow.



The accelerating consolidation of retail chains across the Baltics 

affects greatly the company’s activities. The share of commercial 

chains in the company’s turnover is constantly on the rise, and the 

demands of commerce are also growing rapidly. In addition to the 

monetary of sales promotions and discounts, there is also increasing 

demand for reliability and flexibility of company’s operations.



In the first quarter, cooperation between the Rakvere Group companies 

and AS Tallegg continued. In Latvia and Lithuania Tallegg’s products 

are currently being sold by the Rakvere Group’s companies. In the 

interests of higher manufacturing efficiency, the production of some 

goods and groups of goods has been consolidated into one company. In 

Estonia, Tallegg’s management has been consolidated with the 

management of Rakvere Lihakombinaat and Ekseko. The companies’ 

merchandise and raw material logistics are in the process of being 

standardised.



3. Sales and profit



The net sales of Rakvere Lihakombinaat Group in the first 3 months of 

2005 totaled in 325,8 million kroons or 20 821 th. euros (272,7 

million kroons or 17 428 th. euros in 2004). The sales volume was 

11 th. tons (including by-products)  in the Baltic States. This 

constitutes a 10,1 % volume increase compared to last year. The net 

profit of Rakvere Lihakombinaat Group was 17,1 million kroons or 

1 096 th. euros (in 2004  14,1 million kroons or 902 th. euros). 





Main financial indicators of Rakvere Lihakombinaat Group, millions 

of kroons (th. euros)



                      3months 2005   3months 2004   12months 2004



Net sales          325,8 (20 821)   272,7 (17 428)  1 267,3 (80 995)

Operating expenses 307,9 (19 676)   256,8 (16 411)  1 164,0 (74 394)

Operating profit    17,9  (1 145)    15,9  (1 017)    103,3  (6 601)

Net profit          17,1  (1 096)    14,1    (902)     97,2  (6 211)



Investments         36,4  (2 325)    38,5  (2 459)    140,5  (8 979)





4. Prospects for the future



According to company’s management estimate, the consumption of meat 

products will continue growing, concentrating mainly in bigger retail 

chains. Growth of consumption will give the company a good 

opportunity to grow its production volumes and turnover. The 

approaching grilling season, the success of which depends above all 

on weather conditions, has an important role to play in shaping the 

year’s economic results.



The cost of raw material is projected to remain at a slightly higher 

level than last year. Considering the growing influence of retail 

sector, the price of meat products will rise slowly. In such a 

situation, the company’s turnover will likely grow faster than the 

company’s profitability. Despite the rising costs of raw materials 

and the constant increase of competition, the growth of sales based 

on private consumption gives the company a possibility to develop 

business as planned. According to company’s management estimate 

integrated preliminary production and processing, along with constant 

effort to boost company’s internal efficiency will ensure the success 

of the Rakvere Group in subsequent periods as well. 



RAKVERE LIHAKOMBINAAT GROUP 

BALANCE SHEET 

                       in Thousands of kroons    in Thousands of euros

ASSETS                   31.3.2005 31.12.2004    31.3.2005 31.12.2004



Current assets				

Cash and bank                48 953    29 280      3 129    1 871

Trade receivables           107 303   121 028      6 858    7 735

Tax receivables               6 753     5 252        432      336

Other short-term receivables 43 889    37 423      2 805    2 392

Inventories                 119 970   120 158      7 667    7 680

Biological assets            86 359    83 654      5 519    5 346

Total current assets        413 227   396 795     26 410   25 360

				

Non-current assets				

Long-term receivables        34 689    35 272      2 217    2 254

Tangible fixed assets       513 020   492 859     32 788   31 499

Intangible assets             3 789     3 893        242      249

Total non-current assets    551 498   532 024     35 247   34 002

				

TOTAL ASSETS:               964 725   928 819     61 657   59 362

				

LIABILITIES AND OWNERS’ EQUITY				

				

Current liabilities				

Loans and lease payables     69 235    61 295      4 425    3 917

Supplier payables            87 689    92 554      5 604    5 915

Tax payables                 14 852    14 487        949      926

Other current liabilities    79 688    63 623      5 093    4 066

Total current liabilities   251 464   231 959     16 071   14 824

				

Non-current liabilities				

Deffered tax                    630       628         40       40

Non-curent loans and 

lease payable               103 516   103 704      6 616    6 628

Pension liabilities             775       773         50       49

Total non-current 

liabilities                 104 921   105 105      6 706    6 717

Total  liabilities          356 385   337 064     22 777   21 541

				

Equity				

Equity attributable the Company's equity holders				

Share capital               377 217   377 217     24 109   24 109

Mandatory legal reserve      11 726    11 726        749      749

Retained earnings           217 610   200 462     13 908   12 812

Unrealised translation 

differences                    -976    -1 008        -62      -64

Total equity attributable the 

Company's equity holders    605 577   588 397     38 704   37 606

Minority interest             2 763     3 358        176      215

Total equity                608 340   591 755     38 880   37 821

				

TOTAL LIABILITIES 

AND EQUITY:                 964 725   928 819     61 657   59 362







RAKVERE LIHAKOMBINAAT GROUP

INCOME STATEMENT

                       in Thousands of kroons    in Thousands of euros

Revenue                3 months 05 3 months 04  3 months 05 3 months 04



Net sales                   325 785    272 695     20 821    17 428

Other revenue                 1 333      1 842         85       118

Total revenue               327 118    274 537     20 906    17 546

				

Change in work-in-progress 

and finished goods            1 922      6 943        123       444

Change in fair value of 

biological assets             2 705      8 205        173       524

Materials, consumables 

and supplies               -223 994   -182 838    -14 315   -11 685

Other operating expenses    -38 520    -38 562     -2 462    -2 465

Personnel expenses          -34 722    -37 924     -2 219    -2 424

Depreciation and write-downs 

of non-current assets       -15 357    -13 644       -982      -872

Other expenses               -1 240       -799        -79       -51

				

Operating profit             17 912     15 918      1 145     1 017

				

Financial income/expenses				

Net foreign exchange gain/loss  128         31          8         2

Interest and other 

financial income                968        528         62        33

Interest and other 

financial expenses           -1 929     -2 428       -123      -155

Total financial 

income/expenses                -833     -1 869        -53      -120

				

Net profit for the period    17 079     14 049      1 092       897

Attributable to:				

  Equity holders of the 

          Company            17 148     14 126      1 096       903

Minority interest               -69        -77         -4        -6

Net profit                   17 079     14 049      1 092       897

				

				

Earnings per share for profit attributable to the equity holders 

of Company:                    eek per share        eur per share 

                               0,45       0,37      0,029     0,024