Kalev                  FINANCIAL RESULTS                12.05.2005



FINANCIAL REPORT 9 MONTHS 2004/2005



COMMENTS ON FINANCIAL RESULTS



Characteristic indicators for the first nine months of the

financial year 2004/2005, compared to the same period last

year:



·  Increase in revenue: 1.8 times (279 million kroons –

   i.e. 17.8 million euros);

   Increase in sugar and chocolate confectionery product

   revenue: 1.04 times (10 million kroons – i.e. 0.6

   million euros);

·  Increase in export revenue: 5.6 times (199 million

   kroons – i.e. 12.7 million euros);

·  Increase in revenue per employee: 1.4 times (0.26

   million kroons – i.e. 16.6 thousand euros);

·  Increase in confectionery products (chocolate and sugar

   confectionery products, baked goods, biscuits) sold: 2 times

   (5,200 tons);

·  Dairy products sold: 10,324 tons (269 million kroons –

   i.e. 17.2 million euros);

·  Changes in the group structure.





Group structure



The financial indicators of Kalev Ltd and its subsidiaries

have been consolidated line by line in this 9-month interim

report.



The Kalev Group incorporates the parent company Kalev Ltd

and six subsidiaries.



Name of subsidiary                   Location   Share as  of

                                                31.12.2004

                                                

AS Kalev Paide Tootmine              Estonia    100%

AS Kalev Jõhvi Tootmine              Estonia    99.1%

AS Vilma                             Estonia    60.7%

AS  Kalev  Real Estate Company  (AS  Estonia    100%

Kalev REC)

OÜ Maiasmokk                         Estonia    81.3%

Kalev Merchant Services Ltd          USA        100%



On 1 July 2004, Kalev Ltd acquired 60.6746% of the shares

(i.e. 436,857 shares) of Viljandi bakery AS Vilma, which

currently manufactures baked goods and confectionery

products as well as semi-manufactured flour products under

the Vilma trademark The objective of the purchase of the

shares of AS Vilma was to expand the activities of Kalev Ltd

in the flour confectionery sector in accordance with the

company’s long-term development strategy. The majority

interest acquired in AS Kalev Jõhvi Tootmine (formerly known

as AS Järle) at the end of 2003 was Kalev Ltd’s first step

towards this objective.



On 7 December 2004, AS Kalev REC and United Real Estate OÜ

(URE OÜ) concluded a contract on the free-of-charge transfer

of a share in the private limited company Sõbra Korterid OÜ.

Pursuant to the contract, URE OÜ transferred to AS Kalev REC

a 20-thousand-kroon share—i.e. 50% of the share capital—of

the private limited company.



Sõbra Korterid OÜ’s main field of activity is real estate

development and administration.



AS Kalev REC acquired the share in Sõbra Korterid OÜ with

the aim of pursuing real estate development on the housing

market. The private limited company plans to construct two

new apartment buildings on the real estate located at

Kastani 183a and 183b in Tartu.



In the given period, Kalev Ltd prematurely repaid to Skanska

EMV AS the balance due for the acquisition of 40.7% of the

shares of AS Kalev Real Estate Company (AS Kalev REC) – i.e.

16,950,000 kroons.



Pursuant to the shareholder’s agreement concluded between

Skanska EMV AS and Kalev Ltd on 3 May 2002, Kalev Ltd had

the right to acquire the 40.7% of the shares of AS Kalev REC

held by Skanska EMV AS. Kalev Ltd paid a total of 25.2

million kroons for the acquired shares.



On 6 January 2005, Skanska EMV AS transferred 40.7% of the

shares of AS Kalev REC to the securities account of Kalev

Ltd, thus making Kalev Ltd the full owner of the company.





Product sales



In the first nine months of the financial year 2004/2005,

the company focused its marketing and sales activities on

the three holidays during the period – Christmas,

Valentine’s Day and Easter.



This year, Kalev Ltd’s Christmas collection comprised 50

product items. A new addition to the assortment of Christmas

products was the collection of classics – various pralines,

handmade boxed chocolate and chocolate bars. For the first

time in the company’s history, Kalev Ltd launched a special

new product series for young sweet tooths. The assortment of

ginger bread products was improved, compared to last year.



For Valentine’s Day, the company mainly focused on

anniversary chocolate bars of various sizes, as well as

heart-shaped marzipan and chocolate products.



The Easter product portfolio consisted of traditional

anniversary chocolate bars, candy packages and gift boxes.

Kalev Ltd also launched a new product – wheat pollard

biscuits – at the market. These biscuits will remain a part

of the company’s main assortment.



Aiming at strengthening the company’s position in the low

price class sector, Kalev Ltd launched a new product series

under the Sonja trademark at the market in February 2005.

The share of low price class sweets has rapidly grown at the

local market in recent years. While in 2003 the share of

candy with lower-than-average prices was an estimated 33% of

the Estonian packaged candy market, this indicator reached

42.5% in 2004.



The Sonja trademark series include four new specially

prepared candies: cocoa-flavoured wafer candies, cocoa-

flavoured sweet bites, lemon-flavoured jelly candies and the

arachis-flavoured pralines. The candies come in simple

noticeable packages, comprising a visually cohesive product

family.



Other products launched by Kalev Ltd in the given period

included chocolate-coated cocoa-flavoured pralines, boxed

chocolates Athena and Toompea, double-layered praline

sticks, and biscuits Tähekesed. Kalev Ltd also brought the

biscuit series manufactured by AS Kalev Jõhvi Tootmine under

the Kalev trademark, and modernised several dark bread and

white bread packages of AS Kalev Jõhvi Tootmine. In co-

operation with AS EMT, the company launched a new product –

POP-biscuits – for young sweet tooths.



According to the retail survey conducted by AC Nielsen

Eesti, Kalev Ltd’s market share was 42% in February and

March 2004, as regards chocolate confectionery and sugar

confectionery products (February and March 2003: 43%). In

the biscuit sector, the company’s market share was 15% in

the same period.



Kalev Group’s total sales of various confectionery and dairy

products amounted to 20,944 tons in the first nine months of

the financial year 2004/2005. The home market constituted

68% of the total sales. 32% of the sales were exported.



Kalev Group sold a total of over 4,900 tons of confectionery

products (incl. chocolate confectionery and sugar

confectionery products) in the given period—a 5% decrease,

compared to the same period last year. 91% of the total

volume of confectionery products was sold at the home

market; 9% was exported. In the given period, the Baltic

States remained the company’s main export targets. In

addition to the above countries, Kalev Ltd also exported its

products to the Scandinavian countries, Russia and the

United States.



Kalev Group’s total sales of flour baked goods (incl. bakery

products and biscuits) amounted to 5,600 tons in the first

nine months of the financial year 2004/2005. The majority

was sold at the home market. The company was not yet

actively involved in the flour baked goods sector in the

given period.



In the given period, Kalev Group sold a total of over 10,300

tons of dairy products, including skim milk and milk powder,

highly pasteurised milk and butter (over 900 tons in the

comparative period). Over a half – i.e. 57% of the above

products was exported to various EU member states.

     

Economic activities and financial results



The consolidated net sales of Kalev Ltd for the financial

year 2004/2005 amounted to 611.4 million kroons (i.e. 39.1

million euros)—a 1.8-time increase, compared to the same

period last year. In the given period, the company earned

6.4 million kroons (0.4 million euros) in consolidated net

profit, compared to the 22-million-kroon (i.e. 1.4-million-

euro) net profit in the first nine months of the financial

year 2003/2004.



Increase in the consolidated net sales of Kalev Ltd was

facilitated by the incorporation of two new subsidiaries –

AS Kalev Jõhvi Tootmine (formerly known as AS Järle) and AS

Vilma – in the Kalev Group at the beginning of 2004 and in

July 2004, respectively, as well as the turnover increase of

the subsidiaries AS Kalev Paide Tootmine and AS Kalev Real

Estate Company (AS Kalev REC) in the given period.



The turnover increase in the first nine months of the

financial year 2004/2005, compared to the same period last

year can also be explained by the deficit of chocolate

confectionery goods at the end of the summer of 2003,

conditioned by the company’s relocation to a new production

complex.



The decrease in the consolidated net profit of Kalev Ltd in

the first nine months of the financial year 2004/2005 was,

above all, conditioned by the production input price

increase – incl. the raw material price increase after

Estonia’s accession to the European Union. The low purchase

price of powdered dairy products at the European dairy

product market in the first quarter of the year was another

contributor to the decrease in consolidated profit, since

the subsidiary AS Kalev Paide Tootmine exports most of its

products to EU member states.



The company earned 30 million kroons (i.e. 1.9 million

euros) in extraordinary revenue from real estate

transactions in the financial year 2003/2004. This revenue

remained modest in the given period.



The 47.5% increase in the company’s marketing expenses in

the given period, compared to the same period last year, was

due to incorporation of new subsidiaries in the Kalev Group.

The expanded product assortment and the tightening

competition at the final consumer market also contributed to

the increase in marketing expenses.



The company’s general and administrative expenses decreased

by 20.7% in the given period. The general and administrative

expenses for the first nine months of the financial year

2003/2004 included single expenses on production equipment

relocation and assembly, and launch of the production

process in the amount of 15.2 million kroons (0.97 million

euros).



The 51.7% and 42% decrease in expenses and revenue

(respectively) was conditioned by the real estate

transactions, the volume of which was smaller than the

volume of transactions concluded in the comparative period.



In the first nine months of the financial year 2004/2005,

Kalev Group employed an average of 806 people—an 11%

increase, compared to the same period last year. This

increase was mainly due to incorporation of the employees of

the new subsidiary AS Vilma among the group staff in July

2004.



The Tax and Customs Board conducted an audit in Kalev Ltd in

the first nine months of the financial year 2004/2005,

inspecting the company’s sugar stock reserve and its

declaration. The audit commenced on 8 November 2004, and had

not been finished by the time of the preparation of this

report.



Kalev Ltd believes the sugar stock reserve declaration to be

correct and in compliance with the Excessive Stock Reserve

Fee Act. Consequently, the company’s management does not

expect the audit to have any effect on Kalev Ltd’s financial

results.



The potential “leaking” of the data presented to the Tax and

Customs Board in the course of the audit caused unfounded

media speculations on the company’s supposed stock reserves

and the fines to be calculated thereof. Violation of the tax

secret harmed Kalev Ltd’s reputation as a listed company and

employer.



Balance sheet (consolidated, unaudited)



                 Consolidated  Consolidated  Consolidated Consolidated

ASSETS            31.03.2005   31.03.2004     31.03.2005  31.03.2004

CURRENT ASSETS   EEK           EEK           EUR          EUR

CASH AND BANK      36 433 589     3 254 736     2 328 531      208 015

ACCOUNTS

RECEIVABLES       115 000 387   123 610 798     7 349 864    7 900 150

PREPAYMENTS         4 764 835    19 740 351       304 528    1 261 635

INVENTORIES       107 837 206    85 853 581     6 892 054    5 487 030

TOTAL CURRENT     264 036 017   232 459 466    16 874 977   14 856 830

ASSETS

                                                                      

NON-CURRENT                                                           

ASSETS

LONG-TERM                                                             

FINANCIAL

INVESTMENTS

OTHER LONG-TERM       330 180       330 180        21 102       21 102

RECEIVABLES

PROPERTY, PLANT   343 187 561   363 089 521    21 933 683   23 205 591

AND EQUIPMENT

INVESTMENT        128 222 247    61 665 519     8 194 895    3 941 135

PROPERTY

INTANGIBLE          6 624 095    -9 019 603       423 357     -576 546

ASSETS

TOTAL NON-        478 364 083   416 065 617    30 573 037   26 591 371

CURRENT ASSETS

                                                                      

TOTAL ASSETS      742 400 100   648 525 083    47 448 014   41 448 201

                                                                      

LIABILITIES AND                                                       

OWNER’S EQUITY

                                                                      

LIABILITIES                                                           

BORROWINGS        102 441 616    65 235 634     6 547 213    4 169 306

PREPAYMENTS         2 410 112    14 333 000       154 034      916 043

RECEIVED FROM

CUSTOMERS

ACCOUNTS PAYABLE  168 639 527   127 466 815    10 778 030    8 146 593

TAXES PAYABLE               0     5 577 867             0      356 490

OTHER PAYABLES     10 654 666    16 595 672       680 957    1 060 654

TOTAL CURRENT     284 145 921   229 208 988    18 160 234   14 649 087

LIABILITIES

                                                                      

LONG-TERM         179 074 692   156 549 867    11 444 959   10 005 335

BORROWINGS

TOTAL NON-        179 074 692   156 549 867    11 444 959   10 005 335

CURRENT

LIABILITIES

TOTAL             463 220 613   385 758 855    29 605 193   24 654 422

LIABILITIES

                                                                      

OWNER’S EQUITY                                                        

SHARE CAPITAL     236 325 000    78 775 000    15 103 920    5 034 627

REVALUATION        17 159 388    17 159 388     1 096 685    1 096 682

RESERVE

MANDATORY           4 020 204     1 537 837       256 938       98 285

RESERVE

RETAINED           10 231 636   143 137 790       653 921    9 148 149

EARNINGS

PROFIT FOR THE      6 391 544    21 966 913       408 494    1 403 938

FINANCIAL YEAR

MINORITY            5 051 715       189 300       322 863       12 098

INTEREST

TOTAL OWNER'S     274 127 772   262 766 228    17 519 958   16 793 779

EQUITY

                                                                      

TOTAL             742 400 100   648 525 083    47 448 014   41 448 201

LIABILITIES AND

OWNER’S EQUITY



Income statement (consolidated, unaudited)



              Consolidated   Consolidated  Consolidated  Consolidated

                                           

              01.07.2004-    01.07.2003-   01.07.2004- 01.07.2003-

              31.03.2005     31.03.2004    31.03.2005  31.03.2004

              EEK            EEK           EUR         EUR

REVENUE          611 428 451  332 208 026   39 077 400   21 231 908

                                                                   

COST OF SALES    489 927 956  211 390 576   31 312 103   13 510 286

                                                                   

GROSS PROFIT     121 500 495  120 817 450    7 765 297    7 721 623

                                                                   

MARKETING         62 885 594   42 640 707    4 019 122    2 725 231

EXPENSES

GENERAL AND       51 864 247   65 431 832    3 314 730    4 181 846

ADMINISTRATIV

E EXPENSES

OTHER REVENUE    18 965  209   32 685 123    1 212 098    2 088 955

OTHER              7 411 264   15 335 657      473 666      980 125

EXPENSES

                                                                   

OPERATING         18 304 599   30 094 377    1 169 877    1 923 376

PROFIT

                                                                   

FINANCIAL            548 352      989 904       35 046       63 266

INCOME

FINANCIAL         11 400 744    9 141 791      728 640      584 265

EXPENSES

                                                                   

PROFIT BEFORE      7 452 207   21 942 490      476 283    1 402 377

INCOME TAX

                                                                   

MINORITY         - 1 060 663       24 423      -67 789        1 561

INTEREST

                                                                   

NET PROFIT         6 391 544   21 966 913      408 494    1 403 938

                                                                   

EARNINGS PER            0,27        2, 79         0,02         2,18

SHARE





Income statement: 3rd quarter (consolidated, unaudited)



              Consolidated   Consolidated  Consolidated  Consolidated

                                          

              01.01.2005-    01.01.2004-   01.01.2005- 01.01.2004-

              31.03.2005     31.03.2004    31.03.2005  31.03.2004                             

              EEK            EEK           EUR         EUR

      REVENUE    171 369 485  146 044 841   10 952 478    9 333 943

                                                                   

COST OF SALES    148 764 771   89 166 814    9 507 802    5 698 798

                                                                   

 GROSS PROFIT     22 604 714   56 878 027    1 444 677    3 635 145

                                                                   

    MARKETING     18 319 098   13 719 600    1 170 804      876 842

     EXPENSES

  GENERAL AND     10 638 146   30 995 602      679 901    1 923 231

ADMINISTRATIV

   E EXPENSES

OTHER REVENUE     12 906 922   30 995 602      824 903    1 980 980

        OTHER      3 900 693   11 767 848      249 300      752 103

     EXPENSES

                                                                   

    OPERATING      2 653 699   32 294 153      169 574    2 063 949

       PROFIT

                                                                   

    FINANCIAL        113 949      404 527        7 283       25 854

       INCOME

    FINANCIAL      3 309 412    3 856 856      211 510      246 498

     EXPENSES

                                                                   

PROFIT BEFORE       -541 764   28 866 247      - 1 607       34 625

   INCOME TAX                                      332

                                                                   

     MINORITY       -232 669       24 423     - 14 872        1 561

     INTEREST

                                                                   

   NET PROFIT      - 774 433   28 866 247     - 49 495    1 844 866

                                                                   

 EARNINGS PER          -0,03         3,66         -0,0         0,23

        SHARE





Ruth Roht

PR manager

+372 6 077 858