RAKVERE LIHAKOMBINAAT GROUP        FINANCIAL RESULTS       05.08.2005



FINANCIAL RESULTS 6 MONTHS



Financial year 2005, 6 months



1.  Preface



AS Rakvere Lihakombinaat is the largest meat processing company in 

the Baltics. As of 30 June 2005 Rakvere Lihakombinaat Group had 

1,238 employees (1,231 employees as of 30 June 2004).

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

Lääne-Virumaa, Sõmeru , Roodevälja Village.



The Group companies as at 30 June 2005:



                           Country      Participation  Participation 

                         of location        30.06.05       31.12.04

AS Rakvere Lihakombinaat 

(the parent company)            Estonia	

AS Ekseko                       Estonia       99,11%         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 Pentinuotis            Lithuania         100%           100%

    OÜ Klaipedos Maisto Prekyba Lithuania       100%           100%



The merger of the two Lithuanian subsidiaries – Klaipedos Maisto Mesos 

Produktai and Klaipedos Maisto Produktai – was completed in the 

second quarter. The newly formed company retained the name Klaipedos 

Maisto Mesos Produktai.



2. General economic environment and its effect on the company



No major changes occurred in the company’s economic activities in 

the second quarter of 2005. The company’s turnover increased by 

18.6%, compared to the same period last year. This increase was, 

above all, conditioned by growth in the retail sales volume, 

supported by increase in private consumption, and successful sales 

activities in all of the Baltic States.



Prices of the company’s main raw materials – pork and beef – were 

significantly higher, compared to the same period last year. While 

the pork price increase remained modest, the average beef price was 

twice as high as in the comparative period. Fluctuations in the beef 

stocking price are conditioned by the seasonal nature of cattle 

stocking.



Rapid retail trade consolidation in the Baltic States has a major 

effect on the company’s operations. The share of retail chain trade 

in the company’s turnover is growing, while trade demands are 

quickly increasing. In addition to monetary increase in sales 

promotion, bigger attention must also be paid to the reliability 

and flexibility of the company’s operations.



The company’s operating expenses have increased since the beginning 

of 2005. The increase has been greatest in the expense items 

regulated by law; rapid growth in waste management expenses also 

deserves mentioning. Positive economic development together with the 

opening of the borders in the European Union has triggered a 

noticeable labour flow, and exerted strong pressure on the company’s 

personnel expenses.



Proportionally, the moderate increase in meat and meat product prices 

during the period was noticeably smaller than the increase in the 

price of raw materials and the cumulative increase in sales 

subsidies. As the fixed costs increased, the company faced a 

situation where increase in profitability was noticeably smaller 

than growth in turnover. Still, the extent of growth in turnover 

enabled the company to increase its net profit.



3. Sales and profit



The net sales of Rakvere Lihakombinaat Group in the first 6 months of 

2005 totaled in 712,8 million kroons or 45 555 th. euros (600,8 

million kroons or 38 398 th. euros in 2004). The sales volume was 

23,3 th. tons (including by-products)  in the Baltic States. This 

constitutes a 8,5 % volume increase compared to last year. The net 

profit of Rakvere Lihakombinaat Group was 47,2 million kroons or 

3 014 th. euros (in 2004  43,1 million kroons or 2 752 th. euros). 





Main financial indicators of Rakvere Lihakombinaat Group, millions 

of kroons (th. euros)



                       6 months 2005  6 months 2004  12 months 2004



Net sales               712,8 (45 555)  600,8 (38 398) 1 267,3 (80 995)

Operating expenses and 

other revenue           663,9 (42 427)  554,0 (35 405) 1 164,0 (74 394)

Operating profit         48,9  (3 128)   46,8  (2 993)   103,3  (6 601)

Net profit of 

parent company           47,2  (3 014)   43,1  (2 752)    97,2  (6 211)



Investments              65,7  (4 201)   73,8  (4 715)   140,5  (8 979)





4. Future perspectives



According to the management of the company, meat product consumption 

is bound to grow, concentrated, above all, in retail chains. Growth 

in consumption will provide the company with an excellent opportunity 

to enhance its production volume and turnover.



In the second half of the year, fixed costs will continue growing as 

a result of amendments introduced in the laws (waste handling 

expenses, implementation of packaging excise duty, environmental and 

energy expenses). The pressure on wage increase will remain strong. 

According to the estimates, raw material prices will slightly 

increase, compared to 2004.



Although expenses are rapidly increasing, tight competition on the 

retail market will not allow product prices to be raised.



At the same time, the company’s development, which is based on the 

planned growth in sales volumes, will provide a good foundation for 

continued success. The company’s turnover is still growing at a far 

greater speed than profitability. According to the company’s 

management, integration of primary production and processing, 

together with the continual efforts made for enhancing internal 

efficiency, will ensure Rakvere Group’s success in the upcoming 

periods.





Olle Horm

Chairman of the Management Board 

Rakvere Lihakombinaat AS

05.08.05







RAKVERE LIHAKOMBINAAT GROUP 

BALANCE SHEET 

                       in Thousands of kroons    in Thousands of euros

ASSETS                   30.6.2005 31.12.2004    30.6.2005 31.12.2004



Current assets				

Cash and bank                 41 798   29 280       2 671     1 871

Trade receivables            124 075  121 028       7 930     7 735

Tax receivables                4 410    5 252         282       336

Other short-term receivables  42 039   37 423       2 687     2 392

Inventories                  120 277  120 158       7 687     7 680

Biological assets             79 675   83 654       5 092     5 346

Total current assets         412 274  396 795      26 349    25 360

				

Non-current assets				

Long-term investments         36 033   35 272       2 303     2 254

Tangible fixed assets        521 253  492 859      33 314    31 499

Intangible assets              3 592    3 893         230       249

Total non-current assets     560 878  532 024      35 847    34 002

				

TOTAL ASSETS:                973 152  928 819      62 196    59 362

				

LIABILITIES AND OWNERS’ EQUITY

				

Current liabilities

Loans and lease payables      62 178   61 295       3 974     3 917

Supplier payables             90 060   92 554       5 756     5 915

Tax payables                  14 881   14 487         951       926

Other current liabilities     64 402   63 623       4 116     4 066

Total current liabilities    231 521  231 959      14 797    14 824

				

Non-current liabilities				

Deffered tax                     629      628          40        40

Non-curent loans and 

lease payable                101 805  103 704       6 507     6 628

Pension liabilities              775      773          50        49

Total non-current liabilities103 209  105 105       6 596     6 717

Total  liabilities           334 730  337 064      21 393    21 541

				

Equity				

Equity attributable the Company's equity holders

Share capital                377 217  377 217      24 109    24 109

Mandatory legal reserve       16 585   11 726       1 060       749

Retained earnings            242 755  200 462      15 515    12 812

Unrealised translation 

differences                     -983   -1 008         -63       -64

Total equity attributable the Company's 

equity holders               635 574  588 397      40 621    37 606

Minority interest              2 848    3 358         182       215

Total equity                 638 422  591 755      40 803    37 821

				

TOTAL LIABILITIES 

AND EQUITY:                  973 152  928 819      62 196    59 362







RAKVERE LIHAKOMBINAAT GROUP

INCOME STATEMENT

                       in Thousands of kroons    in Thousands of euros

Revenue                6 months 05 6 months 04  6 months 05 6 months 04



Net sales                     712 786   600 802     45 555   38 398

Other revenue                   3 814     3 138        244      201

Total revenue                 716 600   603 940     45 799   38 599

				

Change in work-in-progress 

and finished goods              2 515     5 715        161      365

Change in fair value of 

biological assets              -3 979     6 933       -254      443

Materials, consumables 

and supplies                 -473 953  -381 602    -30 291  -24 389

Other operating expenses      -84 269   -85 287     -5 386   -5 451

Personnel expenses            -72 300   -74 723     -4 621   -4 775

Depreciation and write-downs 

of non-current assets         -31 575   -27 903     -2 018   -1 783

Other expenses                 -4 094      -244       -262      -16

				

Operating profit               48 945    46 829      3 128    2 993

				

Financial income/expenses				

Net foreign exchange gain/loss    379      -127         24       -8

Interest and other 

financial income                1 743       869        111       56

Interest and other 

financial expenses             -3 792    -4 469       -242     -286

Total financial 

income/expenses                -1 670    -3 727       -107     -238

				

Net profit for the period      47 275    43 102      3 021    2 755

Attributable to:				

 Equity holders of the Company 47 152    43 066      3 014    2 752

 Minority interest                123        36          7        3

								

Earnings per share for profit attributable to the

equity holders of Company 

(in kroons / euros)              1,25      1,14      0,080    0,073