Merko Ehitus                  FINANCIAL RESULTS                 02/26/2004



INTERIM FINANCIAL RESULTS 2003



COMMENTARY TO 2003 INTERIM FINANCIAL RESULTS



Merko Ehitus group 2003 consolidated and unaudited interim net sales

amounted to EEK 2 708,2 million (EUR 173,1 million), and net profit

was EEK 184,5 million (EUR 11,8 million).  

The respective figures year ago were net sales of EEK 1 669,6 million

(EUR 106,7 million) and net profit of EEK 98,9 million (EUR 6,3 million).



Merko Ehitus group deals in the field of construction and with activities

concerned to that, in Estonia, Latvia and Lithuania. Companies of the

group 2003 interim net sales and consolidated net sales (sales outside

the group) were:





                                                           in thousand EEK



                                                Net sales        including

                                                              consolidated

                                                                 net sales

Estonian companies

    Construction

    AS Merko Ehitus                             1 697 409        1 696 742

    AS Gustaf (100% partnership)                   45 131           35 305

    OÜ Gustaf Tallinn (100% partnership)           19 511           18 480

    AS Merko Tartu (66% partnership)              134 474          113 357

    Tallinna Teede AS (100% partnership)          142 366          116 631

    Production of structures for small houses

    OÜ Matek (71,6% partnership), sold in 29.07.03 30 304           29 897

    Construction

    AS Normanni Linnagrupp (50% partnership)       21 830                -

    Production of concrete

    AS Tartu Maja Betoontooted (25% partnership)  138 557                -

    Telecommunication networks

    AS Telegrupp (45% partnership)                 45 894                -

Latvian companies

    Construction

    SIA Merks (100% partnership)                  263 434          263 434

    Lithuanian companies

    Construction

    UAB Merko Statyba (100% partnership)          434 353          434 353







                                                           in thousand EUR



                                                Net sales        including

                                                              consolidated

                                                                 net sales

Estonian companies

    Construction

    AS Merko Ehitus                               108 484          108 441

    AS Gustaf (100% partnership)                    2 884            2 256

    OÜ Gustaf Tallinn (100% partnership)            1 247            1 181

    AS Merko Tartu (66% partnership)                8 594            7 245

    Tallinna Teede AS (100% partnership)            9 099            7 454

    Production of structures for small houses

    OÜ Matek (71,6% partnership), sold in 29.07.03  1 937            1 911

    Construction

    AS Normanni Linnagrupp (50% partnership)        1 395                -

    Production of concrete

    AS Tartu Maja Betoontooted (25% partnership)    8 855                -

    Telecommunication networks

    AS Telegrupp (45% partnership)                  2 933                -

Latvian companies

    Construction		

    SIA Merks (100% partnership)                   16 837           16 837

Lithuanian companies

    Construction		

    UAB Merko Statyba (100% partnership)           27 760           27 760





Merko Ehitus group 2003 interim consolidated data illustrating financial

ratios were:



                                        2003           2002



Net profit margin                      6,8 %          5,9 %

Operating profit margin                7,5 %          5,9 %

Return on equity (per year)           48,3 %         36,7 %

Return on assets (per year)           19,9 %         16,2 %

Current ratio                          1,5            1,5

Invoice turnover (per year)            6,6           10,1

Equity-to-assets ratio                40,4 %         42,6 %



Year 2003 interim consolidated and unaudited income statement and balance

sheet are compiled in accordance with the principles of the International

Accounting Standards (IAS), and correspond with the Estonian legal acts

regulating the accounting principles used.





INTERIM INCOME STATEMENT 2003

consolidated, unaudited in thousand EEK and EUR



                                         EEK                   EUR

                                  2003.a.     2002.a.    2003.a.    2002.a.



Sales                            2 708 199   1 669 597    173 085    106 706



Cost of sales                   (2 429 661) (1 499 283)  (155 283)   (95 821)



Gross profit                       278 538     170 314     17 802     10 885



Marketing expenses                 (15 832)    (14 118)    (1 012)      (902)

Administrative expenses            (73 347)    (49 821)    (4 688)    (3 184)

Other operating income              15 509       2 156        991        138

Other operating expenses            (2 322)    (10 015)      (148)      (640)



Operating profit                   202 546      98 516     12 945      6 296



Financial income and expenses

from stocks of subsidiaries            542           0         35          0

Financial income and expenses

from stocks of associates            4 448       2 739        284        175

Financial income and expenses

from other long-term fin. invest.    1 084       1 674         69        107

Interest expense                    (2 503)       (805)      (160)       (51)

Foreign exchange gain               (2 692)     (3 739)      (172)      (239)

Other financial income and expense  (5 684)      4 386       (363)       280

Total financial income and expenses (4 805)      4 255       (307)       272



Profit before taxes                197 741     102 771     12 638      6 568



Income tax                          10 901       3 209        697        205



Net profit(loss) for the fin. year 186 840      99 562     11 941      6 363



Minority interest                   (2 367)       (699)      (151)       (45)



Net profit(-loss) for the group    184 473      98 863     11 790      6 318

				

Net profit per share

(basic and diluted, in EEK and EUR)  20,84       11,17       1,33       0,71









INTERIM BALANCE SHEET AS OF 31.12.2003

consolidated, unaudited in thousand EEK and EUR



                                       EEK                      EUR

                             31.12.2003   31.12.2002  31.12.2003  31.12.2002

ASSETS



Cash and cash equivalents       240 152       96 310      15 348       6 155



Marketable securities            36 096       53 018       2 307       3 388



Accounts receivable             409 239      165 138      26 155      10 554

Allowance for doubtful receivables (408)        (424)        (26)        (27)

Total accounts receivable       408 831      164 714      26 129      10 527



Receivables from parent-

and other group companies         4 275        6 472         273         414

Receivables from associates      11 022        1 227         704          78

Other short-term receivables     15 677       21 656       1 002       1 384

Total other receivables          30 974       29 355       1 980       1 876



Interest receivable                 388        1 116          25          71

Dividends receivable                233            0          15           0

Other accrued income                 52           32           3           2

Total accrued income                673        1 148          43          73



Prepaid taxes and tax refund     12 642       11 275         808         721

Other prepaid expenses            8 538        3 158         546         202

Total prepaid expenses           21 180       14 433       1 354         922



Raw materials                       839        2 735          54         175

Work-in-progress                 37 773       41 119       2 414       2 628

Finished goods                        0        1 314           0          84

Merchandise purchased for resale105 900       66 426       6 768       4 245

Prepayments to suppliers            138          374           9          24

Prepayments for real estate      13 565       15 181         867         970

Prepayments for construction work24 503       12 229       1 566         782

Due from customers               74 471       84 962       4 760       5 430

Total inventories               257 189      224 340      16 437      14 338



TOTAL CURRENT ASSETS            995 095      583 318      63 598      37 281



Shares in associated companies   25 040       21 338       1 600       1 364

Long-term receivables from

associated companies                  0        7 757           0         496

Other shares, holdings

and debt securities               1 800        1 800         115         115

Miscellan. long-term receivables  1 525        9 906          97         633

Long-term accounts receivable         0        1 679           0         107

Total long-term financial assets 28 365       42 480       1 813       2 715



Land                             26 181       15 249       1 673         975

Buildings                         3 496       13 544         223         866

Accumulated real-estate

investments depreciation           (396)      (5 140)        (25)       (329)

Prepayments for real-estate

investments                      23 588       11 655       1 508         745

Total real-estate investments    52 869       35 308       3 379       2 257



Land and buildings                9 909       13 015         633         832

Ground lease                        458          458          29          29

Plant and equipment              84 038       66 854       5 371       4 273

Other equipment and fixtures     25 180       20 683       1 609       1 322

Accumulated depreciation        (46 774)     (50 790)     (2 989)     (3 246)

Fixed assets in-progress and

advance payments on fixed assets    240          170          15          11



Total fixed assets               73 051       50 390       4 669       3 220



Purchased concessions,

patents, licenses, etc.             331          135          21           9

Goodwill                         (1 923)      (5 418)       (123)       (346)

Total intangible assets          (1 592)      (5 283)       (102)       (338)



TOTAL NON-CURRENT ASSETS        152 693      122 895       9 759       7 854



TOTAL ASSETS                  1 147 788      706 213      73 357      45 135



Short-term loans and bonds        9 063        8 087         579         517

Current period long-term

debt repayment                    3 384        4 717         216         301

Total debt obligations           12 447       12 804         796         818



Customer prepayments             17 881       42 820       1 143       2 737



Merchandise credit              267 597      178 152      17 103      11 386



Payables to parent-

and other group companies        10 611          859         678          55

Payables to associated companies 11 148        3 853         712         246

Other short-term payables         2 440            0         156           0

Total other payables             24 199        4 712       1 547         301



Tax liabilities                  21 352       16 344       1 365       1 045



Payables to employees            20 100       18 051       1 285       1 154

Dividends payable                     3          889           0          57

Interest payable                    299            6          19           0

Other accrued expenses              693        1 037          44          66

Total accrued expenses           21 095       19 983       1 348       1 277



Provisions for construction

warranty liability                5 333        3 368         341         215

Due to customers                283 321      104 917      18 107       6 705

Total current provisions        288 654      108 285      18 448       6 921



TOTAL CURRENT LIABILITIES       653 225      383 100      41 749      24 484



Loans, bonds and financial

lease liabilities                16 399        2 604       1 048         166



Merchandise credit                7 092       14 900         453         952

Other long-term payables          2 440            0         156           0

Total other long-term payables    9 532       14 900         609         952



TOTAL NON-CURRENT LIABILITIES    25 931       17 504       1 657       1 119



TOTAL LIABILITIES               679 156      400 604      43 406      25 603



OWNERS' EQUITY

Share capital                    88 500       88 500       5 656       5 656

Share premium                     2 950        2 950         189         189

Mandatory legal reserve           8 850        8 850         566         566

Retained earnings               180 430      101 480      11 532       6 486

Net profit (-loss) for the

financial year                  184 473       98 863      11 790       6 318

Exchange rate differences        (1 380)         174         (88)         11

TOTAL OWNERS' EQUITY            463 823      300 817      29 644      19 226



Minority interest                 4 809        4 792         307         306



TOTAL LIABILITIES AND

OWNERS' EQUITY                1 147 788      706 213      73 357      45 135





Teet Roopalu

Member of Council

+372 6 805 225