Merko Ehitus                  FINANCIAL RESULTS                 08/06/2004



FINANCIAL RESULTS 6M 2004



COMMENTARY TO 6M 2004 FINANCIAL RESULTS



Merko Ehitus group 6M 2004 consolidated and unaudited net sales amounted

to EEK 1 498,6 million (EUR 95,8 million) and net profit was EEK 109,8

million (EUR 7,0 million). Profit was earned from general business activities

with the exception of a nonrecurring profit of 11.7 million kroons (0.7

million euros), which was gained in first quarter from the disposal of a

project managing unit of Tallinna Teede AS. Compared to the same period of

previous year net sales increased by 38,5% and net profit 31,1% (without

extraordinary profit).



Companies of the Group 6M 2004 net sales and consolidated net sales

(sales outside the Group) were (in thousand kroons and euros):



                                                   Sales            including

                                                                 consolidated

                                                                    net sales



                                            EEK      EUR        EEK       EUR

Estonian companies

   Construction

   AS Merko Ehitus                    1 052 600   67 273   1 052 353   67 257

   AS Gustaf (100% partnership)          31 431    2 009      30 757    1 966

   OÜ Gustaf Tallinn (80% partnership)   30 214    1 931      29 648    1 895

   AS Merko Tartu (66% partnership)      36 009    2 301      25 355    1 620

   Tallinna Teede AS (100% partnership)  59 500    3 803      52 921    3 382

   Construction

   AS Normanni Linnagrupp(50%partnership)64 347    4 113           -        -

   Production of concrete

   AS Tartu Maja Betoontooted

   (25% partnership)                     60 204    3 848           -        -

   Telecommunication networks

   AS Telegrupp (45% partnership)        35 621    2 277           -        -

Latvian companies

   Construction

   SIA Merks (100% partnership)         206 763   13 215     206 763   13 215

Lithuanian companies

   Construction

   UAB Merko Statyba (100% partnership) 100 839    6 445     100 839    6 445





The ratios and calculation methods characterizing the operating activities of

the Group were as follows:



                                          6M 2004       6M 2003



Net profit margin                          6,5 % *       6,9 %

Operating profit margin                    7,3 % *       8,0 %

Return on equity (per year)               43,9 %        45,7 %

Return on assets (per year)               19,0 %        18,8 %

Current ratio                              1,6           1,4

Equity-to-assets ratio                    46,2 %        40,2 %



* without extraordinary profit



Net profit margin: Net profit / Sales

Operating profit margin: Operating profit / Sales

Return on equity: Net profit x 2 / Average equity during the period

Return on assets: Net profit x 2 / Average assets during the period

Current ratio: Current assets / Current liabilities

Equity-to-assets ratio: Owners equity / Total assets



Year 2004 6M interim consolidated and unaudited income statement and balance

sheet are compiled in accordance with the principles of the International

Financial Reporting Standards (IFRS).





INCOME STATEMENT II quarter 2004

consolidated, unaudited in thousand EEK and EUR



                                           EEK                   EUR

                                  IIq 2004    IIq 2003   IIq 2004   IIq 2003



Sales                              728 475     614 697     46 558     39 286

Cost of sales                     (644 674)   (539 685)   (41 202)   (34 492)



Gross profit                        83 801      75 012      5 356      4 794



Marketing expenses                  (4 384)     (4 099)      (280)      (262)

Administrative expenses            (20 714)    (16 632)    (1 324)    (1 063)

Other operating income                 328       1 110         21         71

Other operating expenses              (890)        (37)       (57)        (2)



Operating profit                    58 141      55 354      3 716      3 538



Financial income and expenses from

stocks of associate companies        3 158       1 690        202        108

Financial income and expenses from

other long-term financial investments   50         234          3         15

Interest expense                      (425)       (543)       (27)       (35)

Foreign exchange gain                   35        (962)         2        (61)

Other financial income and expense  (2 093)     (1 614)      (134)      (103)

Total financial income and expenses    725      (1 195)        46        (76)



Profit before taxes                 58 866      54 159      3 762      3 461



Income tax                          (7 479)     (6 530)      (478)      (417)



Net profit for fiscal year          51 387      47 629      3 284      3 044



incl. minority interest               (809)       (952)       (52)       (61)



Net profit for the group            50 578      46 677      3 233      2 983



Net profit per share (basic

and diluted, in EEK and EUR)          5,72        5,27       0,37       0,34





INCOME STATEMENT 6M 2004

consolidated, unaudited in thousand EEK and EUR



                                           EEK                   EUR

                                   6M 2004     6M 2003    6M 2004    6M 2003



Sales                            1 498 636   1 082 075     95 780     69 157

Cost of sales                   (1 344 732)   (960 336)   (85 944)   (61 377)



Gross profit                       153 904     121 739      9 836      7 781



Marketing expenses                  (7 770)     (7 664)      (497)      (490)

Administrative expenses            (36 926)    (31 743)    (2 360)    (2 029)

Other operating income              12 345       4 824        789        308

Other operating expenses              (997)       (848)       (64)       (54)



Operating profit                   120 556      86 308      7 705      5 516



Financial income and expenses

from stocks of subsidiaries           (299)          1        (19)         0

Financial income and expenses from

stocks of associate companies        3 239       2 403        207        154

Financial income and expenses from

other long-term financial investments   50       1 014          3         65

Interest expense                      (869)       (688)       (56)       (44)

Foreign exchange gain                  615      (2 398)        39       (153)

Other financial income and expense  (3 723)     (4 003)      (238)      (256)

Total financial income and expenses   (987)     (3 671)       (63)      (235)



Profit before taxes                119 569      82 637      7 642      5 281



Income tax                          (8 454)     (6 530)      (540)      (417)



Net profit for fiscal year         111 115      76 107      7 102      4 864



incl. minority interest             (1 316)     (1 265)       (84)       (81)



Net profit for the group           109 799      74 842      7 017      4 783



Net profit per share (basic



and diluted, in EEK and EUR)         12,41        8,46       0,79       0,54





BALANCE SHEET AS OF 30.06.2004

consolidated, unaudited in thousand EEK and EUR



                                       EEK                      EUR

                             30.06.2004   31.12.2003  30.06.2004  31.12.2003

ASSETS



Cash and cash equivalents       289 308      240 152      18 490      15 349

Marketable securities            29 843       36 096       1 907       2 307

Accounts receivable             265 327      408 296      16 957      26 095

Miscellaneous receivables        82 035       27 385       5 243       1 750

Accrued income                    1 426          673          91          43

Prepaid expenses                 11 070       21 180         708       1 354

   incl. income tax                  19        1 746           1         112

Inventories                     261 235      255 263      16 696      16 314



TOTAL CURRENT ASSETS            940 244      989 045      60 093      63 211



Shares in associate companies    26 654       25 040       1 704       1 600

Other long-term fin. investments 22 078        3 325       1 411         213

Deferred income tax liability     4 124        4 124         264         264

Real estate investments          68 319       52 869       4 366       3 379

Tangible assets                 100 862       73 051       6 446       4 669

Intangible assets                  (991)      (1 592)        (63)       (102)



TOTAL NON-CURRENT ASSETS        221 046      156 817      14 127      10 022



TOTAL ASSETS                  1 161 290    1 145 862      74 220      73 234



Debt obligations                  3 365       12 447         215         796

Customer prepayments             17 018       17 881       1 088       1 143

Merchandise credit              194 654      267 597      12 441      17 103

Miscellaneous liabilities        23 154       24 199       1 480       1 547

Tax liabilities                  17 654       21 352       1 128       1 365

   incl. income tax                 466        5 124          30         327

Accrued expenses                 36 936       21 095       2 361       1 348

Current provisions              304 247      286 728      19 445      18 325



TOTAL CURRENT LIABILITIES       597 028      651 299      38 157      41 626



Long-term payables               14 717       16 399         941       1 048

Other long-term payables          7 731        9 532         494         609



TOTAL NON-CURRENT LIABILITIES    22 448       25 931       1 435       1 657



TOTAL LIABILITIES               619 476      677 230      39 592      43 283



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               327 733      180 430      20 946      11 532

Net profit for fiscal year      109 799      184 473       7 017      11 790

Exchange rate differences          (947)      (1 380)        (61)        (88)

TOTAL OWNERS' EQUITY            536 885      463 823      34 313      29 644



Minority interest                 4 929        4 809         315         307



TOTAL LIABILITIES

AND OWNERS' EQUITY            1 161 290    1 145 862      74 220      73 234





Alar Lagus

Member of Board

+372 6 805 109