AS KALEV

ANNOUNCEMENT

 

COMMENTARY TO THE ARTICLES PUBLISHED IN PRINTING MEDIA		

 

Overview of the financial situation of subsidiaries and affiliated 

companies

 

In the second half of the year, the operating result of affiliated 

company Bogatõr and subsidiary Tsharodeika was nearly a break-even 

while the production output and sales have gradually increased. The 

subsidiary LCU is still operating in loss. The change in the U.S. 

dollar exchange rate within a year has brought the company a 

considerable foreign exchange loss, which is also the main factor 

influencing the consolidated financial results of Kalev.

 

Accounts receivables against the subsidiaries and affiliated 

companies amount to 81.5 million EEK, including 53.1 million EEK of 

accounts receivables overdue and 28.4 million EEK of accounts 

receivables outstanding. The provisions for receivables amount up 

to 29.9 million EEK and net receivables to 51.5 million EEK. The 

receivables do not take into account the expiry date, but the real 

asset value of subsidiaries and affiliated companies. Taking into 

account the recommendations of the auditors, the provision of the 

receivables of subsidiaries and affiliated companies are in 

accordance with the International Accounting Standards. The extent 

of final provisions for the fiscal year of 1999 is not decided yet. 

In accordance with recommendations of the auditors, the provisions 

for receivables with the subsidiaries and affiliated companies 

account for 12.5 million EEK for the six months this year. A rapid 

sale of subsidiaries and affiliated companies would not be 

reasonable at the given economic situation. The Management Board of 

AS Kalev is ready to reconsider the sale of the companies. 

 

Commentary to the financial situation of the parent company

 

Due to seasonal characteristic of sales, the need for financial 

resources of AS Kalev is different within the year. The most 

intense financial period  is in November and December, as the 

increase in sales volume increases the need for working capital and 

there will be a growth in accounts receivables. 

 

In the beginning of the year the sales volumes are substantially 

lower than during the last months of the year, at the same time 

outstanding receivables from the Christmas sales will be collected. 

Therefore, accounts receivables decreases substantially and the 

financial status of the company improves. 

 

During the previous years, the summer-fall period of 1998 was a 

complicated one for AS Kalev, as the company was in need of 

inventory, human resources, etc., which increased expenses and 

demand for working capital. Today the company has rescheduled 

itself into a smaller output and the restructuring of the company, 

which continues during the year 2000, has started giving results.

 

In 1997 and 1998 AS Kalev invested into Bogatõr factory in Russia 

through Tsharodeika and Kim Amsterdam Ltd. subsidiaries, into the 

working capital of their and Ukrainian Logistics Centre and into 

the sales working capital of the Russian and Ukrainian parent 

company. The receivables that AS Kalev provisioned in 1998 and 1999 

have occurred during the economic crisis in Russia and they include 

mostly the above-mentioned investments. Out of the 1998 

receivables, an 11 million EEK receivable against AS Kanpol is 

still outstanding. There have occurred no further receivables from 

the core activity in 1999 and the result from core business is 

positive. During the six months in 1999, the profit before 

provisions is 5.1 million EEK. During the end of the year, most of 

profits will be earned and the company has fulfilled its 

liabilities to the banks. There are no foreseen financial 

difficulties also for the year 2000.

 

Commentary to the price of raw materials

 

In November 26, 1997, AS Kalev signed a sugar procurement in order 

to ensure the required quantity of raw materials, based on the 

sales forecast of 1998. The price was fixed according to the world 

market price as well as quantity. The consumption of the raw 

material was evidently smaller than forecasted due to the drastic 

decrease in export capacity in 1998, at the same time the company 

was tied with the contract until the quantities were bought out at 

the fixed prices. So the company could not react to the decrease in 

the price of sugar in the world market. AS Kalev will start using 

the new sugar, purchased with lower price, in January-February, 

2000. 

 

Investments

 

The priority in the company's year 2000 investment plan is on 

marketing. The production facility investment plan is under 

correction. The 200 million EEK quoted by the printing media does 

not show the company's actual investment necessity, which according 

to the estimates is smaller in reality.

 

 

Üllar Udras

Board member

 

 

Tiina Altmets

Head of Information

+372 62 83 711