Kalev                         FINANCIAL RESULTS                 03/08/2002



COMMENTARY TO AUDITED RESULTS, 2001



Market and Sales



According to the study company ACNielsen in 2001 the

market share of Kalev Ltd composed 45 per cent of

confectioneries’ market in Estonia. Local market was

in the reported year the principal market, where company

continued  to preserve its strong leading position.



The total sales in 2001 amounted to 7319.4 tons, thus

constituting 13 per cent less than in the previous year.

Decrease of total sales was connected with the decrease

of export to the eastern markets.



60 per cent of total sales in 2001 were chocolate

confectioneries: candy, bars and boxes. In respect

of sales of sugar confectioneries Draakon chewing candy,

toffee and caramel candy progressed well. Unexpectedly

good market success showed a nostalgic product Kamatahvel,

which was introduced in August.



75.7 per cent of the total sales in 2001 were sold in the

local market and 24.3 per cent elsewhere. The biggest export

market in the reported year was Latvia, which share was

37.1 per cent of the export sales. Second important export

market for Kalev Ltd. was the Ukraine, where the sales in 2001

increased almost by a half in comparison with the previous

year. In addition to the above mentioned countries Kalev Ltd

exported its’ goods into Lithuania, Russia and to the

Scandinavian countries. Since summer the company started

to market its marzipan to the United States of America.



According to the export development strategy of Kalev Ltd

the company began in 2001 searching for new potential

co-operation partners and target markets. Thereby,

co-operation with Sweden, Czechoslovakia and Benelux

countries was initiated.



The main export articles of Kalev Ltd in 2001 were chewing

candy, toffee and chewing gum.





Economic Activities and Results



Net turnover of Kalev Ltd in 2001 was 317.5 million EEK

(20.3 million EUR), which is decreased by 22.1 million EEK

(1.4 million EUR), i.e. by 6.5 per cent, in comparison

with 2000. The decrease of the enterprise turnover is

mostly caused by the the decrease of export turnover on

eastern markets. Turnover of confectioneries of Kalev Ltd

on the local market was 249.3 million EEK (15.9 million EUR),

increasing by four per cent in comparison with the previous

year.



The net profit of Kalev Ltd in 2001 was 29.9 million EEK

(1.9 million EUR), increasing by 9.6 million EEK (613 600 EUR),

i.e. 47.3 per cent, in comparison with the previous year.



In comparison with the previous year other operating and

financial costs of the company were reduced in 2001.

Relatively big reduction of other operating costs was due

to reduction of obligations’ reserve. Also, differently from

the previous year, other operating costs of the inspected

year do not include the costs related to subsidiaries.



At the same time, the marketing costs of the company have

increased to some extent due to restructuring of the sales

and logistics department and transition to the Mobile Salesman Positions. Some

increase in general administrative costs

was caused by adjustment to the European requirements.



Gross profitability increased in 2001 by almost 5 per cent

in comparison with 2000. The increase of gross profitability

has been caused by the transition to contemporary

management measures. This has established a sound base

for more efficient management of resources than previously

and guaranteed stable profit for Kalev.



According to the data from the end of year 2001, in AS Kalev

there were employees in a principal job 533, the average

number of employees was 542. The average monthly salary of

the employees in the year 2001 was 6 273 kroons (401 euros).

The chairman of the management board and members of the

supervisory board were paid annual remuneration in total

497 714 kroons (31 810 euros) in 2001.





Investments



The most important investment of Kalev Ltd in 2001 was

related to establishing the second and third link of

the shop-café network of the company Põlva Kalevite

Kodu and Valga Kalevite Kodu. The company invested

2.9 million EEK (185 300 EUR) into the above mentioned

project. The investment into Valga Kalevite Kodu will

continue in 2002. Kalev Ltd has planned in the future

to establish similar  shop-cafés in all bigger centres

of Estonia.



Investments into production were targeted on improving of

the quality and increasing of the efficiency. The amount

of investments into production was 0.7 million EEK

(44 700 EUR).



1.6 million EEK (102 300 EUR) investment was caused by

the renovation of a former mechanical premises in the

second half of 2001. In December the company turned the

premises for marketing purposes into the Kalevi Jõulumaailm

(Kalev Christmas World), which was visited by more

than 23 000 people.



In 2001 Kalev Ltd procured real estate on the address

Pärnu Road 139E (2.2 million EEK – 140 600 EUR) and

Kohila 6/8 (6.6 million EEK – 421 800 EUR) in order to

set up a new factory building.



According to the decision of the Council in the year 2002

it is planned to establish in co-operation with financial

partners a subsidiary, dealing with real estate

administration and development, in order to build a new

factory building and manage the free rental premises.





Main Directions for 2002



In 2002 Kalev Ltd continues its’ operations according

to the established strategic development plans and set

objectives. The main objective of the company is to ensure 

sustainability and elaborated long-term development,

not rapid rise in profits.



For Kalev Ltd. the priority in the year under discussion

is export, first of all  re-orientation to the new target

markets and strengthening its position on current markets.



In marketing the company has taken a direction towards

improvement existing and elaboration of new products. Thereby

it is planned to increase substantially the share of

so-called anniversary products in company’s portfolio.



Regarding sales the transition to direct distribution and

expansion of Kalevite Kodu   network of shop-cafes to other

county centres will continue. It is planned to implement new 

contemporary IT-solutions, related to sales management.



In production the company hopes to increase the efficiency

and optimise the use of existing resources. One of the

priorities for the company is to get crediting and recognition, 

proceeding from the Food Act, the precondition of which is in 

compliance with the European requirements to the production

premises.





Ruth Roht

PR Manager

+372 6 283 858