Kalev                         FINANCIAL RESULTS                 09/01/2004



12 MONTHS INTERIM REPORT



COMMENTS ON FINANCIAL RESULTS



Group structure



The financial indicators of Kalev Ltd and its subsidiaries

have been consolidated line by line in this 12-month

interim report.



The Kalev Group incorporates the parent company Kalev Ltd

and five subsidiaries.



Subsidiary                           Location   Share as at

                                                30.06.2004

AS Kalev Paide Tootmine              Estonia    100%

AS Kalev Jõhvi Tootmine              Estonia    99.1%

AS  Kalev  Real Estate Company  (AS  Estonia    59.3%

Kalev REC)

OÜ Maiasmokk                         Estonia    81.26%

Kalev Merchant Services Ltd          USA        100%



By concluding the contract on 24 December 2003, Kalev Ltd

acquired 99.1% of the shares of AS Kalev Jõhvi Tootmine

(formerly known as AS Järle). The subsidiary manufactures

flour confectionery products and baked goods.



By concluding the contract on 20 February 2004, Kalev Ltd

acquired 59.52% of the shares of OÜ Maiasmokk. Pursuant to

the contract concluded on 13 May 2004, Kalev Ltd acquired

an additional 21.84% of the shares of OÜ Maiasmokk. The

subsidiary manufactures and sells flour confectionery

products in both - the cafe at Pikk Street in the Old Town

of Tallinn and via other retail trade companies.



Pursuant to the agreement concluded between the

shareholders of AS Kalev Real Estate Company (AS Kalev REC)

on 3 May 2002, Kalev Ltd has the right to acquire all

shares of AS Kalev REC held by AS Skanska EMV (i.e. 40.7%

of the shares of AS Kalev REC) until 15 February 2005 for

either 23.4 million kroons or 27.8 million kroons,

depending on the time of purchase.



AS Kalev and Skanska EMV AS agreed on amending the

shareholders’ agreement so that Kalev Ltd would pay a total

of 25.2 million kroons for the shares to be acquired. The

downpayment amounted to 2.6 million kroons; the rest of the

purchase price will be paid in equal quarterly instalments

between 1 July 2004 and 30 June 2005. An instalment must be

paid on the last day of the quarter at the latest. Kalev

Ltd is obliged to pay interest (EURIBOR + annual 2%) on the

last two instalments (a total of 11.3 million kroons) from

1 November 2004 onwards.



The public limited company Kalev will become the owner of

the shares under the contract after completing the payment

of the full amount. Upon acquiring the above shares, Kalev

Ltd will become the full owner of Kalev REC.





Confectionery market and sales



According to the retail trade survey of the market research

supplier AC Nielsen, Kalev Ltd’s share at market was 46.1%

in June/July of 2004 as regards chocolate and sugar

confectionery products.



In the first half of the financial year 2003/2004, the main

emphasis of Kalev Ltd’s marketing and sales activities lay

in the preparation and successful launch of Christmas

sales. In October, Kalev Ltd launched the biggest Christmas

collection in the company’s history, which contained over

50 items. The company also expanded its product selection

by introducing new products - gingerbread and alcohol-free

mulled wine.



In the first half of the financial year, the company also

launched a new product at the market - a mixture of toffee

and puffed corn called Mõnus Maius, which was declared

Estonia’s Best Confectionery Product 2003 at the

competition held by the Association of Estonian Food

Industry. In addition, the company launched, for export

purposes, Bitter chocolate with new additives, as well as

The Sealords and Mermaid chocolates for sales through the

tax-free system.



In the 3rd quarter of the financial year 2003/2004, the

company focused on the launch and sales of the Valentine’s

Day and Easter product portfolio. New products included the

boxed chocolate Coco, hazelnut candy Maiuspala, Magus Mäng,

Kuldne Kalev and vanilla-flavoured Souffle. In addition,

the company launched, as an extension of the Oops! candy

family, the banana and peppermint-flavoured Oops! candies.

Boxed chocolates Tallinna Raekoda and Koorelikööri were

introduced in the 4th quarter.



In the second half of the financial year, Kalev Ltd

enhanced sales in the flour confectionery sector by

introducing a new series of biscuits, and renewing the

packaging of several mold biscuits that used to form a part

of the AS Kalev Jõhvi Tootmine product portfolio. According

to the retail trade survey by AC Nielsen Eesti, Kalev Ltd’s

market share in the biscuits sector was 19.4% in June/July

2004.



In the first half of the financial year Kalev Ltd continued

the production of other bakery products of AS Kalev Jõhvi

Tootmine and sales of these in the local market, and

started modernising bread and white bread packaging.



In addition to milk-based confectionery products, AS Kalev

Paide Tootmine also enhanced in the given period the

production of dairy products - mainly butter, skimmed milk and

milk powder, as well as high-temperature pasteurized milk.



The total sales of Kalev Ltd’s confectionery products

amounted to nearly 7,300 tonnes in the financial year

2003/2004 - an increase of 9%, compared to the same period

last year. The increase in total sales was mostly

conditioned by the addition of cookies and baked goods to

the company's product portfolio at the beginning of 2004.







Domestic market constituted 76% of the total sales of

confectionery products, and 24% of the sales was exported.

In the given period, Latvia and, until 1 May 2004, Ukraine

remained the company’s main export countries. After

Estonia’s accession to the European Union, Kalev Ltd ended

the export to the Ukraine, since the company’s products are

no longer competitive in the country due to their price. In

addition to the above countries, Kalev Ltd also exported

its products to Russia, the Scandinavian countries and the

United States.



Economic activities and results



The consolidated net sales of Kalev Ltd in the financial

year 2003/2004 totalled 564.9 million kroons (36.1 million

euros), which exceeds the net sales of the last financial

year by 62% (2002/2003: 347.7 million kroons - i.e. 22.2

million euros).





The consolidated net profit of the company in the given

financial year amounted to 17.2 million kroons (1.1 million

euros) - 48% less than in the last financial year

(2002/2003: 32.5 million kroons - i.e. 2.1 million euros).



Increase in consolidated net sales was facilitated by the

incorporation of the new subsidiary - AS Kalev Jõhvi

Tootmine (formerly known as AS Järle) - in the Kalev Group

at the beginning of 2004, as well as the sales growth of

two subsidiaries - AS Kalev Paide Tootmine and AS Kalev

Real Estate Company (AS Kalev REC) - in the given period.



The increase in the consolidated net profit of Kalev Ltd in

the financial year 2003/2004, compared to the same period

last year, was conditioned by the revenue earned from other

operating activities. The company’s main activities - i.e.

production and sales of confectionery products - have

stabilised after the relocation of the company to the new

plant building to Põrguvälja in the 1st quarter of the

financial year, and after the initial difficulties upon

launch of production were overcome. The company focuses on

and continues to strive towards increasing profitability of

the main activities.



At the same time, the price of Kalev Ltd’s main raw

material - sugar - increases by approximately 9 kroons per

kilogram after Estonia’s accession to the European Union.

As a result, the company will incur annual additional

expenses in the estimated amount of 37 million kroons (2.4

million euros).



Kalev Ltd’s relocation to the new plant building also had

an effect on the company’s administrative and general

expenses in the given period. General and administrative

expenses include single costs on relocation and

(dis)assembly of the production equipment of the chocolate

plant as well as launch of production in the total amount

of 15.2 million kroons (0.97 million euros). The expenses

in the amount of 2.5 million kroons (160 thousand euros),

which incurred upon the relocation of the caramel plant,

were added to these costs in the last quarter of the

financial year.



The 16% increase in marketing expenses in the given period

was mostly conditioned by the incorporation of the new

subsidiary - AS Kalev Jõhvi Tootmine - in the Kalev Group.



Other expenses of Kalev Ltd include 10.06 million kroons

(643 thousand euros) of loss from the disposal of

investment property.



In  the  financial  year 2003/2004 the  average  number  of

employees  in Kalev Group was 610 people - an 11% increase,

compared  to  the same period last year. This increase  was

mostly conditioned by the incorporation of the staff of  AS

Kalev Jõhvi Tootmine in the group.





BALANCE SHEET (unaudited, consolidated)

in kroons                           



ASSETS                       30.06.04     30.06.03

                            Consolidated  Consolidated

                                 

CURRENT ASSETS                  EEK          EEK

CASH AND BANK                 2 780 382    8 591 080

CUSTOMER RECEIVABLES        206 221 733   90 024 044

PREPAID EXPENSES              4 826 939    5 308 235

INVENTORIES                 102 165 282   40 726 937

TOTAL CURRENT ASSETS        315 994 336  144 650 296

                                                    

NON-CURRENT ASSETS                                  

MISCELLANEOUS LONG-TERM         330 180      330 180

RECEIVABLES

TANGIBLE ASSETS             351 168 558  255 038 885

REAL ESTATE INVESTMENTS      40 962 761   75 573 095

INTANGIBLE ASSETS            -9 017 055      217 715

TOTAL NON-CURRENT ASSETS    383 444 445  331 159 875

                                                    

TOTAL ASSETS                699 438 780  475 810 171

                                                    

LIABILITIES AND OWNER’                              

EQUITY

                                                    

LIABILITIES                                         

CURRENT LIABILITIES         109 628 402   27 346 235

PREPAYMENTS FROM CUSTOMERS    3 416 983      497 042

SUPPLIER PAYABLES           161 155 063   76 162 122

TAXES PAYABLE                 2 329 803    4 537 792

OTHER PAYABLES               41 606 668   10 275 440

TOTAL CURRENT LIABILITIES   318 136 918  118 818 631

                                                    

NON-CURRENT LIABILITIES     123 323 114  116 381 525

                                                 

                                                    

TOTAL NON-CURRENT           123 323 114  116 381 525

LIABILITIES

                                                    

MINORITY INTEREST               184 070                                 

OWNER’S EQUITY                                      

SHARE CAPITAL                78 775 000   78 775 000

REVALUATION RESERVE          17 159 388   17 159 388

STATUTORY LEGAL RESERVE       1 537 837    1 537 837

RETAINED EARNINGS           143 137 191  110 675 117

NET PROFIT FOR THE           17 184 663   32 462 673

FINANCIAL YEAR

TOTAL OWNER’S EQUITY        257 794 678  240 610 015

                                                    

TOTAL LIABILITIES           699 438 780  475 810 171









BALANCE SHEET (unaudited, consolidated)

in euros                            



ASSETS                       30.06.04     30.06.03

                            Consolidated  Consolidated

                                 

CURRENT ASSETS                  EUR          EUR

CASH AND BANK                   177 698      549 069

CUSTOMER RECEIVABLES         13 179 937    5 753 570

PREPAID EXPENSES                308 497      339 257

INVENTORIES                   6 529 535    2 602 919

TOTAL CURRENT ASSETS         20 195 667    9 244 815

                                                    

NON-CURRENT ASSETS                                  

MISCELLANEOUS LONG-TERM          21 102       21 102

RECEIVABLES

TANGIBLE ASSETS              22 443 704   16 299 914

REAL ESTATE INVESTMENTS       2 617 991    4 829 989

INTANGIBLE ASSETS              -576 293       13 914

TOTAL NON-CURRENT ASSETS     24 506 504   21 164 919

                                                    

TOTAL ASSETS                 44 702 171   30 409 734

                                                    

LIABILITIES AND OWNER’                              

EQUITY

                                                    

LIABILITIES                                         

CURRENT LIABILITIES           7 006 514    1 747 738

PREPAYMENTS FROM CUSTOMERS      218 384       31 767

SUPPLIER PAYABLES            10 299 659    4 867 634

TAXES PAYABLE                   148 901      290 017

OTHER PAYABLES                2 659 144      656 719

TOTAL CURRENT LIABILITIES    20 332 603    7 593 875

                                                    

NON-CURRENT LIABILITIES       7 881 763    7 438 116

                                                    

TOTAL NON-CURRENT             7 881 763    7 438 116

LIABILITIES

                                                    

MINORITY INTEREST                11 764             

OWNER’S EQUITY                                      

SHARE CAPITAL                 5 034 627    5 034 627

REVALUATION RESERVE           1 096 682    1 096 682

STATUTORY LEGAL RESERVE          98 285       98 285

RETAINED EARNINGS             9 148 149    7 073 411

                                                 

NET PROFIT FOR THE            1 098 297    2 074 738

FINANCIAL YEAR

TOTAL OWNER’S EQUITY         16 476 041   15 377 743

                                                    

TOTAL LIABILITIES            44 702 171   30 409 734







INCOME STATEMENT (unaudited, consolidated)

in kroons

                         01.07.03 -     01.07.02 -

                          30.06.04       30.06.03

                        Consolidated   Consolidated

                            EEK            EEK

NET SALES                 564 857 926    347 665 766

                                                    

COST OF GOODS SOLD        422 481 837    240 414 863

                                                    

GROSS PROFIT              142 376 089    107 250 903

                                                    

MARKETING EXPENSES         71 422 289     61 017 665

ADMINISTRATIVE AND         68 942 074     45 426 410

GENERAL EXPENSES

OTHER OPERATING INCOME     47 075 080     49 668 441

OTHER OPERATING            19 226 567      8 466 942

EXPENSES

                                                    

OPERATING PROFIT           29 860 239     42 008 327

                                                    

FINANCIAL INCOME            2 166 626      3 355 717

FINANCIAL EXPENSES         14 865 495     12 901 371

                                                    

PROFIT BEFORE INCOME       17 161 371     32 462 673

TAX

                                                    

MINORITY INTEREST              23 292               

                                                    

NET PROFIT                 17 184 663     32 462 673

                                                    

EARNINGS PER SHARE               2,18           4,12







INCOME STATEMENT (unaudited, consolidated)

in euros                                   



                         01.07.03 -     01.07.02 -

                          30.06.04       30.06.03

                        Consolidated   Consolidated

                            EUR            EUR



NET SALES                  36 100 909    22 219  835

                                                    

COST OF GOODS SOLD         27 001 442     15 365 271

                                                    

GROSS PROFIT                9 099 467      6 854 564

                                                    

MARKETING EXPENSES          4 564 705      3 899 730

ADMINISTRATIVE AND          4 406 190      2 903 269

GENERAL EXPENSES

OTHER OPERATING INCOME      3 008 638      3 174 384

OTHER OPERATING             1 228 798        541 135

EXPENSES

                                                    

OPERATING PROFIT            1 908 412      2 684 815

                                                    

FINANCIAL INCOME              138 472        214 469

FINANCIAL EXPENSES            950 076        824 546

                                                    

PROFIT BEFORE INCOME        1 096 809      2 074 738

TAX

                                                    

MINORITY INTEREST               1 489               

                                                    

NET PROFIT                  1 098 297      2 074 738

                                                    

EARNINGS PER SHARE               0,14           0,26





Ruth Roht

PR manager

6 077 858