AS RAKVERE LIHAKOMBINAAT

ANNOUNCEMENT

31.03.99

 

MANAGEMENT REPORT 1998

 

AS RAKVERE LIHAKOMBINAAT

GENERAL INFORMATION

 

Share capital as of 31.12.1998:  377 217 000.- (three hundred seventy 

seven million two hundred seventeen thousand) Estonian kroons.

As of 31.12.1998, the company employed 748 workers.

 

SUBSIDIARIES

AS Rigas Miesnieks, shareholding 87.95%

AS EKSEKO, shareholding 96.38%

AS Linnulihatooted, shareholding 76%

AS Rigas Miesnieks Trading, shareholding 100%

AS Rakvers Mesos Produktai Vilnius, shareholding 100%

 

SHAREHOLDERS (as of 31.12.1998)

 

Holding above 2%:

Shareholder		number of shares	holding %

 

Hüvitusfond		 1774092		 4.6766

KH Ruokatalo Oyj	30148402		79.9232

 

Supervisory and Management Board members holding shares in RLK:

Shareholder		number of shares	holding %

 

Uno Vallner	           1 000		 0.0026%

 

MANAGEMENT

 

SUPERVISORY BOARD (until 12.08.1998)

Toomas Kõuhkna, Chairman of the Supervisory Board 

Heino Priimägi, Member of the Supervisory Board

Tiit Kõuhkna, Member of the Supervisory Board

Ants Laos, Member of the Supervisory Board

Rein Soidla, Member of the Supervisory Board

 

SUPERVISORY BOARD (as of 12.08.1998)

Simo Palokangas, Chairman of the Supervisory Board

Jukka Ahonen, Member of the Supervisory Board

Matti Perkonoja, Member of the Supervisory Board

Tiit Kõuhkna, Member of the Supervisory Board

Toomas Kõuhkna, Member of the Supervisory Board

 

MANAGEMENT BOARD

 

Peeter Maspanov, Chairman of the Management Board

Rita Ukkivi, Member of the Management Board

Uno Vallner, Member of the Management Board

 

MANAGEMENT

 

Peeter Maspanov, Managing Director

Uno Vallner, Chief Engineer

Valentin Rätsep, Production Director

Teet Soorm, Financial Director

Jaan Kaljula, Personnel Director

Andrus Sonts, Commercial Director

Rita Ukkivi, Chief Accountant

Indrek Lekko, Purchase Director

Raivo Pae, Chief Veterinarian

 

 

 

1998 FINANCIAL RESULTS

 

UNCONSOLIDATED

 

The 1998 financial year was challenging, yet interesting, for AS 

Rakvere Lihakombinaat. The company’s net turnover totaled 726.4 million 

EEK. Compared to 1997, the turnover increased by 54.1 million EEK, or 

8%. Increase in turnover occurred due to increased sales on both domestic 

and export markets (during H1), and to lesser extent also due to increase 

in prices.

 

CONSOLIDATED

 

The consolidated net sales in 1998 amounted to 920.5 million EEK 

(compared to 1997, consolidated turnover increased by 90.8 million 

EEK, or 10.9%), and consolidated net loss 96.0 million EEK. The RLK 

group had a loss mainly due to the financial crisis in Russia, which 

began in summer 1998, and had a significant impact on the main 

export partner of RLK, Ukraine. Compared with the beginning of the 

year, the company’s sales volumes were substantially lower. Also, the 

largest subsidiary of RLK, Rigas Miesnieks, lost its export markets in 

Russia. Proceeding from the above, in accordance with the 

auditor’s (PriceWaterhouseCoopers) proposal, and proceeding from the 

principle of conservatism and probability of negative developments in 

the future period cash flows of Rigas Miesnieks, the goodwill of Rigas 

Miesnieks in the amount of 58.3 million EEK was written off from the 

1998 balance sheet of RLK. Also, the loss of RLK group in 1998 

increased due to Rigas Miesnieks’ operating loss (43.2 million EEK).

 

Loss, parent company 	 		 6.9 million EEK

AS Ekseko, profit		         3.3 million EEK 

Rigas Miesnieks Trading, loss	         1.9 million EEK

AS Rigas Miesnieks, loss		36.7 million EEK

AS Linnulihatooted, profit		 0.5 million EEK

AS Rakveres Mesos Produktai

Vilnius, loss				 0.2 million EEK

Write-off of Rigas Miesnieks positive

goodwill				58.3 million EEK

Transfer of negative goodwill of Ekseko

to the revenue account 			 4.2 million EEK

Total consolidated loss	     		96.0 million EEK

 

 

 

INVESTMENTS

 

INVESTMENTS IN NON-CURRENT ASSETS

 

In 1998, the total volume of investments in non-current assets amounted 

to 27.9 million EEK. The main share of this amount (11.8 million EEK) 

was spent to renew and improve the logistics; 7.6 million EEK was 

invested to improve technology and increase production capacity. Rest 

of the investments were made in improvement of the company’s sales 

system and information technology, and to secure the reliability of 

continuous freezing system. 

 

PRODUCTION AND PRODUCT DEVELOPMENT

 

The largest product group of Rakvere Lihakombinaat are frankfurters and 

sausages. In 1998, Rakvere Lihakombinaat expanded the selection of pork 

products, starting to market them to stores and catering companies.  

The main new products included meat balls, croquets, dumplings. The 

other products marketed included also the line of cheap "Valla" 

products.

 

MARKETING

 

Compared to 1997, the quantitative sales volume of the products of AS 

Rakvere Lihakombinaat increased in 1998 by 3% or 538 tons. The greatest 

increase occurred in the sales of frankfurters, culinary products and 

sausages. The average daily sales volume was 75.9 tons.

 

Total exports accounted for 24.6% (179.2 million EEK) of turnover. 

Compared to 1997, the exports increased in 1998 by 82.5 

million EEK, or 46%. In relation with opening of new export markets in 

Ukraine in the H1 1998, the volume of exports increased 

significantly. Decline of exports began in August 1998, due to the 

financial crisis in Russia and other CIS states. The main export 

partners of AS Rakvere Lihakombinaat in 1997 included Latvia, Ukraine 

and Lithuania.

 

Total export volumes by countries, expressed in money: 

Latvia 44.2%, Ukraine 33.4%, Lithuania 9.8%, Russia 7.3%; 

Exports of goods produced by countries: 

Ukraine 64.4%, Latvia 19.1%, Russia 13.9%, other countries 2.6%.

 

In 1999, AS Rakvere Lihakombinaat intends to continue to focus on 

achieving the pre-crisis export volumes, and moving to the new target 

markets. On the Estonian market, the company will focus on 

securing its positions, mainly through development of product selection, 

service, and increase of the product quality.

 

According to EMOR, the market share of AS Rakvere Lihakombinaat in 

Estonia in 1998 was 38.5%.

 

 

Peeter Maspanov

Chairman of the Management Board

+372 322 9211