BALTIKA

COMMENTARY TO FINANCIAL RESULTS



COMMENTARY TO THE FINANCIAL RESULTS, 9M 2000



The 9m 2000 consolidated reports reflect the results of the following 

subsidiaries and associated companies:



                              30.09.2000            30.09.1999

                                holding %             holding %

AS Baltika (parent)

AS Virulane (Estonia)            55.15%                 55.15%

AS Baltman (Estonia)               100%                   100%

SIA Baltman (Latvia)               100%                   100%

Baltmano Prekiba (Lithuania)       100%                    90%

Baltika Sweden (Sweden)            100%                   100%

AS Elina STC (Estonia)            37.5%                  37.5%

Baltika Poland (Poland)            100%                     -

Baltinia OY (Finland)              100%                     -



AS Elina STC is treated as subsidiary since AS Baltika controls the 

financial activities of AS Elina STC. On 01.03.2000 AS Baltika bought 

an additional 10% holding in Baltmano Prekiba, thus increasing its 

holding to 100%.



AS Baltika 9m 2000 consolidated and unaudited net sales amounted to 

EEK 260.9 mln, providing EEK 48.4 mln (23%) annual growth. Sales of 

manufactured output amounted to EEK 195.3 mln (EEK 44.1 mln or 29% 

more than in 9m 1999) and turnover of subcontracting works EEK 63.8 

mln (EEK 7.2 mln or 13% more than in 9m 1999).



Exports accounted for 66% (EEK 173.5 mln) of net sales, providing EEK 

27.2 mln annual growth; manufactured output accounted for 7% of net 

sales.



Sales by markets:

(EEK mln)

		      Q3 2000  9m 2000	Q3 1999   9m 1999

Estonia	  		32.5	  85.6	  18.6	    64.1

Latvia, Lithuania	20.8	  53.7	  13.4	    46.2

Scandinavia		30.8	  70.2	  29.5	    73.2

Russia, Ukraine		11.8	  21.1	   3.1	     7.1

Great Britain	         8.7	  20.7	   4.9	    15.0

Germany 		 0.5	   3.7	   1.3	     1.7

Poland	 		 0.8	   2.6	   0.3	     0.3

USA		 	 1.5	   1.5	   -		     -





General improvement in the economic environment have boosted the 

sales in most of the markets. 29% increase in sale s of manufactured 

output is also due to opening of new stores and expansion of sales 

premises. In 9m 2000 the company opened altogether 3 of its own 

stores (2 in Poland, 1 in Sweden), and 4 "shop-in-shop" type stores 

in Poland and 5 franchises (2 in Latvia, 3 in Russia).



AS Baltika 9m 2000 consolidated and unaudited net profit was EEK 

13.2 mln (EEK 12.1 mln y-o-y growth), incl. group's profit EEK 10.7

mln (EEK 10.4 mln y-o-y growth).



Also the expenses made for purchase of raw materials and goods 

increased due to higher sales of manufactured output. The 

aforementioned expense articles, however, are not comparable to the 

last year's results, since the manufactured output was then sold also 

from the stock and the related expenses were reflected on changes in 

inventories account on the income statement.



Compared with 9 m 1999 the operating expenses grew by EEK 12.3 mln or 

37%. The major factor behind the increased expenses is development of 

sales and management during the whole period, due to which the rental 

expenses (opening of new stores), advertising and marketing expenses, 

expenses related with entrance to new markets, and also 

transportation costs (due to tightened schedule of delivery of goods) 

grew substantially.



Weak Euro has not had a negative impact on Baltika group's financial 

activities in year 2000. In 9 months the company showed EEK 1.9 mln 

in foreign exchange gain. Financial expenses are 36.3% or EEK 2.1 mln 

lower than in 9m 1999 (incl. EEK 1.2 mln drop in interest expenses).



Consolidated balance sheet size stood at EEK 239 mln, having 

increased by EEK 20.8 mln since the beginning of the year. The 

current assets grew by EEK 19.6 mln. Customer receivables also grew 

substantially, mainly due to high sales in Q3 (EEK 108.4 mln); at 

end-September the customer receivables stood at EEK 65.9 mln (EEK 

29.7 mln growth since the beginning of the year). Supply of raw 

materials and goods inventories that the company acquired to support 

the sales of manufactured output, and investments made into opening 

of new sales premises decreased the cash account by 11.1 mln EEK, and 

increased inventories (+3.5 mln EEK) and loans (+ 5.6 mln EEK).



AS Baltika financial ratios as of 30.09.2000:



 	 		               			9m 2000     9m 1999

- gross margin (gross profit/net sales) 	  	5.6%         3.2%

- profit margin (net profit/net sales) 		        5.0%	     0.5%

- ROE (net profit/owners equity) 			8.6%	     0.2%

- ROA(net profit/average cost of assets) 		4.5%  	     0.1%

- Quick ratio						0.94         0.85

((current assets - inventories)/current liabilities)





Ülle Järv

Management Board member

+372 63 02 741