BALTIKA

COMMENTARY TO FINANCIAL RESULTS



GROUP MANAGEMENT REPORT 2000



1. Financial Results



The main aim of Baltika Group (hereinafter BG) for year 2000

was development and launch of the new strategy for continual growth.



In May 2000, “Baltika Group strategy for years 2000–2001“ was published.

The strategy summed up previous developments and concentrated on providing 

the best service (product with logistical services) to an end consumer, 

focusing on retail sale solutions. 

On target markets (the Baltic region, Ukraine) BG started to build 

an active retail system. Thus BG commenced creating a respective 

organization.

Launch of the strategy has already had an effect on financial results of 2000:

number of retail sales premises increased from 20 to 36, incl. 8 Baltika's 

own stores and 5 stores under franchise contracts, in 7 countries in all.



AS Baltika consolidated net sales in 2000 amounted to EEK 340.8 

million, which is 18% (EEK 51.8 million) more than in 1999 (net sales

EEK 289.0 million, respectively). 2000 net profit amounted to 

EEK 16.5 million, incl. EEK 14.3 million net profit of Baltika group.

Compared with 1999 results the consolidated net profit grew by 

EEK 14.7 million and group’s net profit by EEK 13.1 million (1999 

consolidated net profit was EEK 1.8 million and group’s EEK 1.2 million).



AS Baltika market capitalization as of 31.12.2000 stood at EEK 144.0 

million, group owners equity EEK 127.8 million, and share capital 

EEK 48.0 million.





AS Baltika financial ratios as of 31.12.2000:



                                         2000           1999

gross margin (gross profit/net sales)    5.60%          2.58%

profit margin (net profit/net sales)     4.84%          0.6%

earnings per share (EEK)                 2.97           0.25

ROE (net profit/owners equity)          11.16%          1.04%

ROA(net profit/average cost of assets    6.3%           0.2%

Quick ratio                              0.75           0.85

((current assets - inventories)/current liabilities)



At the end of 2000, Baltika's share price stood at EEK 30.00, 

increasing annually 115.8%.





2. Significant Events in 2000



February - opening of the first store of Baltman in Warsaw, Poland.

         - CHR designer Janika Sootna won the annual prize “Kuldnõel” of 

	   Estonian fashion designers          



March    - annual general meeting of shareholders



May      - presentation of “Baltika Group strategy for years 2000–2001“



June     - first franchise contract of Baltman in the Latvian market 



July     - establishment of BG structure. Description of production division

	   and commercial division of BG



August   - first franchise contract of Baltman in the Russian market,

           first shipment to the USA market



November - presentation of BG's new corporate graphics,

           establishment of Baltika Ukraine – subsidiary in Ukraine



December - opening of the first store of Baltman in Kiev, Ukraine





3 . Commercial activities



Commercial and marketing activities were combined into one commercial

division, which today runs 6 operating subsidiaries in 6 countries 

( Estonia, Lithuania, Poland, Sweden, Finland and Ukraine ) and

sales of manufactured output in 13 markets. In 2000 sales of manufactured 

output amounted to EEK 257.9 million, which is 23% more than in 1999

( EEK 209.6 million, respectively ). Export of manufactured output

amounted to EEK 145.0 million and grew in comparison to the previous year by

30.7% ( in 1999 EEK 110.9 million, respectively ). With regard to 

the strategy of BG the number of retail sales premises increased by 1.8 times

( from 20 in December 1999 to 36 in December 2000 ), forms of co-operation

of franchise and shop-in-shop retail sales were developed and

never-out-of-stock ( NOS ) supply system was launched.

In 2000 investments in retail sale amounted to EEK 7.2 million.

In 2001 BG will continue developing retail sales and its supporting

system. By the year end estimated number of retail sale premises

will exceed 50.





4. Production Activities



Production activities were combined into one production division,

which today runs production in the parent company as well as

in AS Virulane ( production of coats and overcoats ) and 

AS Elina ( production of overcoats for women ). In addition to 

production of manufactured output production division realized 

subcontracting works in total of EEK 80.4 million, which 9% more

than in 1999 ( EEK 73.7 million, respectively ). Subcontracting 

works were realized in 7 countries.

The production division ordered subcontracting works from various

Estonian companies. Additionally, cooperation with Russian 

sewing factory “Slavjanka” continued.

In 2000, investments in production amounted to EEK 4.6 million.



In accordance with the strategy, BG will continue specializing 

production division on retail sales in 2001. AS Virulane is

planning of building a new sewing factory to replace one in Ahtme.





5. Management and organization



With regard to the new strategy, management structure of BG was reorganized.

In July 2000, two functional divisions were formed: commercial and marketing

division and production division, which control relevant activities

in the companies under BG. 

In September 2000, Maire Milder and Boris Loifenfeld were elected members 

of the Management Board of AS Baltika. Today AS Baltika Management Board 

consists of 5 persons. AS Baltika Management Board members are also 

the employees of the company, who received in 2000 EEK 2,138.0 thousand 

in total salaries.

In November 2000, subsidiary Baltika Ukraine was established for

management of retail sales in Ukraine. SIA Baltman, subsidiary in Latvia, 

was liquidated.

At the end of 2000, in addition to parent company BG consisted of 6 sales

companies: AS Baltman ( Estonia ), Baltmano Prekyba ( Lithuania ), 

Baltika Sweden ( Sweden ), OY Baltinia AB ( Finland ), Baltika Poland

( Poland ), Baltika Ukraine, and 2 production companies: AS Virulane 

and AS Elina STC.



Average number of group employees in 2000 stood at 1,410





Meelis Milder

Management Board chairman

+372 6 302 731