Rakvere Lihakombinaat         FINANCIAL RESULTS                 02/25/2003



AUDITED ECONOMICAL RESULTS OF 2002



RAKVERE LIHAKOMBINAAT GROUP

COMMENT ON FINANCIAL RESULTS



AS Rakvere Lihakombinaat Group consisted of the following companies as 

at 31 December 2002:



				Country 	Partici-  	Partici-	

				of location	pation	  	pation 

						31.12.02	31.12.01

AS Rakvere Lihakombinaat 

(the parent company)		Estonia	

AS Ekseko			Estonia		98,2%		97,82%

	AS Ekseko’s subsidiaries:

	OÜ Paistu Põldur	Estonia		100%		100%

	OÜ Põlva Peekon		Estonia		100%		100%

	OÜ Paistu Põllumees	Estonia		100%		100%

AS Linnulihatooted		Estonia		76%		76%

AS RLK Kinnisvarahaldus		Estonia		100%		100%

AS Rigas Miesnieks		Latvia		92,47%		92,47%

OÜ Klaipedos Maisto Produktai	Lithuania	100%		100%

	OÜ Klaipedos Maisto 

	Produktai subsidiary:

	OÜ Pentinuotis		Lithuania	100%		100%



The year 2002 was successful for AS Rakvere Lihakombinaat Group. The group 

obtained its main objectives -

increase in sales and profit as well as growth in efficiency.



The consolidated sales of the company amounted to 1 226.5 million kroons  

(78.4 million euros), which constitutes an increase of 14.6%, compared to 

2001. The annual sales volume in tons (without the by- products) totalled 

36.6 th. tons - an increase of 25.5%, compared to 2001. In 2002, the profit 

of the company totalled 75.8 million kroons (4.8 million euros), which 

constitutes an increase of 16.6%, compared to 2001.



In general, the market situation was favourable for the company in 2002. 

The Baltic States constituted an exception to the general slow-down of 

global economic growth. Positive economic growth together with the 

increase in individual consumption facilitated the sales of meat and meat 

products in the whole region. Furthermore, the exceptionally long and sunny 

summer increased the sales volume of season products.



At the same time, competition between meat processing plants for the market 

share tightened considerably. Although the total number of companies 

decreased, new investments that were made in order to meet the requirements 

of the changed laws have significantly increased the expenditure level of 

companies. According to AS Rakvere Lihakombinaat Group, competition will 

become even tighter this year. Fast development of retail trade and 

concentration of  retail into chains in the Baltic States had a major 

effect on the industry. Trade competition together with stricter 

requirements on trade areas reduced sales in small shops and markets.



Compared to the previous period, the market price of the main raw material 

of the company - pork - dropped considerably. At the same time, pork 

production volumes both in the subsidiary Ekseko as well as contractual 

pig farms related to Ekseko (the so-called "piglet project") increased 

significantly. The above change resulted in a relatively quicker growth in 

production volumes, compared to the turnover of the company, as well as a 

change in the internal division of profitability - profit of the production 

company Ekseko decreased, and profit of processing companies increased 

accordingly. Similarly, the profitability of fresh meat sales decreased, 

and the profit earned from the sales of meat products increased. No 

considerable changes could be seen in the price level of beef and poultry 

during the year.



The group companies continued to develop and put into operation management 

and quality systems. 

Rigas Miesnieks and Ekseko were granted ISO 9001:2000 quality certificates 

in 2002. These companies also

hope to get the ISO 14000 certificates by the end of 2003. The parent 

company, Rakvere Meat Processing Plant, expects to obtain the ISO 9001:2000 

and ISO 14001:1996 certificates in the beginning of 2003. The "Balanced 

Scorecard" system was applied as management model in several Group companies 



in 2002. Other companies will apply the management system in 2003.



The earned profit was reinvested in the development of the company. In 2002, 

investments totalled 73.8 million kroons (4.7 million euros). Major 

investments were made to bring the production facilities into accordance 

with the requirements of the European Union. By today, the Veterinary and 

Food Board has submitted to Brussels an application for the recognition of 

AS Rakvere Lihakombinaat as compliant with the EU Directives. The company 

also invested in product development - new products included the new 

customer-friendly frankfurter and sausage packages of Rakvere, and the new 

sliced product series in Riga. 



In 2002, the strategic raw material base for the Group - Ekseko - invested a 

total of 27 million kroons (1.7 million euros) in expanding the production 

and increasing the efficiency. As a result of stricter requirements of the 

law, the Management Board of the company decided to close down production in 

the Järlepa unit - production was relocated to parent company in 2002.



The need for investments, caused by quick development of the market, is the 

reason why the management of the Group proposes not to pay dividends for the 

financial year 2002. 



Research and development costs in the amount of 11.5 million kroons (0.73 

million euros) were charged to expenses during the accounting period (7.1 

million kroons/0.45 million euros in 2001). Research and development costs 

were conditioned by developing new products, launching the new trademark of 

the Lithuanian subsidiary at the market, and renewing the trademark of the 

parent company.



Despite the persistently unstable global economy, the company remains 

optimistic as regards the year 2003. The management hopes that the company 

will continue to develop similarly to previous periods. This positive 

outlook is supported by the estimated increase in consumption in the whole 

region. Activities started in previous periods in order to increase 

efficiency and strengthen internal integration will ensure the 

competitiveness of the company even under heavier circumstances. According 

to the management of the company, the possible establishment of restrictions,

which hinder the trade between the Baltic States, poses a great risk to the 

economic activities of the Group. Major changes in competition in the whole 

region will take place once the Baltic States join the European Union in 

2004. 



In 2002, the average number of employees of the Group totalled 1 267 (1,189 

in 2001). Remuneration in the total amount of 54 th. kroons was paid to the 

members of the Supervisory Board of the Group companies. As a rule, members 

of the Management Board of the Group companies are also the active members 

of the management of the company. No separate remuneration is thus paid to 

the members of the Management Board. Total labour expenses of the group 

(wage costs and social tax) amounted to 152.1 million kroons (9.7 million 

euros) in 2002 (134.6 million kroons /8.6 million euros in 2001).



Only major change in personal of the Group during the period was due to 

restructuring in the subsidiary AS Linnulihatooted. Because of the transfer 

of production from subsidiary to the parent company as described above, 

employees of the subsidiary were made redundant. 





Olle Horm

Rakvere Lihakombinaat

Chairmen of the Board

032 29 211







RAKVERE LIHAKOMBINAAT GROUP 				

AUDITED AND CONSOLIDATED

BALANCE SHEET 				

				Thousand Estonian 	Thousand Euros

				kroons				

ASSETS				31.12.02    31.12.01	31.12.02   31.12.01

				

Current assets				

Cash and bank			  15 259     11 787	   975	     753

Trade receivables		  89 260     89 379	 5 705	   5 712

Tax receivables			   5 548      4 549	   355	     291

Other short-term receivables	   6 199     12 724	   396	     813

Inventories		         158 730    152 538	10 144	   9 749

Total current assets		 274 996    270 977	17 575	  17 318

				

Non-current assets				

Long-term financial assets	   4 535      2 176	   290	     139

Tangible fixed assets		 415 726    413 442	26 570	  26 424

Other intangible assets		   2 029      2 832	   130	     181

Total non-current assets	 422 290    418 450	26 990	  26 744

				

T OT A L  A S S E T S:		 697 286    689 427	44 565	  44 062

				

LIABILITIES AND OWNERS’ EQUITY				

				

Current liabilities				

Loans and lease payables	   2 768     29 312	   177	   1 873

Supplier payables		  68 566     61 251	 4 382	   3 915

Tax payables			  11 827      9 685	   756	     619

Other current liabilities	  16 039    113 546	 1 025	   7 257

Total current liabilities	  99 200    213 794	 6 340	  13 664

				

Long-term loans and lease 

payable				 142 821     94 117	 9 128	   6 015

Total liabilities		 242 021    307 911	15 468	  19 679

				

Minority interest	   	   3 523      3 570	   225	     228

				

Owners’ equity				

Share capital			 377 217    377 217	24 108	  24 108

Mandatory legal reserve		   5 942      2 690	   380	     172

Retained earnings		  67 813     -4 772	 4 334	    -305

Unrealised translation 

differences			     770      2 811	    50	     180

Total owners’ equity		 451 742    377 946	28 872	  24 155

				

TOTAL LIABILITIES AND 

OWNERS’ EQUITY :		 697 286    689 427	44 565	  44 062







RAKVERE LIHAKOMBINAAT GROUP				

AUDITED AND CONSOLIDATED

INCOME STATEMENT				

				Thousand Estonian 	Thousand Euros

 		  	       	kroons

				     2002       2001	   2002      2001		

Revenue	

				

Net sales			1 226 521  1 070 073	 78 389	   68 390

Other revenue			    5 518      6 019	    352	      385

Total revenue			1 232 039  1 076 092	 78 741	   68 775

				

Change in work-in-progress 

and finished goods 		      -56     19 346	     -4	    1 236

Materials, consumables 

and supplies			 -776 948   -686 529	-49 656	  -43 877

Other operating expenses	 -155 373   -135 443	 -9 930	   -8 656

Personnel expenses	         -152 140   -134 592	 -9 723	   -8 602

Depreciation and write-downs 

of non-current assets	  	  -48 709    -50 535	 -3 113	   -3 230

Other expenses			   -9 590     -7 929	   -613	     -507

				

Operating profit		   89 224     80 409	  5 702	    5 139

				

Financial income/expenses				

Net foreign exchange gain/loss	   -1 993     -4 849	   -128	     -310

Interest and other financial 

income				    2 544      4 258	    163	      272

Interest and other financial 

expenses		  	  -13 589    -14 940	   -868	     -955

Total financial 

income/expenses			  -13 038    -15 531	   -833	     -993

				

Profit before taxes		   76 186     64 878	  4 869	    4 146

Income tax				0	  -1	      0	        0

Minority interest		     -349	 160	    -22	       10

Net profit			   75 837     65 037	  4 847	    4 157

				

Earnings per share		    2,010      1,724	  0,128	    0,110





Olle Horm

Chairmen of the Board

032 29 211