AS BALTIKA               ANNUAL RESULTS                28.02.2005 



AS Baltika annual results for 2004



The unaudited consolidated net sales of AS Baltika were MEEK

581.9( 37,2 MEUR)and the net profit was MEEK 16.7(1,1 MEUR).

Compared to 2003, the net sales increased by 17% (net sales

MEEK 497( 31,8 MEUR), respectively). AS Baltika ended the year

2003 with a loss of MEEK 67.4 (4,3 MEUR).



1. Sales



Retail sales



The retail sales income of Baltika for 2004 was MEEK 420.3

(26,9 MEUR), which is an increase of 31% compared to the year

2003. The total increase in sales income was MEEK 99.6 (6,4

MEUR), of which MEEK 75.3 (4,8 MEUR) and MEEK 24.4 (1,6 MEUR)

accounted for retail system growth and retail sales area

efficiency growth, respectively. Retail sales income accounted

for 72% of total sales income (65% in 2003). As of the end of

2004, Baltika had 78 outlets and 11,668 m2 of sales premises.

Twelve new outlets and 1559 m2 of sales premises were added

during the year.



Sales were the largest in the domestic Estonian market,

totalling MEEK 117 (7,5 MEUR)(growth 22%) and forming 28% of

the retail sales of the entire Baltika Grupp, followed by

Lithuania and the Ukraine with sales of MEEK 106.9 (6,8 MEUR,

growth 36%) and MEEK 71 (4,5 MEUR, growth 31%), respectively.

Growth was the greatest in 2004 in the Latvian market – sales

increased by 42% and sales income totalled MEEK 52.26 (3,3

MEUR). Retail operations began in Russia through the joint

venture launched in May, and the eight months’ sales result was

MEEK 31 (1,98 MEUR). Major changes in the size of retail

premises and in lease contracts were made in the Polish market

in 2004 as a result of reviewing the retail premises, which

were reduced by 10%. The sales income from the Polish market

was MEEK 40.3 (2,6 MEUR), which is 17% less than in 2003.



The best-sold brand of Baltika in 2004 was Monton, which

accounted for 53% of retail sales and totalled MEEK 221.1 (14,1

MEUR), being 3.2% less than in 2003 owing to the reduced Monton

sales area in the Polish market.

Volume growth was the greatest in the CHR/Evermen and Baltman

retail chains, where sales increased 2.8 and 2.4 times,

respectively. The sales incomes of CHR/Evermen and Baltman in

2004 were MEEK 118.5 (7,6 MEUR) and MEEK 63.72 (4,1 MEUR),

respectively.



Wholesale



Wholesale of own products totalled MEEK 115.6 (7,4 MEUR) in

2004, having decreased by 5.8% compared to the previous year.

The reduction in sales was mainly due to the results of the

retail chain taken over in Russia, which replaced the former

wholesale sales in part.



Subcontracting sales



Subcontracting sales volumes decreased by 16% compared to the

year 2003 and totalled MEEK 42,7 (2,7 MEUR). In connection with

the establishment of the joint venture OÜ Baltika Tailor, based

on the production division of Baltika in November 2004, of

which 50% is owned by Baltika and 50% by OY Turo Tailor AB, the

consolidation principle of the joint venture will change from

2005 and the joint venture’s income and expenses will no longer

be consolidated in the financial statements of Baltika Grupp.



2. Financial Results



The net profit of AS Baltika in 2004 was MEEK 16.7 (1,1 MEUR).

Most of net profit, MEEK 11.4 (0,7 MEUR), was earned in the

fourth quarter.



In 2004, new skills of inventory management and central

operation of the retail system were developed in the Baltika

Grupp head office; the result was a 40% rise in gross profit to

MEEK 269.7 (17,2 MEUR), a good inventory quality, and the

inventory turnover of 3.9. This was achieved through a better

management of discount periods and sales margins, the creation

of successful product collections and optimisation of retail

operation and administration costs.



Improved methods of assessing new retail areas and the closure

or restructuring of less efficient shops resulted in a higher

efficiency of retail system investments.



After the rehabilitation process carried out in the Polish

market, market management costs decreased by MEEK 2.4 (0,15

MEUR) compared to the year 2003.



The staff of the head office and production units was reduced

by 91 persons. MEEK 1.8 (0,12 MEUR)of redundancy benefits were

paid during year.



In December 2004, sale of the 50% holding in OÜ Baltika Tailor

generated a financial income of MEEK 3.9 (0,25 MEUR).



3. Balance Sheet



The consolidated balance sheet total of Baltika was MEEK 317.7

(20,3 MEUR) as of 31.12.2004; the decrease compared to the

beginning of the year was MEEK 12.1 (0,8 MEUR). Although the

retail system was constantly growing, inventories in the system

decreased by MEEK 4.9 (0,3 MEUR) over the year, totalling MEEK

145.6 (9,3 MEUR). The aggressive sale of old inventories,

especially in the first half of the year, improved the

company’s liquidity. Improved cash flows allowed for reducing

accounts payable by MEEK 23.2 (1,5 MEUR) compared to the

beginning of the year. Debt obligations decreased by MEEK 18.4

(1,2 MEUR). The debt obligations to assets ratio was 38% at the

end of the year (42% in 2003).

A total of MEEK 13.8 (0,9 MEUR) was invested in fixed assets in

2004, mainly in relation to new retail areas and development of

the IT systems supporting retail system monitoring.



4. Personnel



The group employed 1704 persons as of 31.12.2004, including 574

in retail sale, 988 in production and 144 in the head office.

435 people worked outside Estonia. The retail staff increased

by 83 persons and the head office and production staff

decreased by a total of 91 persons during the year.



5. About the plans for 2005



AS Baltika expects its retail system to grow by at least 20%

this year; a minimum of 12 new retail areas are planned to be

opened in four retail markets: Estonia, Lithuania, the Ukraine

and Russia.





The main ratios of the group as of 31.12.2004 were:



                              31.12.2004    31.12.2003

Annual increase in sales, %           17           2.3

Percentage of retail sales            72            65

in net sales

Number of retail outlets              78            66

Retail area owned by BG (m2)                          

                                  11,668        10,109

                                                      

Markets managed by own                 6             6

retail organisations

Gross margin (operating              3.3         -10.3

profit to net sales), %

Profit margin (net profit to         2.9         -13.6

net sales), %

Return on equity (net               14.6         -42.7

profit/12 months’ average

equity), %

Return on assets (net                5.1         -17.5

profit/12 month’s average

assets), %





INCOME SATEMENT                                                   

th. EEK                                                                  

                    IVQ 2004  IVQ 2003      IVQ     2004    2003     2003

                                           2003

                              proforma                   proforma         

                                                               

Revenue                                                                  

Net sales            152 997   137 529  131 449  581 878 497 048  496 686

Other revenue          -1184       122      118    1 692     607      603

Total revenue        151 813   137 651  131 567  583 570 497 655  497 289

                                                                         

Expenses                                                                 

Cost of goods         -48533    -66559   -74647  -195326 -214053  -224112

Change in               1568      2465     2465   -11726    -659     -659

inventories

Other operating       -46263    -37893   -37768  -162401 -136990  -136825

expenses

Personnel expenses    -42284    -43730   -43680  -168409 -164248  -164192

Depr. of fixed         -5361     -5709    -5577   -21848  -21813   -22130

assets

Other expenses         -3439     -3526    -3243    -5073  -11009    -4507

Total expenses       -144312   -154952  -162450  -564783 -548772  -552425

                                                                         

Operating profit        7501    -17301   -30883    18787  -51117   -55136

(loss)

                                                                         

Financial income        4294       161      268     4491     707      814

Financial expenses     -3690    -10060    -1895    -9262  -16384    -8056

                                                                         

Profit (loss)           8105    -27200   -32510    14016  -66794   -62378

before taxes

Income tax expense      1148      -444     -444      947    -465     -465

Profit (loss)                                                            

before

minority interest       9253    -27644   -32954    14963  -67259   -62843

Minority interest      -2089      -319     -318    -1738     188      188

Net profit (loss)      11342    -27325   -32636    16701  -67447   -63031





INCOME SATEMENT                                                   

th. EUR                                                                  

                     IVQ 2004      IVQ      IVQ     2004    2003     2003

                                  2003     2003

                               proforma                   proform a        

                                                          

Revenue                                                                  

Net sales               9 778    8 790    8 401   37 189  31 767   31 744

Other revenue             -76        8        8      108      39       39

Total revenue           9 703    8 798    8 409   37 297  31 806   31 783

                                                                         

Expenses                                                                 

Cost of goods           -3102    -4254    -4771   -12484  -13680   -14323

Change in                 100      158      158     -749     -42      -42

inventories

Other operating         -2957    -2422    -2414   -10379   -8755    -8745

expenses

Personnel expenses      -2702    -2795    -2792   -10763  -10497   -10494

Deprec. of fixed         -343     -365     -356    -1396   -1394    -1414

assets

Other expenses           -220     -225     -207     -324    -704     -288

Total expenses          -9223    -9903   -10382   -36096  -35073   -35306

                                                                         

Operating profit          479    -1106    -1974     1201   -3267    -3524

(loss)

                                                                         

Financial income          274       10       17      287      45       52

Financial expenses       -236     -643     -121     -592   -1047     -515

                                                                         

Profit (loss)             518    -1738    -2078      896   -4269    -3987

before taxes

Income tax expense         73      -28      -28       61     -30      -30

Profit (loss)                                                     

before

minority interest         591    -1767    -2106      956   -4299    -4016

Minority interest        -134      -20      -20     -111      12       12

Net profit (loss)         725    -1746    -2086     1067   -4311    -4028





BALANCE SHEET                                       

th.EEK                                              

                             31.12.2004  31.12.2003  31.12.2003

                                                           

ASSETS                                    proforma           

Current assets                                               

Cash and bank                    12515       12836      12836

Shares and other                   603         377        377

securities

Customer receivables             27501       45727      45727

Other receivables                                            

and prepaid expences             10585       13822      13822

Inventories                     145460      150424     147846

Total current assets            196664      223186     220608

Non-current assets                                           

Long-term investments             1095        5394       5394

Investment in real estate         7500           0          0

Deferred tax assets               4349           0          0

Other long-term                   2264           0          0

investments

Tangible fixed assets            77325       87017      89741

Intangible fixed assets          27983       13779      13851

Total non-current assets        120516      106190     108986

TOTAL ASSETS                    317180      329376     329594

                                                             

LIABILITIES AND OWNER`S EQUITY                               

Current liabilities                                          

Debt obligations                 74504       69336      69336

Customer prepayments               204         260        260

Accounts payable                 30722       53939      53939

Other tax liabilities            12669       10634      10634

Accrued expenses                 11667       10515      10515

Total current                   129766      144684     144684

liabilities

Non-current                                                  

liabilities

Long-term debt                   45923       69482      69482

Provisions                          21          45         32

Total non-current                45944       69527      69514

liab.

TOTAL LIABILITIES               175710      214211     214198

                                                             

                                                             

OWNER`S EQUITY                  141470      108046     108277

Share capital (par               56340       54994      54994

value)

Share premium                    44508       42490      42490

Other restricted                 26783       22885      22885

equity

Retained profit                 -16508       50939      50939

Profit for the                   16701      -67447     -63031

acc.period

Exchange rate                     6622        4185          0

differencies

Minority Interest                 7024        7119       7119

TOTAL LIABILITIES                                            

AND OWNER's EQUITY              317180      322257     322475







BALANCE SHEET                                       

th.EUR                                              

                            31.12.2004  31.12.2003  31.12.2003

                                                            

ASSETS                                    proforma           

Current assets                                      

Cash and bank                      800         820        820

Shares and other                    38          24         24

securities

Customer receivables              1758        2922       2922

Other receivables                                   

and prepaid expenses               677         883        883

Inventories                       9296        9614       9449

Total current assets             12569       14264      14099

Non-current assets                                  

Long-term investments               70         345        345

Investment in real                 479           0          0

estate

Deferred tax assets                278           0          0

Other long-term                    145           0          0

investments

Tangible fixed assets             4942        5561       5735

Intangible fixed                  1788         881        885

assets

Total non-current                 7702        6787       6965

assets

TOTAL ASSETS                     20271       21051      21065

                                                    

LIABILITIES AND OWNER`S EQUITY                      

Current liabilities                                 

Debt obligations                  4762        4431       4431

Customer prepayments                13          17         17

Accounts payable                  1963        3447       3447

Other tax liabilities              810         680        680

Accrued expenses                   745         672        672

Total current                     8293        9247       9247

liabilities

Non-current                                         

liabilities

Long-term debt                    2935        4441       4441

Provisions                           1           3          2

Total non-current                 2936        4444       4443

liab.

TOTAL LIABILITIES                11229       13691      13690

                                                    

OWNER`S EQUITY                    9042        7360       7375

Share capital (par                3601        3515       3515

value)

Share premium                     2845        2716       2716

Other restricted                  1712        1463       1463

equity

Retained profit                  -1055        3256       3256

Profit for the                    1067       -4311      -4028

acc.period

Exchange rate                      423         267          0

differencies

Minority interest                  449         455        455

TOTAL LIABILITIES                                   

AND OWNER's EQUITY               20271       21051      21065





Ülle Järv

Financial Director

+372 6302 731

AND OWNER's EQUITY               20271       21051      21065







Ülle Järv

Financial Director

+372 6302 731