RAKVERE LIHAKOMBINAAT GROUP      FINANCIAL RESULTS        31.10.2005



FINANCIAL RESULTS 9 MONTHS 2005



COMMENT ON FINANCIAL RESULTS

Financial year 2005, 9 months



1.  Preface



AS Rakvere Lihakombinaat is the largest meat processing company in 

the Baltics. As of 30 September 2005 Rakvere Lihakombinaat Group had 

1,234 employees (1,154 employees as of 30 September 2004).

The parent company is located and registered in Estonia, County of 

Lääne-Virumaa, Sõmeru, Roodevälja Village.



The Group companies as at 30 September 2005:

                              Country   Participation  Participation 

                            of location     30.09.05       31.12.04

AS Rakvere Lihakombinaat 

(the parent company)            Estonia	

AS Ekseko                       Estonia       99,31%         98.75%

     AS Ekseko’s subsidiaries:

     OÜ Kurika Seafarm          Estonia         100%           100%

     OÜ Põlva Peekon            Estonia         100%           100%

AS Linnulihatooted              Estonia          76%            76%

AS Rigas Miesnieks               Latvia       93.82%         93,82%

     AS Rigas Miesnieks subsidiaries:

        AS Tallat                Latvia         100%           100%

OÜ Klaipedos Maisto 

Mesos Produktai               Lithuania         100%           100%

  OÜ Klaipedos Maisto Mesos Produktai subsidiary:

    OÜ Pentinuotis            Lithuania         100%           100%

    OÜ Klaipedos Maisto Prekyba Lithuania       100%           100%







2. General economic environment and its effect on the company



Positive growth continued in the third quarter of 2005. The 

company’s turnover grew by 18.3%, compared to the same period last 

year. This had much to do with the successful sale of summer 

products in all Baltic States. Summer is the main sales season for 

the meat industry, having a great effect on the results for the whole 

year. The sale of summer BBQ meat still showed the biggest growth, 

with 38% increase compared to last year. Alongside Estonia, Latvia 

has also shown fast growth in sales volume. Product portfolio renewal 

and and fresh-up of brand allowed Rigas Miesnieks to increase 

turnover by 28% compared to the comparative period. This, in turn, 

increased the company’s share in the Latvian meat market. The volume 

of export to other countries beside the Baltic States is growing; 

Ekseko's high-quality pork has found its way into many EU member 

states.



The price of the company’s main raw material – pork – has not 

changed, compared to the same period last year. The average beef 

price was still twice as high as in the comparative period. 

Fluctuations in the beef price are conditioned by the seasonal nature 

of the supply of cattle.



Rapid retail trade consolidation in the Baltic States has a major 

effect on the company’s operations. The share of retail chain trade 

in the company’s turnover is growing, while trade demands are quickly 

increasing. In addition to monetary increase in sales promotion, 

bigger attention must also be paid to the reliability and flexibility 

of the company’s operations.



Throughout the year, the company’s operating expenses have been 

higher than in the comparative period. The increase has been greatest 

in environmental expense items – waste management and pollution 

charge. Positive economic development together with the opening of 

the borders in the European Union has triggered a noticeable labour 

flow, especially in the parent company Rakvere Lihakombinaat. The 

lack of qualified labour at the time when the company’s production 

volumes are rapidly growing has clearly become a hindrance to 

corporate development. The lack of personnel conditions a rise in 

average salaries within the company, and a substantial increase in 

personnel expenses.



The moderate increase in meat and meat product prices during the 

period was proportionally smaller than the increase in the price of 

raw materials and the cumulative increase in sales subsidies. At the 

same time, fixed costs increased. The rapid growth in turnover and 

sales volumes, which had much to do with the successful sale of 

summer products, still enabled the company to increase its net 

profit.



3. Sales and profit



The net sales of Rakvere Lihakombinaat Group in the first 9 months of 

2005 totaled in 1 097,0 million kroons or 70 113 th. euros (927,4 

million kroons or 59 274 th. euros in 2004). The sales volume was 

35,5 th. tons (including by-products)  in the Baltic States. This 

constitutes a 9,3 % volume increase compared to last year. The net 

profit of Rakvere Lihakombinaat Group was 90,9 million kroons or 

5 810 th. euros (in 2004  74,6 million kroons or 4 766 th. euros). 





Main financial indicators of Rakvere Lihakombinaat Group, millions 

of kroons (th. euros)



                        9 months 2005   9 months 2004   12 months 2004



Net sales              1 097,0 (70 113) 927,4 (59 274) 1 267,3 (80 995)

Operating expenses 

and other revenue      1 003,4 (64 129) 847,5 (54 169) 1 164,0 (74 394)

Operating profit          93,6  (5 984)  79,9  (5 105)   103,3  (6 601)

Net profit of parent 

company                   90,9  (5 810)  74,6  (4 766)    97,2  (6 211)



Investments               95,9  (6 128)  87,5  (5 589)   140,5  (8 979)





4.Future perspectives



According to the company’s management, meat product consumption is 

bound to grow, concentrated, above all, in retail chains. Growth in 

consumption will provide the company with an excellent opportunity 

to enhance its production volume and turnover.



During the end of the year, fixed costs will continue growing as a 

result of amendments introduced in the laws (waste handling expenses, 

implementation of packaging excise duty, environmental and energy 

expenses). Personnel expenses are bound to show significant growth, 

compared to last year. According to the estimates, raw material 

prices will slightly increase, compared to 2004.



Although expenses are rapidly increasing, tight competition on the 

retail market will not allow product prices to be raised.



At the same time, the company’s development, which is based on the 

planned growth in sales volumes, will provide a good foundation for 

continued success. The company’s turnover is still growing at a 

greater speed than profitability. According to the company’s 

management, integration of primary production and processing, 

together with the continual efforts made for enhancing internal 

efficiency, will ensure Rakvere Group’s success in the upcoming 

periods.





Olle Horm

Chairman of the Management Board 

Rakvere Lihakombinaat AS

31.10.05







RAKVERE LIHAKOMBINAAT GROUP 

BALANCE SHEET 

                       in Thousands of kroons    in Thousands of euros

ASSETS                   30.9.2005 31.12.2004    30.9.2005 31.12.2004



Current assets				

Cash and bank                 53 907   29 280       3 445     1 871

Trade receivables            119 436  121 028       7 633     7 735

Tax receivables                3 923    5 252         251       336

Other short-term receivables  42 489   37 423       2 715     2 392

Inventories                  118 128  120 158       7 550     7 680

Biological assets             83 719   83 654       5 351     5 346

Tangible fixed assets for sale 3 227        0         206         0

Total current assets         424 829  396 795      27 151    25 360

				

Non-current assets				

Long-term investments         35 939   35 272       2 297     2 254

Tangible fixed assets        528 235  492 859      33 760    31 499

Intangible assets              4 029    3 893         258       249

Total non-current assets     568 203  532 024      36 315    34 002

				

TOTAL ASSETS:                993 032  928 819      63 466    59 362

				

LIABILITIES AND OWNERS’ EQUITY				

Current liabilities				

Loans and lease payables      58 923   61 295       3 766     3 917

Supplier payables             91 597   92 554       5 854     5 915

Tax payables                  11 610   14 487         742       926

Other current liabilities     46 741   63 623       2 987     4 066

Total current liabilities    208 871  231 959      13 349    14 824

				

Non-current liabilities				

Deffered tax                     629      628          40        40

Non-curent loans and 

lease payable                100 578  103 704       6 428     6 628

Pension liabilities              775      773          50        49

Total non-current 

liabilities                  101 982  105 105       6 518     6 717

Total  liabilities           310 853  337 064      19 867    21 541

				

Equity				

Equity attributable the Company's equity holders

Share capital                377 217  377 217      24 109    24 109

Mandatory legal reserve       16 585   11 726       1 060       749

Retained earnings            286 517  200 462      18 312    12 812

Unrealised translation 

differences                     -978   -1 008         -62       -64

Total equity attributable the 

Company's equity holders     679 341  588 397      43 418    37 606

Minority interest              2 838    3 358         181       215

Total equity                 682 179  591 755      43 599    37 821

				

TOTAL LIABILITIES 

  AND EQUITY                 993 032  928 819      63 466    59 362





RAKVERE LIHAKOMBINAAT GROUP

INCOME STATEMENT

                       in Thousands of kroons    in Thousands of euros

Revenue                9 months 05 9 months 04  9 months 05 9 months 04



Net sales                   1 097 023  927 440      70 113    59 274

Other revenue                   6 048    5 069         386       324

Total revenue               1 103 071  932 509      70 499    59 598

				

Change in work-in-progress 

and finished goods              2 617    6 916         167       442

Change in fair value 

of biological assets               65   10 786           4       689

Materials, consumables 

and supplies                 -719 926 -590 682     -46 012   -37 751

Other operating expenses     -127 840 -124 906      -8 170    -7 983

Personnel expenses           -109 999 -111 310      -7 030    -7 114

Depreciation and write-downs 

of non-current assets         -48 043  -42 374      -3 071    -2 708

Other expenses                 -6 317   -1 059        -403       -68

				

Operating profit               93 628   79 879       5 984     5 105

				

Financial income/expenses				

Net foreign exchange 

gain/loss                         129     -146           8       -9

Interest and other 

financial income                2 706    1 398         173       89

Interest and other 

financial expenses             -5 085   -6 301        -325     -403

Total financial 

income/expenses                -2 250   -5 049        -144     -323

				

Net profit for the period      91 378   74 830       5 840    4 782

Attributable to:				



 Equity holders of the Company 90 914   74 572       5 810    4 766



 Minority interest                464      258          30       16



Earnings per share for profit attributable to the

equity holders of Company 

(in kroons / euros)              2,41     1,98       0,154    0,126