Merko Ehitus                FINANCIAL RESULTS                   08.11.2004



FINANCIAL RESULTS 9M 2004



COMMENTARY TO 9M 2004 FINANCIAL RESULTS



Merko Ehitus group 9M 2004 consolidated and unaudited net sales amounted to

EEK 2 232.6 million (EUR 142.7 million) and net profit was EEK 187.7 million

(EUR 12.0 million). Profit was earned from general business activities with

the exception of a nonrecurring profit of 11.7 million kroons

(0.7 million euros), which was gained in first quarter from the disposal of

a project managing unit of Tallinna Teede AS. Compared to the same period of

previous year net sales increased by 20,4% and net profit 31,4% (without

extraordinary profit). Income increase, which exceeded expenses' growth rate,

and successful selling of residential buildings improved Group’s operating

and net profit margins in the 3rd quarter.



Companies of the Group 9M 2004 net sales and consolidated net sales

(sales outside the Group) were (in thousand kroons and euros):



                                                   Sales            including

                                                                 consolidated

                                                                    net sales



                                            EEK      EUR        EEK       EUR

Estonian companies

   Construction

   AS Merko Ehitus                    1 514 313   96 782   1 513 696   96 743

   AS Gustaf (100% partnership)          48 282    3 086      47 488    3 035

   OÜ Gustaf Tallinn (80% partnership)   45 215    2 890      44 516    2 845

   AS Merko Tartu (66% partnership)      68 108    4 353      43 490    2 780

   Tallinna Teede AS (100% partnership) 127 903    8 174     118 821    7 594

   Construction

   AS Normanni Linnagrupp(50%partnership)97 737    6 247           -        -

   Production of concrete

   AS Tartu Maja Betoontooted

   (25% partnership)                    110 714    7 076           -        -

   Telecommunication networks

   AS Telegrupp (45% partnership)        46 755    2 988           -        -

Latvian companies

   Construction

   SIA Merks (100% partnership)         326 983   20 898     326 983   20 898

Lithuanian companies

   Construction

   UAB Merko Statyba (100% partnership) 137 246    8 772     137 246    8 772





The ratios and calculation methods characterizing the operating activities of

the Group were as follows:



                                          9M 2004       9M 2003



Net profit margin                          7,9 % *       7,2 %

Operating profit margin                    8,4 % *       8,1 %

Return on equity (per year)               46,4 %        50,0 %

Return on assets (per year)               20,7 %        20,1 %

Current ratio                              1,6           1,5

Equity-to-assets ratio                    48,3 %        38,6 %



* without extraordinary profit



Net profit margin: Net profit / Sales

Operating profit margin: Operating profit / Sales

Return on equity: (Net profit x 4/3) / Average equity during the period

Return on assets: (Net profit x 4/3) / Average assets during the period

Current ratio: Current assets / Current liabilities

Equity-to-assets ratio: Owners equity / Total assets



Year 2004 9M interim consolidated and unaudited income statement and balance

sheet are compiled in accordance with the principles of the International

Financial Reporting Standards (IFRS).





INCOME STATEMENT III quarter 2004

consolidated, unaudited in thousand EEK and EUR



                                           EEK                   EUR

                                  IIIq 2004   IIIq 2003  IIIq 2004  IIIq 2003



Sales                              733 957     772 664     46 908     49 382

Cost of sales                     (631 561)   (697 218)   (40 364)   (44 560)



Gross profit                       102 396      75 446      6 544      4 822



Marketing expenses                  (3 645)     (3 126)      (233)      (200)

Administrative expenses            (20 170)    (17 711)    (1 289)    (1 132)

Other operating income                 449      10 493         29        671

Other operating expenses            (1 321)       (607)       (84)       (39)



Operating profit                    77 709      64 495      4 967      4 122



Financial income and expenses

from stocks of subsidiaries              0         541          0         35

Financial income and expenses

from stocks of associate companies   7 661         969        490         62

Financial income and expenses from

other long-term financ ial investments  97          66          6          4

Interest expense                    (5 208)       (663)      (333)       (42)

Foreign exchange gain                2 082          (4)       133         (0)

Other financial income and expense  (2 404)     (1 075)      (154)       (69)

Total financial income and expenses  2 228        (166)       142        (11)



Profit before taxes                 79 937      64 329      5 109      4 111



Income tax                          (1 572)     (4 558)      (100)      (291)



Net profit for fiscal year          78 365      59 771      5 008      3 820



incl. minority interest               (449)       (594)       (29)       (38)



Net profit for the group            77 916      59 177      4 980      3 782



Net profit per share (basic

and diluted, in EEK and EUR)          8,80        6,69       0,56       0,43





INCOME STATEMENT 9M 2004

consolidated, unaudited in thousand EEK and EUR



                                           EEK                   EUR

                                   9M 2004     9M 2003    9M 2004    9M 2003



Sales                            2 232 593   1 854 739    142 689    118 539

Cost of sales                   (1 976 331) (1 657 554)  (126 311)  (105 937)



Gross profit                       256 262     197 185     16 378     12 602



Marketing expenses                 (11 415)    (10 790)      (730)      (690)

Administrative expenses            (57 125)    (49 454)    (3 651)    (3 161)

Other operating income              12 960      15 317        828        979

Other operating expenses            (2 418)     (1 455)      (155)       (93)



Operating profit                   198 264     150 803     12 671      9 638



Financial income and expenses

from stocks of subsidiaries           (299)        542        (19)       (35)

Financial income and expenses

from stocks of associate companies  10 900       3 372        697        216

Financial income and expenses from

other long-term financial investments  147       1 080          9         69

Interest expense                    (6 077)     (1 351)      (388)       (86)

Foreign exchange gain                2 697      (2 402)       172       (154)

Other financial income and expense  (6 127)     (5 078)      (392)      (325)

Total financial income and expenses  1 241      (3 837)        79       (245)



Profit before taxes                199 505     146 966     12 751      9 393



Income tax                         (10 025)    (11 088)      (641)      (709)



Net profit for fiscal year         189 480     135 878     12 110      8 684



incl. minority interest             (1 765)     (1 859)      (113)      (119)



Net profit for the group           187 715     134 019     11 997      8 565



Net profit per share (basic

and diluted, in EEK and EUR)         21,21       15,14       1,36       0,97





BALANCE SHEET AS OF 30.09.2004

consolidated, unaudited in thousand EEK and EUR



                                       EEK                      EUR

                             30.09.2004   31.12.2003  30.09.2004  31.12.2003

ASSETS



Cash and cash equivalents       133 302      240 152       8 520      15 349

Marketable securities            25 235       36 096       1 613       2 307

Accounts receivable             291 713      408 296      18 644      26 095

Miscellaneous receivables       253 744       99 394      16 217       6 352

Accrued income                    1 677          673         107          43

Prepaid expenses                 15 242       21 180         974       1 354

   incl. income tax               3 423        1 746         219         112

Inventories                     315 128      183 254      20 140      11 712



TOTAL CURRENT ASSETS          1 036 040      989 045      66 215      63 211



Shares in associate companies    34 622       25 040       2 213       1 600

Other long-term fin. investments 24 197        3 325       1 546         213

Deferred income tax liability     4 124        4 124         264         264

Real estate investments          69 676       52 869       4 453       3 379

Tangible assets                 102 956       73 051       6 580       4 669

Intangible assets                   290       (1 592)         19        (102)



TOTAL NON-CURRENT ASSETS        235 865      156 817      15 075      10 022



TOTAL ASSETS                  1 271 905    1 145 862      81 290      73 234



Debt obligations                  3 375       12 447         216         796

Customer prepayments             33 796       17 881       2 160       1 143

Merchandise credit              238 532      267 597      15 245      17 103

Miscellaneous liabilities       298 620      305 736      19 085      19 540

Tax liabilities                  15 359       21 352         982       1 365

   incl. income tax               3 339        5 124         213         327

Accrued expenses                 34 646       21 095       2 214       1 348

Current provisions                5 787        5 191         370         332



TOTAL CURRENT LIABILITIES       630 115      651 299      40 272      41 626



Long-term payables               13 867       16 399         886       1 048

Other long-term payables          8 465        9 532         541         609



TOTAL NON-CURRENT LIABILITIES    22 332       25 931       1 427       1 657



TOTAL LIABILITIES               652 447      677 230      41 699      43 283



Share capital                    88 500       88 500       5 656       5 656

Share premium                     2 950        2 950         189         189

Mandatory legal reserve           8 850        8 850         566         566

Retained earnings               327 733      180 430      20 946      11 531

Net profit for fiscal year      187 715      184 473      11 997      11 790

Exchange rate differences        (1 663)      (1 380)       (106)        (88)

TOTAL OWNERS' EQUITY            614 085      463 823      39 247      29 643



Minority interest                 5 373        4 809         343         307



TOTAL LIABILITIES

AND OWNERS' EQUITY            1 271 905    1 145 862      81 290      73 234





Alar Lagus

Member of Board

+372 6 805 109