AS BALTIKA

ANNOUNCEMENT

31.03.99

 

COMMENTARY TO THE FINANCIAL RESULTS OF 1998

 

The goals of the financial activities of AS Baltika in 1998 included 

increasing the sales volumes on the existing markets, moving to new 

export markets, increasing the production efficiency, and development 

of the group. The activities during the II half of the year were 

directed towards softening of the effects of the Russian crisis and 

preparation of the company for operating in the new economic 

environment.

 

The 1998 consolidated net sales of AS Baltika amounted to 280.3 million 

EEK, which is 11% (27.9 million EEK) more than in the previous year 

(1997 net sales 252.4 million EEK). The turnover of export markets 

accounted for 67.8% (190.1 million EEK) of total sales. There was a 

substantial increase in the sales of goods produced (211,2 million EEK 

in 1998, vs. 189.0 million EEK in 1997) on the aforementioned markets. 

The most significant increase occurred on the Latvian and Lithuanian 

markets (increase 16.0 million EEK, or 33%), and Finnish and Swedish 

markets (increase 14.1 million EEK, or 84%). Russian crisis brought 

along negative impact on turnovers, as a result of which the sales 

turnover on the Russian and Ukrainian markets declined by 8.3 million 

EEK, accounting for 77% of the respective figures of 1997. Compared 

with the results of 1997, the sales of subcontracting works increased 

in 1998 by 6%, or 3.7 million EEK (62.2 million EEK in 1998; 58.6 

million EEK in 1997). However, the relative importance of 

subcontracting sales decreased by 1% (22.2% in 1998).

 

The 1998 consolidated net profit of AS Baltika 1998 amounted to 1.4 

million EEK, where the parent company’s share amounted to 1.9 million 

EEK, and minority interests share –0.5 million EEK, In comparison with 

the results of 1997, the group’s net profit decreased by 9.7 million 

EEK. The profit forecast of AS Baltika for year 1998 anticipated 16 

million EEK of net profit. During the first half year, the company was 

able to meet 39 % (6.3 million EEK) of the annual profit forecast, 

which was in accordance with the plans. In its 10.09.98 Exchange 

announcement, AS Baltika evaluated the direct effect of the Russian 

financial crisis (started in August 1998), respectively to decline in 

the sales volumes, to amount to up to 33%. As of August, Baltika began 

to make provisions on the positions related to the crisis, and increase 

reserves on the account of expenditures. Regional extent of the Russian 

financial crisis and impact on markets was specified at the end of 1998 

and in January-February of 1999. According to the evaluations of AS 

Baltika, the direct loss from the 1998 Russian crisis totaled 7.8 

million EEK, which is also reflected in full amount on the 1998 

consolidated balance sheet and income statement. The indirect effect in 

the form of unearned profit due to decrease in the sales volume 

amounted to 5.3 million EEK.

 

The company’s profit in 1998 was also affected by the loss proceeding 

from the currency exchange differences, which exceeded the profit 

earned from the exchange differences by 1.9 million EEK, whereas the 

loss occurred mainly due to unfavorable exchange rates of USD, GBP and 

SEK. Increase in the bank loans in 1998 occurred mainly due to the 

reflection of bank loan residues of subsidiary AS Virulane (purchased 

in October 1998) in the year-end consolidated balance sheet in the 

amount of 10.7 million EEK.

 

 

Avo Reiska

Financial director