KLEMENTI

COMMENTARY TO FINANCIAL RESULTS



COMMENTARY TO FINANCIAL RESULTS, Q1 2000



In Q1 2000 the consolidated and unaudited net sales of AS Klementi 

amounted to EEK 25.2 million, which is EEK 2.2 million or 9.6% 

less than in Q1 1999 (Q1 99 consolidated net sales EEK 23.0 million). 

Compared to the same period last year, the sale of goods produced 

increased by 38.3% (from EEK 12.0 million to EEK 16.6 million).



Sale of goods produced by markets (million EEK):

                    	   Q1 2000       Q1 1999           Change

Estonia                       10.1           7.8            29.5%

Latvia, Lithuania             2.9            2.2            31.8%

Finland, Sweden               3.4            1.8            88.9%

Other                         0.2            0.2              -



Increase in sales of goods produced was due to changes in marketing 

policy, whereby sales to Scandinavian countries increased 

substantially. More than half of domestic sales (EEK 6.4 million) 

were made through the chain of company's own stores, established in 

1999. In Q1 2000 the sales of goods produced and group output volume 

did not grow; compared with the same period last year, the sales of 

subcontracting works were lower by 18.6% (from EEK 9.7 million to EEK 

7.9 million).



In Q1 2000 AS Klementi consolidated and unaudited loss stood at 

EEK 2.1 million (net loss during the same period last year EEK 

1.6 million).



Net loss was mainly due to the following factors:

- delayed delivery of fabrics for spring collections and resulting 

under-fulfillment of sales schedule of goods produced in Q1;

- expenditures for development of retail sales (also main reason for 

increased operating expenses)



Lower sales volume is also reflected in increased inventories of 

finished goods, as compared with the standings at the end of the last 

year. Compared to Q1 1999, however, volume of finished goods 

inventories is lower by EEK 1.5 million.



In Q2 the company plans to organize several promotional activities, 

with an aim to gain back funds invested in spring collection.



In March 2000 the company started to upgrade its technological 

equipment, based on the resolution of annual general meeting 

(24.03.00) to increase share capital (total EEK 11.0 million, incl. 

monetary payment of EEK 8.55 million). In year 2000 Klementi intends 

to invest EEK 0.8 million in sewing equipment with an aim to improve 

production effectiveness.



In March the company started to build a new logistics center at cost 

of EEK 5.5 million. The logistics center is scheduled to be completed 

by September 2000; in the future P.T.A. Group OY will conduct the 

distribution of raw materials to subcontractors through the logistics 

center. 

Construction of new logistics center will be financed by Hansa 

Leasing in the amount of EEK 3.5 million and by P.T.A. Group OY in 

the amount of EEK 2.0 million, through issue of convertible bonds 

(see resolutions of annual general meeting).





Madis Võõras

Management Board chairman

+372 6 710 700