Estiko                        FINANCIAL RESULTS                 02/28/2002



COMMENTARY TO UNAUDITED FINANCIAL RESULTS, 2001



Financial ratios characteristic to the financial activities of AS Estiko:

                                              2001 a.            2000 a.

                                

General profitability of net sales              19,7%            21,1%

(gross profit / net sales)



Operating profitability of net sales            10,5%            10,2%

(oprating profit / net sales)



Return on sales                                  4,7%             5,7%

(net profit / net sales)



Return on equity                                8,5 %             1,0%

(net profit / average equity)



Return on assets                                 3,7%             4,9%

(net profit / average assets)



Coverage coefficient of short-term liabilities   0,71             0,86

(current assets / Short-term liabilities)



Owners' equity rate                             41,0%            44,8%

(owners' equity / assets)





Mission of the companies of Estiko Group - to create values for the owners,

partners and the society with the help of creative work environment and em-

ployees who have the feeling of ownership.



The consolidated audited net sales of AS Estiko in 2001 was EEK 172.4 mil-

lion (11 million EUR), the net profit EEK 8.1 million  (517 thousand EUR).

The net sales of the same period of the previous year was EEK  168.1  mil-

lion (EUR 10.7 million), the net profit EEK 9.5 million (607 thousand EUR).

The growth of net sales in comparison with the same period of the previous

year was EEK 4.3 million (298 thousand EUR) or 2.8%.  As compared  to  the

same period of the previous year the  profit  gained  was EEK  1.4 million

(90 thousand EUR) less.



The Group deals mostly with the two following areas of activity: manufactu-

ring and real estate operations.  Upon dividing two areas of activity, the

year 2001 has provided a clearer survey of financial  accounting  than the

year 2000. The company had 5.3 million EEK (336 thousand EUR) of restricted

expenditures in 2000, however, in 2001 the figure was only 44 thousand EEK

(2.8 thousand EUR). The decrease in restricted expenditures has influenced

the profit of real estate sector very much. Above all, the restricted costs

of the year 2000 are considered to be the general administration  costs of

the parent company. 



During the accounting period 29 967 thousand EEK (1 915 thousand EUR), were

allocated for employees' salary (with social tax), including 3 368 thousand

EEK (215 thousand EUR) in the parent company. The total remuneration   paid

to the members of the Management Board and Supervisory Board was  reflected

in the wage costs of the parent company. The average number of employees in

the Group was 290. The Management Board of AS Estiko consists of 3 members,

whose total remuneration amounted to 730 thousand EEK  (46.7 thousand EUR).

The Supervisory Board consists of 3 members, who received  all in  all  600

thousand EEK (38.3 thousand EUR).



Relevant occurrences in the year 2001::





* Liquidation of a subsidiary



At the Annual General Meeting of shareholders of AS Estiko Soojus held  on

04 May 2001, it was decided to dissolve the company.  As  of  31  December

2001,  the assets of AS Estiko Soojus amounted to 0.9 million EEK,  duties

formed 0.5 million EEK (32 thousand EUR) and the owner's equity 0.4 million

EEK (25.5 thousand EUR) on the basis of the balance sheet. Estiko Investee-

ringute AS took over the activities of AS Estiko Soojus. The  company  was

not operating in the years 2000 and 2001. The public limited company has no

personnel on the staff.





* Increasing of the share capital of the subsidiary



The Annual General Meeting of the shareholders  of AS Emajõe  Ärikeskus of

04.05.2001 passed a resolution on increasing  the  share  capital  in  the

amount of EEK 4.0 million (0.3 million EUR). 399, 955 shares with the nomi-

nal value of EEK 10 (0.64 EUR) were  issued.   After the  increasing,  the

share capital amounted up to EEK 22 million (1.4 million EUR). 



At the Extraordinary General Meeting of the shareholders of AS Emajõe Äri-

keskus of 12.12.2001 it was decided to increase the share capital by EEK 3

million (0.2 million EUR) - 300,000 new shares with the  nominal value  of

EEK 10 (0.64 EUR)  were issued.  The amount of new share capital after the

increasing is EEK 25 million (1.6 million EUR). The nominal value   in the

amount of EEK 3 million (0.2 million EUR) and the premium in the amount of

EEK 10.2 million (0.7 million EUR) will be paid for the shares issued. The

shares  were  paid  by a non-monetary contribution. The basis for the non-

monetary contribution is  the loan agreement  concluded between  AS Estiko

and AS Emajõe Ärikeskus, according to which  the parent company  has given

loan to the subsidiary in the amount of EEK 13.2 million (843 thousand EUR)

as of 10.12.2000.





At the extraordianry general meeting of the shareholders of  Estiko Inves-

teeringute AS, it was decided to increase the share capital by EEK 21 mil-

lion (1.3 million EUR), by emitting  2,100,000 new shares with the nominal

value of EEK 10  (0.64 EUR)  to the present shareholder.   The  new  share

capital after the increase is EEK 45 million (2.9 million EUR). The shares

were paid by a non-monetary contribution.





* Strategy of changes of Estiko Group



The year 2001 was the first one to implement a new systematic  approach in

the management system of Estiko Group. A two-year project has been develop-

ed with the consultation company KPMG, the aim of which is to increase the

merits of the company by valuing intellectual capital. The first stage  of

the development of the strategy was successfully completed during  the  fi-

nancial year; in the course of the development the business environment of

companies has been analyzed, the group and the vision of subsidiaries  has

been renewed, the long-term goals have been worded and critical success fi-

gures have been defined. In the next stage the company can move on with the

implementation of the principles of balanced scorecard in the level of the

group and its subsidiaries. The planned deadline of the project is December

2002, the result of the project is the completion of Balanced Scorecard mo-

del in the level of the company and employees.



In November the management board launched a project in order to restructure

AS Estiko. The purpose of restructuring is to regulate the affiliation  of

capital assets within the Group.  The immovable objects connected with the

management of immovable property are concentrated in Estiko Investeeringute

AS and the immovable objects  connected with  manufacturing  in  AS Estiko.

According to the evaluation of the management board of Estiko, the balance

value of the immovable property of the Group did not reflect  their market

value in all cases. On the basis of the valuation of immovable objects con-

ducted by Kinnisvaraekspert Tartu OÜ, the capital assets of the Group were

knocked down by 7.6 million EEK (0.5 million EUR), which decreased directly

the profit of the Group's financial year.





Overview of the manufacturing sector in 2001



The net sales of the  manufacturing sector in 2001 was  EEK  137.6 million

(8.8 million EUR) and the loss EEK 1.6 million (0.1 million EUR). The sales

of the same period of the previous year was EEK 141.5 million  (9  million

EUR) and the net profit EEK 6.4 million (0.4 million EUR). The decrease in

net sales was EEK 3.9 million (0.3 million EUR) or -2.8%  and  the  profit

earned was EEK 8.0 million (0.5 million EUR) less than a year earlier.



In the 2nd  quarter of 2001, the estimated prognosis  were ajusted by  ta-

king into consideration the reorganization efects.  For the year 2001  no

profit was not planned from the financial results of manufacturing due to

the following circumstances:

* Shutdowns in the manufacturing process caused by the reorganizations of

 manufacturing technology;

* increased repair costs;

* Increase of labour costs caused by the changes in work organization;

* Increase of interest costs caused by the lease liabilities;

* Increase of depreciation costs caused by the investments;

* Testing costs of the new production machines and modern materials in the

 4th quarter.



The requirements of package consumers for the products of  better  quality

have influenced the economic results of accounting year  considerably  and

have expressively brought out the shortages of our obsolete  manufacturing

equipment. The increase in sales in the manufacturing sector  is  expected

in the first half of the next year, when the influences  of rearrangements

and investments are revealed and new products are introduced in the market.



From the point of view of the growth strategy of manufacturing sector, the

year turned out to be the time of great rearrangements. The changes in the

sector of manufacturing logistics were completed, the primary task of which

was to locate the technological chain of manufacturing equipment  into the

circle system and to decrease the territorial logistics.  The strategic re-

arrangements were introduced  in the areas of  marketing  and  information

technology.



The investments in production were performed according to the approved in-

vestment plan. The choice of investments was based on the following prin-

iple: technology has to enable the maximum quality to be guaranteed and be

appropriate for the company for achieving its goals in the target market.



Investments were divided as follows:

Reconstruction of buildings    EEK  6.8 million  (0.4 million EUR)

Machinery, equipment           EEK 39.6 million  (2.5 million EUR)



Major part of the company's production was sold in the inner market, which

formed 85.7% of the total turnover. The rate of export amounted  to 14.3%.

The products were mostly exported to Latvia (37%), Ukraine (31%) and  Fin-

land (19%).



The vision of AS Estiko Plastar is to be the first choice as a producer of

packages and packaging materials in the target market.





The first stage of the project was covered in compliance with the strategic

management system of the Group, the development of the project will be con-

tinued in accordance with  the following stages  until the  goals and scale

of the employees working below master's level are specified. The project of

the development and  implementation of  quality management system  has been

approved and launched.



The planned time of the certification of the project is January 2003.



The project of implementation and development of economic software Navision

Axapta has been launched as well. Regulated processes  within  the  company,

which can be optimized with the help of software in order to  support  mana-

gerial decisions with the timely and necessary information, form the  basis

for successful start of economic software. The information  system  of  the

company is build up according  to the principle  of optimal  and  effective

planning of the company's resources, thereby creating values for the owners.



Major changes in the manufacturing processes have caused the need to change

the product-costing system to the activity-operational-costing system.  The

change of the costing system is in conformity with the implementation of new

economic software in 2002.





Overview of the real estate sector of the year 2001



The net sales of the  real estate sector of the  Estiko Group in the  year

2001 was EEK 35.1 million (2.2 million EUR), the net profit EEK 8.8.  mil-

lion (562 thousand EUR).  The corresponding figures for  the year  earlier

were EEK 26.6 million (1.7 million EUR), increase by EEK 8.5 million  (543

thousand EUR) and EEK 8.4 million (537 thousand EUR), increase by  EEK 0.4

million (25.5 thousand EUR).



The vision of the real estate sector of Estiko - we are innovative and able

to develop together with our customers  by offering  the best solutions re-

garding the rentable and immovable objects.



As of 31.12.2001, the real estate sector of the Group of Estiko include the

following enterprises:    

AS Emajõe Ärikeskus                    - participation 100%;

Estiko Investeeringute AS              - participation 100%; 

AS Estiko Soojus (upon liquidation)    - participation 100%; 

Tartu Toidukaubad                      - participation 100%



Important occurrences influencing the economic results of  real estate sec-

tor in the year 2001:



* The basement of Kesklinna Kaubahall was re-built to serve as sales areas.

All in all, 8.7 million EEK (556 thousand EUR)   was invested  in the said

building in the 3rd quarter of the year. After completion of the basement,

the business and sales areas of the size of 5600 m² in Kesklinna Kaubahall

have received new looks and technical equipment



* A new development concept  is being elaborated  in the  framework of the

E-Kaubamaja project. The purpose is to  evolve a shopping  centre having a

certain style, which enables the right place to be found  in the gradually

growing competition of sales areas. On the basis of the project, the  pre-

parations for reconstruction are performed beginning of the year 2002, the

purpose of which is to open the new shopping centre in May 2002.



* The land units in Tehase and Teguri Str. were  privatized with  the pre-

-emptive right with the total cost of EEK 1.3 million (83.1 thousand EUR).



* AS Estiko sold 17 473/22 974  proportionate share  of the  real property

located at Vesse 4, Tallinn in the 2nd quarter of the year,  becoming  the

owner of only 5 501/ 22 974 of the property and manager of a shop building

of the size of 2600 m², built in 1998. The transaction provided 7.2 million

EEK (460 million EUR) of accounting profit. The sales transaction is a part

of a long-tem strategy, pursuant to which Estiko concentrates  its  activi-

ties in the area of immovable property in Tartu,  dealing with the develop-

ment of perspective immovable objects.



* AS Emajõe Ärikeskus received the apartment building title on the basis of

the usufruct contract, previously owned by Viru Vara Liising and Kinnisvara

AS (in bankruptcy). The apartments locate in the first and second  floor of

Emajõe Ärikeskus office building. These areas are rented for using as  ser-

vice areas. 



* AS Emajõe Ärikeskus repurchased office premises  on the 14th floor,  the

area of which is 71 m², aiming at building an office of Estiko Group there.



* The design and preparation works  of the  2nd stage of  Emajõe Ärikeskus

were continued. Among other things,  the new detailed plan  established by

Tartu City Council on 21 June 2001  concerning the areas  located at  Turu

Str. 2 and Soola Str. 8, Tartu, was prepared. AS Emajõe Ärikeskus acquired

real property located at Soola Str. 1B. The designs of the buildings of the

2nd stage of Ärikeskus are being reviewed by architects.



* According to the plans in the area of immovable property sector in  2001,

the market price was assessed on the  basis of the conservative  principle.

On the basis of the valuation conducted by Kinnisvaraekspert Tartu OÜ, the

discount of immovable objects in the amount of  7.6 million EEK (486 thou-

sand EUR) was exercised in the 4th quarter of the year. The said  discount

influenced directly the economic results of the Group. 





To this day the establishment of the 2nd stage of Emajõe Ärikeskus has not

been launched, as the situation in Tartu sales areas market has been chan-

ged and the competition has become more intense. It has caused a  thorough

analysis of the risks of the project by  operating  companies  as  well as

financiers.





Ellen Tohvri

Chairman of the Managm. Board

+372 7 371 000