Merko Ehitus                  FINANCIAL RESULTS                 11/07/2003



FINANCIAL RESULTS 9M 2003



COMMENTARY TO 9M 2003 FINANCIAL RESULTS



Merko Ehitus group 9M 2003 consolidated and unaudited net sales amounted

to 1 854,7 million EEK (118,5 million EUR), and net profit was 134,0

million EEK (8,6 million EUR).

The respective figures year ago were net sales of 1 140,6 million EEK

(72,9 million EUR) and net profit of 72,3 million EEK (4,6 million EUR).



Merko Ehitus group deals in the field of construction and with activities

concerned to that, in Estonia, Latvia and Lithuania. Companies of the group

9M 2003 net sales and consolidated net sales (sales outside the group) were:



                                                           in thousand EEK



                                                Net sales        including

                                                              consolidated

                                                                 net sales

Estonian companies

    Construction

    AS Merko Ehitus                             1 087 920        1 087 420

    AS Gustaf (100% partnership)                   35 542           31 505

    OÜ Gustaf Tallinn (100% partnership)            9 915            9 601

    AS Merko Tartu (66% partnership)               92 074           80 553

    Tallinna Teede AS (100% partnership)           99 621           83 317

    Production of structures for small houses

    OÜ Matek (71,6% partnership) sold in 29.07.03  30 304           29 897

    Construction

    AS Normanni Linnagrupp (50% partnership)        4 091                -

    Production of concrete

    AS Tartu Maja Betoontooted 

    (25% partnership)                             108 775                -

    Telecommunication networks

    AS Telegrupp (45% partnership)                 29 945                -

Latvian companies

    Construction

    SIA Merks (100% partnership)                  174 760          174 760

Lithuanian companies

    Construction

    UAB Merko Statyba (100% partnership)          357 686          357 686





                                                           in thousand EUR



                                                Net sales        including

                                                              consolidated

                                                                 net sales

Estonian companies

    Construction

    AS Merko Ehitus                                69 531           69 498

    AS Gustaf (100% partnership)                    2 272            2 014

    OÜ Gustaf Tallinn (100% partnership)              634              614

    AS Merko Tartu (66% partnership)                5 885            5 148

    Tallinna Teede AS (100% partnership)            6 367            5 325

    Production of structures for small houses

    OÜ Matek (71,6% partnership) sold in 29.07.03   1 937            1 911

    Construction

    AS Normanni Linnagrupp (50% partnership)          261                -

    Production of concrete

    AS Tartu Maja Betoontooted

    (25% partnership)                               6 952                -

    Telecommunication networks

    AS Telegrupp (45% partnership)                  1 914                -

Latvian companies

    Construction

    SIA Merks (100% partnership)                   11 169           11 169

Lithuanian companies

    Construction

    UAB Merko Statyba (100% partnership)           22 860           22 860





Merko Ehitus group 9M 2003 consolidated data illustrating financial

ratios were:



                                      9M 2003        9M 2002



Net profit margin                      7,2 %          6,5 %

Operating profit margin                8,1 %          6,3 %

Return on equity (per year)           50,0 %         38,6 %

Return on assets (per year)           20,1 %         16,5 %

Current ratio                          1,5            1,5

Invoice turnover (per year)            5,5            5,2

Equity-to-assets ratio                38,6 %         39,9 %





Year 2003 9M consolidated and unaudited income statement and balance sheet

are compiled in accordance with the principles of the International

Accounting Standards (IAS), and correspond with the Estonian legal acts

regulating the accounting principles used.





INCOME STATEMENT 9M 2003

consolidated, unaudited in thousand EEK and EUR



                                         EEK                   EUR

                                  2003.a.     2002.a.    2003.a.    2002.a.

                                  9 months    9 months   9 months   9 months



Sales                            1 854 739   1 140 571    118 539     72 896



Cost of sales                   (1 657 554) (1 021 130)  (105 937)   (65 262)



Gross profit                       197 185     119 441     12 602      7 634



Marketing expenses                 (10 790)     (9 517)      (690)      (608)

Administrative expenses            (49 454)    (35 208)    (3 161)    (2 250)

Other operating income              15 317       5 252        979        336

Other operating expenses            (1 455)     (8 117)       (93)      (519)



Operating profit                   150 803      71 851      9 638      4 592



Financial income and expenses

from stocks of subsidiaries            542           0         35          0

Financial income and expenses

from stocks of associates            3 372       1 533        216         98

Financial income and expenses from

other noncurrent fin. investments    1 080          11         69          1

Interest expense                    (1 351)       (444)       (86)       (28)

Foreign exchange gain               (2 402)     (2 434)      (154)      (156)

Other financial income and expense  (5 078)      4 424       (325)       283

Total financial income and expenses (3 837)      3 090       (245)       197



Profit before taxes                146 966      74 941      9 393      4 790



Income tax                         (11 088)     (2 119)      (709)      (135)



Net profit (loss) for the

financial year                     135 878      72 822      8 684      4 654



Minority interest                   (1 859)       (535)      (119)       (34)



Net profit (- loss) for the group  134 019      72 287      8 565      4 620



Net profit (- loss) per share

(basic and diluted, in EEK and EUR)  15,14        8,17       0,97       0,52







BALANCE SHEET AS OF 30.09.2003

consolidated, unaudited in thousand EEK and EUR



                                       EEK                      EUR

                             30.09.2003   31.12.2002  30.09.2003  31.12.2002

ASSETS



Cash and cash equivalents       198 137       96 310      12 663       6 155



Marketable securities            41 879       53 018       2 677       3 388



Accounts receivable             445 990      165 992      28 504      10 609

Allowance for doubtful receivables (407)        (424)        (26)        (27)

Total accounts receivable       445 583      165 568      28 478      10 582



Receivables from associates       2 013        1 227         129          78

Other short-term receivables     30 493       27 245       1 949       1 741

Total other receivables          32 506       28 472       2 078       1 820



Interest receivable               1 779        1 145         114          73

Dividends receivable                238            0          15           0

Other accrued income                  0           32           0           2

Total accrued income              2 017        1 177         129          75



Prepaid taxes                    13 327       11 275         852         721

Other prepaid expenses            8 028        3 158         513         202

Total prepaid expenses           21 355       14 433       1 365         922



Raw materials                     1 118        2 735          71         175

Work-in-progress                  2 867       41 119         183       2 628

Finished goods                        0        1 314           0          84

Merchandise purchased for resale 44 647       66 426       2 853       4 245

Prepayments to suppliers            272          374          17          24

Prepayments for real estate       3 581       15 181         229         970

Construction-in-progress         28 760       12 229       1 838         782

Due from customers               91 845       84 962       5 870       5 430

Total inventories               173 090      224 340      11 062      14 338



TOTAL CURRENT ASSETS            914 567      583 318      58 451      37 281



Shares in associated companies   23 921       21 338       1 529       1 364

Long-term receivables from

associated companies              3 000        7 757         192         496

Other shares, holdings and

debt securities                   1 800        1 800         115         115

Miscellaneous longterm receivabl.11 515        9 906         736         633

Long-term accounts receivable         0        1 679           0         107

Total long-term financial assets 40 236       42 480       2 572       2 715



Land                             39 780       15 249       2 542         975

Buildings                         3 496       13 544         223         866

Accumulated real-estate

investments depreciation           (326)      (5 140)        (21)       (329)

Prepayments for real-estate

investments                           0       11 655           0         745

Total real-estate investments    42 950       35 308       2 745       2 257



Land and buildings                8 306       13 015         531         832

Ground lease                        458          458          29          29

Plant and equipment              97 886       66 854       6 256       4 273

Other equipment and fixtures     23 701       20 683       1 515       1 322

Accumulated depreciation        (55 082)     (50 790)     (3 520)     (3 246)

Self-constructed physical

assets under construction           216          170          14          11

Prepayments for noncurrent

physical assets                     410            0          26           0

Total noncurrent physical assets 75 895       50 390       4 851       3 220



Purchased concessions, patents,

licenses, etc.                      252          135          16           9

Goodwill                         (1 608)      (5 418)       (103)       (346)

Total intangible assets          (1 356)      (5 283)        (87)       (338)



TOTAL NON-CURRENT ASSETS        157 725      122 895      10 080       7 854



TOTAL ASSETS                  1 072 292      706 213      68 532      45 135





Short-term loans and bonds        9 063        8 087         579         517

Current period long-term

debt repayment                    7 387        4 717         472         301

Total debt obligations           16 450       12 804       1 051         818



Customer prepayments             21 035       42 820       1 344       2 737



Accounts payable to suppliers   297 939      179 011      19 042      11 441



Payables to associated companies    373        3 853          24         246

Other short-term payables         2 503            0         160           0

Total other payables              2 876        3 853         184         246



Tax liabilities                  27 302       16 344       1 745       1 045



Payables to employees            15 948       18 051       1 019       1 154

Dividends payable                     0          889           0          57

Interest payable                    213            6          14           0

Other accrued expenses              772        1 037          49          66

Total accrued expenses           16 933       19 983       1 082       1 277



Provisions for construction

warranty liability                4 284        3 368         274         215

Due to customers                238 491      104 917      15 242       6 705

Total current provisions        242 775      108 285      15 516       6 921



TOTAL CURRENT LIABILITIES       625 310      383 100      39 964      24 484



Loans, bonds and financial

lease liabilities                17 109        2 604       1 093         166



Accounts payable to suppliers     8 986       14 900         574         952

Other long-term payables          2 440            0         156           0

Total other long-term payables   11 426       14 900         730         952



TOTAL NON-CURRENT LIABILITIES    28 535       17 504       1 824       1 119



TOTAL LIABILITIES               653 845      400 604      41 788      25 603



OWNERS' EQUITY

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               180 430      101 480      11 532       6 486

Net profit (-loss)

for the financial year          134 019       98 863       8 565       6 318

Exchange rate differences          (604)         174         (39)         11

TOTAL OWNERS' EQUITY            414 145      300 817      26 469      19 226



Minority interest                 4 302        4 792         275         306



TOTAL LIABILITIES AND

OWNERS' EQUITY                1 072 292      706 213      68 532      45 135





Ülo Metsaots

Management Board member

+372 6 805 104