ESTIKO

COMMENTARY TO FINANCIAL RESULTS



COMMENTARY TO CONSOLIDATED FINANCIAL RESULTS, Q2 2000



AS Estiko most important profitability and operating ratios:

                                       	     H1 2000  	      H1 1999

Gross margin                                   17.6%            20.1%

Operating margin                                8.2%             9.6%

Profit margin                                   4.0%             4.3%

ROE                                             8.0%             9.5%

ROA                                             3.8%             4.0%

Current ratio					1.16             1.14

Equity-to-assets ratio 			       48.9%            44.7%

Earnings per share				0.55             0.53



Gross margin (gross profit / net sales)

Operating margin (operating profit / net sales)

Profit margin (net profit / net sales)

ROE (net profit / owners equity)

ROA (net profit / total assets)

Current ratio (current assets / current liabilities)

Equity-to-assets ratio (owners equity / total assets)

Earnings per share (net earnings per share, in EEK)



In H1 Estiko group's consolidated and unaudited turnover stood at EEK 

82.6 million, and net profit at EEK 3.3 million. Compared with H1 

1999 results, the turnover grew by 14.6% or EEK 10.5 million. In H1 

1999 the group's net profit was EEK 0.2 million lower.



In Q2 2000 the group's net sales amounted to EEK 46.1 million, 

providing EEK 9.6 million (26.0%) growth from Q1 2000, and EEK 9.7 

million (26.7%) y-o-y growth. In Q2 the group earned EEK 2.7 million 

of net profit, providing EEK 2.2 million growth from Q1 2000, and EEK 

0.5 million growth on annual basis.



H1 2000 gross margins: 19.9% in Q2, 14.8% in Q1, and 17.6% in H1.  

Last year's gross margins: 19.3% in Q2, 21.0% in Q1 and 20.1% in H1. 

In Q2 the gross margin grew mainly due to realization of high sales 

margin product groups. 



H1 2000 operating margins: 9.8% in Q2, 6.1% in Q1, 8.1% in H1. 

Last year's gross margins: 11.8% in Q2, 7.2% in Q1 and 9.5% in H1. 

Compared with Q1, the operating margin increased in Q2 by 3.7%, due 

to cut in marketing and administrative expenses. 



H1 200 profit margins: 5.9% in Q2, 1.6% in Q1 and 4.0% in H1. 

Last' year's profit margins: 6.1% in Q2, 2.4% in Q1 and 4.2% in H1. 



The group operates in two main fields: production and real estate 

administration. 





PRODUCTION



On 28.06.2000 Estiko-Raamex and Estiko-Plastar Management Boards 

signed a merger agreement, whereby the activities of AS Estiko-Raamex 

will be terminated, and its assets transferred to AS Estiko-Plastar. 

According to the agreement, no changes will be made to the employment 

contracts of the company's workers. Share capital of Estiko-Raamex is 

EEK 0.9 million and Estiko-Plastar's EEK 1.5 million. Merger of the 

two production companies will lead to substantial cut in marketing 

and administrative expenses.



In Q2 2000 AS Estiko-Plastar unaudited turnover was EEK 39.8 million 

(EEK 29.9 million in Q1 2000, 33.1% growth), and net profit EEK 2.4 

million (EEK 0.7 million loss in Q1 2000). H1 unaudited turnover was 

EEK 69.8 million (EEK 56.8 million in H1 1999; EEK 13 million or 

22.9% y-o-y growth), and net profit EEK 2.0 million (EEK 4.0 million 

in H1 1999). H1 I profit margin fell on annual basis from 7.0% to 

2.9%. Lower profit was mainly due to 1.4 times increase in prices of 

polyethylene, compared with the last year's prices. The cost of 

polyethylene accounts for 75% of total cost of materials, thus 

increase of polyethylene prices also increases substantially the 

expenses. Equipment renovation and maintenance expenses have 

increased, due to costs of maintenance of old equipment. 



Management Board of AS Estiko-Plastar is in the process of developing 

new strategies, with an aim to unite complexly interconnected goals, 

which the company wants to achieve in order to compete also with 

skills and innovation, not just based on material assets.



REAL ESTATE



As of 30.06.2000 Estiko group real estate sector consists of the 

following companies:

AS Emajõe Ärikeskus             holding  80%

AS Estiko Investeeringud        holding 100%

AS Estiko-Soojus                holding 100%

AS Tartu Toidukaubad            holding 100%



In H1 366 AS Estiko Soojus shares were bought at price of EEK 44.5 

thousand, thus acquiring 100% holding in the company. 



In Q2 Estiko group's real estate sector's unaudited turnover stood at 

EEK 6.2 million, and net profit at EEK 0.3 million. Compared with Q1 

results, the turnover fell by 6% or EEK 0.4 million. In Q1 the real 

estate sector's net profit was EEK 1.0 million; in Q1, however, the 

profit figure was largely affected by EEK 0.3 million income from 

sale of premises on the fourth floor of Emajõe Ärikeskus (Emajõe 

Business Center) to BICO. Lower turnover and profit were mainly due 

to seasonal nature of heat energy sales, which is accounted for under 

the real estate administration sector.



H1 unaudited net sales amounted to EEK 12.8 million (EEK 15.3 million 

in H1 1999), and net profit EEK 1.3 million (EEK 0.9 million net loss 

in H1 1999). 



Estiko real estate sector will improve the services in Emajõe 

Ärikeskus. As of 30.06.2000 the company had sold 21% of Emajõe 

Ärikeskus and 45% leased to tenants. Improvements to real estate 

sector will secure better service to our clients.





Ellen Tohvri

Management Board chairman

+372 73 08 302