BALTIKA

COMMENTARY TO FINANCIAL RESULTS



COMMENTARY TO GROUP'S FINANCIAL RESULTS, 9 MONTHS 2001



AS Baltika’s consolidated and unaudited net sales in 9m 2001 amounted to 

EEK 302.8 mln, providing EEK 41.9 mln (16%) annual growth. Growth in sales 

is achieved mainly due to increase in sales of manufactured output and

expansion of controlled retail sales premises. Sales of manufactured 

output amounted to EEK 242.4 mln (EEK 47.1 mln or 24% more than in 9m 2000) 

and turnover of subcontracting works EEK 58.7 mln (EEK 5.2 mln or 8% less 

than in 2000). Manufactured output accounted for 80% of net sales. Exports 

accounted for 73% (EEK 220.9 mln) of net sales, providing EEK 47.4 mln 

(27%) annual growth.



AS Baltika 9m 2001 consolidated and unaudited operating profit amounted to

EEK 14.6 mln (EEK 14.6 mln in 9m 2000, respectively). Baltika's 

consolidated and unaudited net profit before minority interest was 

EEK 10.5 mln, and group's profit amounted to EEK 9.2 mln (EEK 13.2 mln 

and EEK 10.7 mln in 9m 2000, respectively). Compared with the last year, 

AS Baltika group's 9m 2001 consolidated net profit decreased 14% 

or EEK 1.5 mln. Net profit was influenced by development expenses 

(totalling EEK 5.0 mln) for establishment of new retail sales concept 

and new trademark (to be applied in 2002), for development of 

information technology and logistics systems, and for elaboration 

of group's management system, all proceeding from the company's 

development strategy. Interest expenses grew due to borrowings 

for investments (influencing net profit by additional EEK 1.4 mln). 



As of 30.09.2001, Baltika has the control of 51 retail stores in 

7 states, incl. "shop-in-shop" type of stores or franchises, increasing 

by 23 stores compared with the last year.



Sales by markets (EEK mln):

		    

               	      Q3 2001   Q3 2000   9m 2001   9m 2000	

Estonia             	24.6      32.5      80.3      85.6

Latvia. Lithuania       23.2      20.7      57.5      53.6	

Scandinavia      	32.5      30.91     73.3      70.21

Eastern Europe       	30.8      12.7      68.5      23.8

Western Europe      	 5.7       9.5      18.4      24.4

USA                  	 1.4       0         3.1       1.49



                  

In 9m 2001, Baltika group has made investments in total of EEK 30 mln 

of which investments made into development of retail sales (opening of 

new stores and renovation of old stores) amounted to EEK 10 mln,

EEK 7.8 mln was invested into development of information technology 

and logistics systems supporting the sales activities (implementation 

of new software, and building a logistics centre in Tallinn), 

EEK 6.9 mln was invested into maintenance of production bases 

(improvements to production facilities, and launch of construction 

works of a new factory in Ahtme), and EEK 5.3 mln was invested into

daily operations.



As of 30.09.2001 consolidated total assets amounted to EEK 287.2 mln, 

having increased in nine months by EEK 54 mln. The company's current 

assets increased by EEK 36 mln. In nine months customer receivables 

grew by EEK 33 mln, and inventories by EEK 10.4 mln. Proceeding from 

growth in investments, non-current assets increased by EEK 17.9 mln. 

In Q3 Short-term bank loans were replaced by long-term loans, and

an additional bank loan of EEK 14.7 mln was taken to finance

investments and development projects.



AS Baltika financial ratios as of 30.09.2001:



                                             30.09.2001  30.09.2000

                                   

- gross margin (gross profit/net sales)          4.84 %     5.61 %

- profit margin (net profit/net sales)           4.79 %     5.04 %

- ROE (net profit/owners equity)                 6.89 %     8.6 %

- ROA (net profit/average cost of assets)        4.0 %      4.5 %

- Quick ratio           			 1.2        0.94

((current assets - inventories)/current liabilities)





Ülle Järv

Management Board member

+372 6 302 741