Rakvere Lihakombinaat         FINANCIAL RESULTS                 08/11/2004



FINANCIAL RESULTS 6 MONTHS 2004



AS Rakvere Lihakombinaat is the largest meat processing company in the 

Baltics. As of 30 June 2004 Rakvere Lihakombinaat Group had 1,231 

employees (1,331 employees as of 30 June 2003).

The parent company is located and registered in Estonia, County of 

Lääne-Virumaa, Sõmeru , Roodevälja Village.



The Group companies as at 30 June 2004:

                            Country      Participation  Participation 

                         of location        30.06.04       31.12.03

AS Rakvere Lihakombinaat 

(the parent company)            Estonia	

AS Ekseko                       Estonia        98,4%          98.4%

     AS Ekseko’s subsidiaries:

     OÜ Kurika Seafarm          Estonia         100%           100%

     OÜ Põlva Peekon            Estonia         100%           100%

     OÜ Viiratsi Söödatehas     Estonia         100%           100%

     OÜ Viiratsi Peekon         Estonia         100%           100%

     OÜ Lutsu Seafarm           Estonia         100%           100%

AS Linnulihatooted              Estonia          76%            76%

AS Rigas Miesnieks               Latvia       93.82%         93,82%

OÜ Klaipedos Maisto Produktai Lithuania         100%           100%

     OÜ Klaipedos Maisto Produktai subsidiaries:

     OÜ Pentinuotis           Lithuania         100%           100%

     OÜ Klaipedos Maisto 

          Prekyba             Lithuania         100%           100%





2. General economic environment and its effect on the company



The Baltic States officially joined the European Union in the second 

quarter of 2004. Although the direct effects of the accession cannot be

 seen straight away, two significant changes have already occurred for 

the company since May 1st, 2004: The protective customs duties in Latvia 

on pork imported from the European Union were abolished. This simplified 

intra-group trade and enhanced profitability. Also the customs 

formalities on the border of the Baltic States were ended, simplifying 

the transport of goods and enabling more flexible work organisation.



The price level of the company’s main raw materials - pork and beef - 

was relatively low in the first half of 2004. The low prices had an 

impeding effect on the Rakvere Group company Ekseko, the largest pig 

farm in the Baltics. Still, the investments made by the company and its 

high efficiency enable Ekseko to earn profit even when the price levels 

are low. 



The measures implemented in the Lithuanian subsidiary Klaipedos Maisto 

Produktai for increasing efficiency and cutting costs had a positive 

effect on the economic results of the Group at the end of the 2nd 

quarter. The logistics centre which was launched in Rigas Miesnieks 

at the end of the quarter enables to render services of improved 

quality and represents one of the biggest investments made by Rakvere 

Group in the last few years. At the same time, the Rigas Miesnieks 

economy programme has helped to cut the company’s costs.



The positive economic growth was accompanied by an increase in the 

consumption of meat and meat products in the Baltic region, 

especially in the major retail chain stores. Increase in private 

consumption prompted a growth in the sales volumes of the company, 

especially as regards the fresh meat sector, even though poor weather 

in May and June had a somewhat negative effect on meat consumption. 

Despite the overall increase in the expense level for the Rakvere Group 

companies, the tightening competition in the retail sector and the 

growing demands for the suppliers have lead to a decline in prices of 

meat products.



The business environment has been quiet in 2004, compared to 2003, 

when the regular operations of the Rakvere Group were interrupted by 

several aspects. The peaceful business environment enabled the company 

to commit to raising the efficiency of several of its core processes. 

This, in turn, enhanced the company’s profitability. Increase in 

profitability, lack of extraordinary expenses and growth in sales 

volumes enabled the company to earn a significantly bigger profit 

than in the same period last year.



3. Sales and profit



The net sales of Rakvere Lihakombinaat Group in the first 6 months of 

2004 totalled 600,8 million kroons or 38 398 th. euros (559,3 million 

kroons or 35 744 th. euros in 2003). 

The sales volume was 21,5 th. tons (including by-products)  in the 

Baltic States. This constitutes a 9,2 % increase compared to last year. 

The company’s production volumes continued to grow at a relatively 

greater speed than that of sales. This indicates a drop in average 

product price.

The net profit of Rakvere Lihakombinaat Group was 43,1 million kroons 

or 2 752 th. euros (in 2003 13,6 million kroons or 871 th. euros). 



Main financial indicators of Rakvere Lihakombinaat Group, millions 

of kroons (th. euros)





                      6months 2004   6months 2003   12months 2003



Net sales            600,8 (38 398)   559,3 (35 744)  1 166,3 (74 543)



Operating expenses   554,0 (35 405)   541,0 (34 576)  1 115,9 (71 321)

Operating profit      46,8  (2 993)    18,3  (1 168)     50,4  (3 222)	    



Net profit            43,1  (2 752)    13,6    (871)     39,8  (2 546)	     



Investments           73,8  (4 715)    39,3  (2 512)     89,7  (5 734)





4. Forecast



For the second half-year, the company’s management forecasts a possible 

increase in pork and beef price levels, influenced mainly by the common 

EU market. In all EU area beef consumption generally exceeds production 

volumes. Consequently, beef prices are subjected to the strongest 

pressure. The forecasted price increase may have an effect on the 

economic results of the Group due to the price-sensitive market.



The negative effect of the raw material price increase is still 

compensated by the growth in the consumption of meat products in the 

Baltic region. Increased export to the "Old" European market enables 

to manage the Rakvere Group meat balance more flexibly, and maximise 

the profit to be earned from different markets.



According to the management, the company’s integrated preliminary 

production and processing together with continual commitment to 

increasing internal efficiency will guarantee Rakvere Group’s success 

in the near future. Ekseko’s share in the Group’s profit will increase, 

if the raw material prices are going to rise.



In order to secure continual increase in efficiency, the company is 

planning the merger of Klaipedos Maisto Produktai with AS Tallegg’s 

Lithuanian subsidiary, AS Selingas.





Olle Horm

Chairman of the Management Board 

Rakvere Lihakombinaat AS







RAKVERE LIHAKOMBINAAT GROUP 

BALANCE SHEET 

                       in Thousands of kroons    in Thousands of euros

ASSETS                   30.6.2004 31.12.2003    30.6.2004 31.12.2003



Current assets				

Cash and bank               25 501    33 026       1 630    2 111

Trade receivables           98 137    86 733       6 272    5 543

Tax receivables              8 633     8 543         552      546

Other short-term 

receivables                  5 214     4 840         333      309

Inventories                 91 963    88 046       5 877    5 627

Biological assets           72 310    65 377       4 621    4 178

Total current assets       301 759   286 565      19 286   18 315

				

Non-current assets				

Long-term receivables and 

investments                 35 395       967       2 262       62

Tangible fixed assets      473 642   437 731      30 271   27 976

Other intangible assets      3 349     3 296         214      211

Goodwill                       736       826          47       53

Total non-current assets   513 122   442 821      32 794   28 301

				

TOTAL ASSETS:              814 881   729 385      52 080   46 616

				

LIABILITIES AND OWNERS’ EQUITY				

				

Current liabilities				

Loans and lease payables    33 888     4 355       2 166      278

Supplier payables           80 999    71 241       5 177    4 553

Tax payables                12 879    10 116         823      647

Deferred tax                 1 741     1 698         111      109

Other current liabilities   34 361    21 833       2 196    1 395

Total current liabilities  163 869   109 243      10 473    6 982

				

Long-term loans and 

lease payable              111 588   124 339       7 132    7 947

Pension liabilities            756       738          48       47

Total liabilities          276 213   234 320      17 653   14 976

				

Minority interest            3 673     3 628         235      232

				

Owners’ equity				

Share capital              377 217   377 217      24 108   24 108

Mandatory legal reserve     11 726     9 734         749      622

Retained earnings          146 342   105 269       9 353    6 728

Unrealised translation 

differences                   -291      -783         -19      -50

Total owners’ equity       534 994   491 437      34 192   31 408

				

TOTAL LIABILITIES AND 

OWNERS’ EQUITY :           814 881   729 385      52 080   46 616







RAKVERE LIHAKOMBINAAT GROUP

INCOME STATEMENT

                       in Thousands of kroons    in Thousands of euros

Revenue                6 months 04 6 months 03  6 months 04 6 months 03



Net sales                 600 802     559 274     38 398    35 744

Other revenue               3 137       5 309        201       339

Total revenue             603 940     564 583     38 599    36 083

				

Change in work-in-progress and 

finished goods              5 715      -3 790        365      -242

Change in fair value of 

biological assets           6 933      -3 363        443      -215

Materials, consumables 

and supplies             -381 602    -356 136    -24 389   -22 761

Other operating expenses  -85 287     -80 222     -5 451    -5 127

Personnel expenses        -74 723     -76 161     -4 776    -4 868

Depreciation and write-downs of 

non-current assets        -27 903     -24 993     -1 783    -1 597

Other expenses               -244      -1 634        -16      -104

				

Operating profit           46 829      18 282      2 993     1 168

				

Financial income/expenses				

Net foreign exchange 

gain/loss                    -127        -657         -8       -42

Interest and other 

financial income              869       1 118         56        71

Interest and other 

financial expenses         -4 469      -5 243       -286      -335

Total financial 

income/expenses            -3 727      -4 782       -238      -306

				

Profit before taxes        43 102      13 500      2 755       863

Income tax                      0           0          0         0

Minority interest             -37         123         -2         8

Net profit                 43 066      13 623      2 752       871

				

Earnings per share           1,14        0,36      0,073     0,023





Olle Horm

Chairman of the Board

+372 32 29 221