Baltika                       FINANCIAL RESULTS                 08/11/2004



2004 6 MONTH RESULTS



Comments on AS Baltika financial results for 6 months of

2004





General results



The unaudited consolidated net sales of AS Baltika in the

first six months of 2004 were EEK 269,4m (EUR 17.22m) and

the net profit was EEK 1.72m (EUR 0.11m). Compared to the

first half of 2003, the net sales increased by 21.2% (net

sales EEK 222.38m; EUR 14.21m, respectively). AS Baltika

ended the first half of 2003 with a loss of EEK 32.44m (EUR

2.07m).



The unaudited consolidated net sales of AS Baltika in the

second quarter of 2004 were EEK 138.73m (EUR 8.87m) and the

net profit was EEK 1.14m (EUR 0.07m).

Compared to the same period of 2003, the net sales increased

by 27.8 (net sales EEK 108.57m; EUR 6.94m, respectively).

The second quarter of 2003 was ended with a loss of EEK

12.47m (EUR 0.8m).



Sales



Retail sales

Based on the sales of its three retail brands, the sales of

the Baltika retail system (Estonian, Latvian, Lithuanian,

Polish, Ukrainian, Russian and Swedish markets) for the six

months were EEK 188.3m (EUR 12.03m), exceeding the result of

the same period of the previous year by 21% (retail sales

EEK 146.13m; EUR 9.34m, respectively). Retail sales formed

70% of total sales, compared to 66% in the same period of

the previous year.



Sales growth was the largest on the Ukrainian (growth

55.8%), Latvian (growth 43.8%) and Lithuanian (growth 29.8%)

markets, where sales totalled EEK 102.61m (EUR 6.56m). On

the domestic Estonian market, the six months’ sales

increased by 23.1% compared to the same period of the

previous year, amounting to EEK 55.33m (EUR 3.54m). The

joint venture of eight shops in Russia, launched in May, has

been successful with sales of EEK 7.46m (EUR 0.48m).



Sales on like-for-like spaces (comparable shops in a

comparable period) increased the most in Estonia (11%),

Latvia (8%), and the Ukraine (10%).



The overall sales efficiency of the retail system (sales/m2)

increased by 6.1% compared to the first half of the previous

year.



Monton was the most sold brand in the retail system in the

first half of 2004; the six months’ sales totalled EEK

107.44m (EUR 6.87m) and increased by 1.7% compared to the

same period of the previous year.

The volumes increased the most in the Baltman and

CHR/Evermen retail chains, where the sales exceeded the

sales of the same period of the previous year by EEK 30.37m

(EUR 1.95m), totalling EEK 63.87m (EUR 4.08m). The results

were the best on the Estonian, Latvian, Lithuanian, and

Ukrainian markets.

Monton, CHR/Evermen and Baltman accounted for 57%, 23.1% and

9.9% of the sales of Baltika’s own retail system,

respectively.





Baltika Grupp had 10,907 m2 of selling area (78 own shops)

in Estonia, Latvia, Lithuania, the Ukraine, Poland, Russia,

and Sweden at the end of June.

The selling area increased by 18 shops during the six months

(including eight in Russia) and six shops were closed down.



Wholesale

The wholesale sales of Baltika’s own production during the

six months, of which CHR/Evermen and Baltman accounted for

80% and Monton accounted for 9.5%, totalled EEK 57.21 (EUR

3.66m), which exceeds the result of the same period of the

previous year by EEK 7.51m (EUR 0.48m) (sales EEK 49.7m; EUR

3.18m, respectively).



Sales of subcontracted production

The sales volumes of subcontracted production continue to go

down; the volumes of the six months decreased by 7% compared

to the previous year and totalled EEK 23.22m (EUR 1.48m);

the sales during the same period of the previous year

amounted to EEK 25m (EUR 1.6m). The decrease in the sales of

subcontracted production is caused by a reduction in vacant

capacities because of a continuous growth of own production

volumes.



Financial results

The consolidated net profit of Baltika for the first six

months of 2004 was EEK 1.72m (EUR 0.11m). The net profit for

the second quarter was EEK 1.14m (EUR 0.07m). While the

first quarter results were mainly influenced by better

managed discounts periods, which yielded a greater retail

income, one the one hand, and curbing of operating costs on

the other hand, the factors that played a role in the second

quarter also included a better inventory management and

retail margin management and substantial sales growths in

the retail system.



Lease and payroll costs increased in the second quarter in

connection with the new retail chain in Russia, while

comparable operating costs in the rest of the system

remained on the same level as in the first quarter.

Redundancy payments and leaving compensations to employees

amounted to EEK 1.0m (EUR 0.06m) in the second quarter.



Balance sheet

The consolidated balance sheet total of Baltika was EEK

327.14m (EUR 20.91m) as of 30.06.2004; the decrease compared

to the beginning of the year was EEK 6,94m (EUR 0,44m).

Accounts receivable decreased by EEK 25.45m (EUR 1.63m)

compared to the beginning of the year, of which a claim of

EEK 14.4m (EUR 0.92) was used to acquire a 50.1% holding in

the Russian joint venture.

The inventories of goods in the system totalled EEK 164.3m

(EUR 10.5m), having increased by EEK 13.9m (EUR 0.88m)

compared to the beginning of the year in connection with the

new Russian retail chain in the Baltika Grupp system.

Comparable inventories (exclusive of Russia) remained on the

same level as in the beginning of the year, while the

inventories have decreased in the system by EEK 9.5m (EUR

0,6m) when compared to the end of June 2003. Inventory

turnover has increased from 2.78 to 3.52 over the year owing

to a more precise inventory management system.

Compared to the beginning of the year, debts have decreased

by EEK 5.78m (EUR 0.37m) and accounts payable have increased

by EEK 11.06m (EUR 0.71m).



As of 30.06.2004, Baltika Grupp employed 1734 people,

including 1015 in production and 575 in retail sale; 416

people worked outside Estonia.



The main ratios of the group as of 30.06.2004 were:



                         30.06.2004     30.06.2003

Sales growth %                 21,0           -4.6

per quarter

Percentage of retail sales     70.0           66.0

in net sales

Number of shops                  78             68

Retail selling area (m2)     10,907          9,953

Managed retail markets            7              6

Operating income/net sales, %  1.86          -12.9

Profit margin %                 0.6          -14.6

(net profit/net sales)

Inventory turnover

(net sales / 12 months’

average inventories)           3.52           2.78





Income Statement                      

consolidated,                         

unaudited

                                      

th. EEK               II Q     II Q    II Q

                      2004     2003    2003

                           proforma        

Revenue                               

Net sales           138732   108570  108407

Other revenue         -422      141     141

Total revenue       138310   108711  108548

                                      

Expenses                              

Materials,mat.,ser  -56722   -42781  -44028

vices

Change in             9498     3614    3614

inventories

Other operating     -39112   -31713  -31708

expenses

Personnel expenses  -43408   -37393  -37385

Depr. of fixed       -5565    -6239   -6458

assets

Other expenses        -528    -5209    -436

Total expenses     -135837  -119721 -116401

                                      

Operating profit      2473   -11010   -7853

(loss)

                                      

Financial income        89      193    -259

Financial expenses   -1727    -1956   -1916

                                      

Profit/loss                           

before taxes           835   -12773  -10028

Income tax expense    -138      -21     -21

Profit/loss before                    

minority interest      697   -12794  -10049

Minority interest     -441     -329    -780

Net profit (loss)     1138   -12465   -9269

                                      

                                      

Income Statement                      

consolidated,                         

unaudited

                                      

th. EUR               II Q     II Q    II Q

                      2004     2003    2003

                           proforma        

Revenue                               

Net sales             8867     6939    6928

Other revenue          -27        9       9

Total revenue         8840     6948    6937

                                      

Expenses                              

Materials,mat.,ser   -3625    -2734   -2814

vices

Change in              607      231     231

inventories

Other operating      -2500    -2027   -2027

expenses

Personnel expenses   -2774    -2390   -2389

Depr. of fixed        -356     -399    -413

assets

Other expenses         -34     -333     -28

Total expenses       -8682    -7652   -7439

                                      

Operating profit       158     -704    -502

(loss)

                                      

Financial income         6       12     -17

Financial expenses    -110     -125    -122

                                      

Profit/loss                           

before taxes            53     -816    -641

Income tax expense      -9       -1      -1

Profit/loss before                    

minority interest       45     -818    -642

Minority interest      -28      -21     -50

Net profit (loss)       73     -797    -592



Income Statement                    

consolidated,                       

unaudited

                                    

th. EEK           6M 2004  6M 2003  6M 2003

                         proforma         

Revenue                             

Net sales         269350   222384   220970

Other revenue       1913      253      253

Total revenue     271263   222637   221223

                                    

Expenses                            

Materials,mat.,se -97543   -83741   -85393

rvices

Change in           3684     -209     -209

inventories

Other operating   -74632   -64273   -64240

expenses

Personnel         -85814   -77533   -77526

expenses

Depr. of fixed    -11065   -12280   -12602

assets

Other expenses      -887   -13227     -905

Total expenses    -266257  -251263  -240875

                                    

Operating profit    5006   -28626   -19652

(loss)

                                    

Financial income     283      335      335

Financial          -3567    -4480    -4436

expenses

                                    

Profit/loss                         

before taxes        1722   -32771   -23753

Income tax          -138      -21      -21

expense

Profit/loss                         

before

minority interest   1584   -32792   -23774

Minority interest   -140     -353     -353

Net profit (loss)   1724   -32439   -23421

                                    

                                    

Income Statement                    

consolidated,                       

unaudited

                                    

th. EUR           6M 2004  6M 2003   6M2003

                         proforma         

Revenue                             

Net sales          17215    14213    14123

Other revenue        122       16       16

Total revenue      17337    14229    14139

                                    

Expenses                            

Materials,mat.,se  -6234    -5352    -5458

rvices

Change in            235      -13      -13

inventories

Other operating    -4770    -4108    -4106

expenses

Personnel          -5485    -4955    -4955

expenses

Depr. of fixed      -707     -785     -805

assets

Other expenses       -57     -845      -58

Total expenses    -17017   -16059   -15395

                                    

Operating profit     320    -1830    -1256

(loss)

                                    

Financial income      18       21       21

Financial           -228     -286     -284

expenses

                                    

Profit/loss                         

before taxes         110    -2094    -1518

Income tax            -9       -1       -1

expense

Profit/loss                         

before

minority interest    101    -2096    -1519

Minority interest     -9      -23      -23

Net profit (loss)    110    -2073    -1497





Balance sheet                                       

consolidated,                                       

unaudited

th.EEK                                              

                 30.06.04 30.06.03 30.06.03 31.12.03 31.12.03

                           proforma         proforma        

                                              

Assets                                                  

Current assets                                      

Cash and bank       8227    9451    9451  12836   12836

Shares,              548     291     291    377     377

securities

Customer           20252   39959   39959  45727   45727

receivables

Other receivables  14621   14612   14612  13822   13822

Inventories       164312  159491  163323 150424  147846

Total current     207960  223804  227636 223186  220608

assets

Non-current                                         

assets

Long-term           8066    6005    6005   5394    5394

investments

Tangible fixed     84341   91288   93788  87017   89741

assets

Intan. fixed       26775   12987   13043  13779   13851

assets

Total non-current 119182  110280  112836 106190  108986

assets

Total Assets      327142  334084  340472 329376  329594

                                                    

LIABILITIES AND                                     

OWNER`S EQUITY                                      

Current                                             

liabilities

Debt obligations   62903   78017   78017  69336   69336

Customer             129     134     134    260     260

prepayments

Accounts payable   42882   26539   26539  53939   53939

Other tax          15858    8834    8834  10634   10634

liabilities

Accrued expenses   12902    7593    7593  10515   10515

Total current     134674  121117  121117 144684  144684

liab.

Non-current                                         

liabilities

Long-term debt     70144   64749   64749  69482   69482

Provisions            47     137     141     45      32

Total non-current  70191   64886   64890  69527   69514

liab.

Total liabilities 204865  186003  186007 214211  214198

                                                    

Minority interest   8517    6578    6578   7119    7119

                                                    

Owner`s equity    113760  141503  147887 108046  108277

Share capital      54994   54600   54600  54994   54994

Unreg. share         880     395     395         

capital

Share premium      43811   42490   42490  42490   42490

Other restricted   22885   22885   22885  22885   22885

equity

                                                    

Retained profit   -16508   50938   50938  50939   50939

Profit for the      1724  -32439  -23421 -67447  -63031

acc. per.

Exchange rate       5974    2634       0   4185       0

diff.

TOTAL LIABILITIES                                   

AND

OWNER`S EQUITY    327142  334084  340472 329376  329594

                                                    

Balance sheet                                       

consolidated,                                       

unaudited

th.Eur                                              

                  30.06.04 30.06.03 30.06.03 31.12.03 31.12.03

                           proforma         proforma       

                                              

Assets                                              

Current assets                                      

Cash and bank        526     604     604    820     820

Shares,               35      19      19     24      24

securities

Customer            1294    2554    2554   2922    2922

receivables

Other receivables    934     934     934    883     883

Inventories        10501   10193   10438   9614    9449

Total current      13291   14304   14549  14264   14099

assets

Non-current                                         

assets

Long-term            516     384     384    345     345

investments

Tangible fixed      5390    5834    5994   5561    5735

assets

Intan. fixed        1711     830     834    881     885

assets

Total non-current   7617    7048    7212   6787    6965

assets

Total Assets       20908   21352   21760  21051   21065

                                                    

LIABILITIES AND                                     

OWNER`S EQUITY                                      

Current                                             

liabilities

Debt obligations    4020    4986    4986   4431    4431

Customer               8       9       9     17      17

prepayments

Accounts payable    2741    1696    1696   3447    3447

Other tax           1014     565     565    680     680

liabilities

Accrued expenses     825     485     485    672     672

Total current       8607    7741    7741   9247    9247

liab.

Non-current            0       0       0      0       0

liabilities

Long-term debt      4483    4138    4138   4441    4441

Provisions             3       9       9      3       2

Total non-current   4486    4147    4147   4444    4443

liab.

Total liabilities  13093   11888   11888  13691   13690

                                                    

Minority interest    544     420     420    455     455

                                                    

Owner`s equity      7271    9044    9452   6905    6920

Share capital       3515    3490    3490   3515    3515

Unreg. share          56      25      25      0       0

capital

Share premium       2800    2716    2716   2716    2716

Other restricted    1463    1463    1463   1463    1463

equity

                                                    

Retained profit    -1055    3256    3256   3256    3256

Profit for the       110   -2073   -1497  -4311   -4028

acc. per.

Exchange rate        382     168       0    267       0

diff.

TOTAL LIABILITIES                                   

AND

OWNER`S EQUITY     20908   21352   21760  21051   21065





Ülle Järv

Financial Director

+372 6302 731