Baltika                    FINANCIAL RESULTS                 25.10.2004



Comments on AS Baltika financial results for nine months of 2004



General results



The unaudited consolidated net sales of AS Baltika for the first nine

months of 2004 were EEK 428.9m (EUR 27.41m) and the net profit was EEK

5.4m (EUR 0.35m). Compared to the first nine months of 2003, the net

sales increased by 19.3% (net sales EEK 359.5m; EUR 22.98m,

respectively). AS Baltika ended the first nine months of 2003 with a

loss of EEK 40.1m (EUR 2.56m).



The unaudited consolidated net sales of AS Baltika for the third

quarter of 2004 were EEK 159.5m (EUR 10.2m) and the net profit was EEK

3.64m (EUR 0.23m). Compared to the same period of 2003, the net sales

increased by 16.4% (net sales EEK 137.14m; EUR 10.2m, respectively).

The third quarter of 2003 was ended with a loss of EEK 7.68m (EUR

0,49m).



Sales



Retail sales



The sales result of the Baltika retail system (Estonian, Latvian,

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

nine months was EEK 297.25m (EUR 19.0m), which exceeds the result of

the same period of the previous year by 34% (retail sales EEK 221.18m;

EUR 14.14m, respectively). Retail sales formed 69% of total sales,

compared to 62% in the same period of the previous year.



Retail sales were successful in the third quarter and at the beginning

of the autumn season. Retail sales grew by 45.2% compared to the third

quarter of the previous year, totalling EEK 108.95m (EUR 6.96m). The

shorter and better managed discount periods in August and a strong

beginning of the autumn season especially for ladies’ collections

(Monton ladies and CHR) increased the sales efficiency of the entire

system (sales/m2) by 11.5% and like-for-like sales (sales/m2 on

comparable premises) by 2.9%.



Sales growth was the largest in the third quarter on the Ukrainian

(growth 35.0%), Latvian (growth 52.0%) and Lithuanian (growth 56%)

markets, where the sales totalled EEK 51,41m (EUR 3.29).

On the domestic Estonian market, sales increased by 32.6% in the third

quarter compared to the same period of the previous year, amounting to

EEK 27,8m (EUR 1.78m).

Retail sales in Russia amounted to EKE 11.58m (EUR 0.74m) in the third

quarter.





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

months of 2004; its sales totalled EEK 165,54m (EUR 10.58m) and

increased by 1.2 since last 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 59.1m (EUR 3.78m), totalling EEK 102.16m (EUR

6.53m).

Monton, CHR/Evermen and Baltman accounted for 53.6%, 23.6% and 11.7% of

the sales of Baltika’s own retail system.



Baltika Grupp had 10,920 m2 of its own shop sales premises (76 shops)

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

at the end of September. Two shops were closed down in the third

quarter, including Baltika’s only own shop in Sweden due to the

termination of the rental contract in September. Sweden is no longer a

retail market of Baltika Grupp as from October.



Wholesale

The results of the first nine months’ wholesale of Baltika’s own

production was on the same level with last year. The wholesale sales of

own products, of which CHR/Evermen and Baltman, on the one hand, and

Monton on the other hand accounted for 73,4% and 10%, respectively,

totalled EEK 97.17m (EUR 6,21m)



Sales of subcontracted production

The sales volumes of subcontracted production continue to go down; the

volumes of the nine months decreased by 16% compared to the previous

year and totalled EEK 33,25m (EUR 2,13m); the sales during the same

period of the previous year amounted to EEK 39.36m (EUR 2.52m). 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 and own retail system.



Financial results

The consolidated net profit of Baltika for the first nine months of

2004 was EEK 5.4m (EUR 0.35m). The net profit for the second quarter

was EEK 3.64m (EUR 0.23m). The third quarter results were mainly

influenced by the successful summer discount campaigns, where the

margins were better than last year.

The discount periods were also shorter owing to a better stock level of

Baltika’s own retail system at the end of the season.

Retail sales in September were above expectations, while Baltika

succeeded to meet the growing demand with its flexible purchases system

and quickly reacting production operations.



Owing to the new Russian retail chain, the rental and labour expenses

for the first nine months increased, while comparable operating

expenses in the rest of the system decreased in the third quarter by

EEK 4.2m (EUR 0.27m) since the second quarter, resulting from a

continued optimisation of operating expenses and cost saving.

Redundancy payments and leaving compensations to employees amounted to

EEK 0.3m (EUR 0,02m) in the third quarter and totalled EEK 1.3m (EUR

0.08m) for the first nine months of the year.



Balance sheet

The consolidated balance sheet total of Baltika was EEK 324.24m (EUR

20.72m) as of 30.09.2004; the decreased compared to the beginning of

the year was EEK 5.14m (EUR 0.33m). Accounts receivable have decreased

in the system by EEK 7.0m (EUR 0.45m) since the beginning of the year

and by EEK 26.16m (EUR 1.67m) since the end of September 2003.



The inventories of goods in the system totalled EEK 146.67m (EUR

9.37m), having decreased by EEK 3.76m (EUR 0.24m) compared to the

beginning of the year and by EEK 14.6m (EUR 0.94m) compared to the end

of September 2003. Inventory turnover has increased from 2.91 to 3.66

over the year owing to the improved inventory management system.

Compared to the beginning of the year, debts have decreased by EEK 9.0m

(EUR 0.58m) and accounts payable have decreased by EEK 16.7m (EUR

1.1m).





As of 30.09.2004, Baltika Grupp employed 1696 people, including 1007 in

production and 541 in retail sale; 401 people worked outside Estonia.

In the third quarter, 38 people left the company.



The main ratios of the group as of 30.09.2004 were:



                            30.09.2004    30.09.2003

Sales growth %                  16.4             1.0

in the quarter

Sales growth

since beginning of year, %      19.0            -4.6

Percentage of retail sales      69.0            62.0

in net sales, %

Number of shops                   76              68

Retail sale area (m2)         10,920           9,953

Managed retail markets              7              6

Gross margin                      2.7            9.4

(operating profit/net sales), %

Profit margin, %                  1.3          -11.2

(net profit/net sales)

Inventory turnover

(net sales/12m average inventories) 3.66         2.91









                                                  

INCOME SATEMENT                                   

th. EEK                                           

                                 III Q    III Q    III Q

                                 2004     2003      2003

                                          proforma

                                        

Revenue                                           

Net sales                          159531  137135  144267

Other revenue                         963     232     232

Total revenue                      160494  137367  144499

                                                  

Expenses                                          

Materials,raw materials,services   -49250  -63753  -64072

Change in inventories              -16978   -2915   -2915

Other operating expenses           -41506  -34824  -34817

Personnel expenses                 -40311  -42985  -42986

Depreciation of fixed assets        -5422   -3824   -3951

Other expenses                       -747    5744    -359

Total expenses                    -154214 -142557 -149100

                                                  

Operating profit (loss)              6280   -5190   -4601

                                                  

Financial income                      -86     211     211

Financial expenses                  -2005   -1844   -1725

                                                  

Profit (loss) before taxes           4189   -6823   -6115

Income tax expense                    -63       0       0

Profit (loss) before minority        4126   -6823   -6115

interest

Minority interest                     491     860     859

Net profit (loss)                    3635   -7683   -6974





INCOME STATEMENT                                 

th. EUR                                             

                                 III Q    III Q   III Q

                                  2004    2003    2003

                                         proforma

                                 

Revenue                                          

Net sales                          10196    8765    9220

Other revenue                         62      15      15

Total revenue                      10257    8779    9235

                                                 

Expenses                                         

Materials,raw                      -3148   -4075   -4095

materials,services

Change in inventories              -1085    -186    -186

Other operating expenses           -2653   -2226   -2225

Personnel expenses                 -2576   -2747   -2747

Depreciation of fixed assets        -347    -244    -253

Other expenses                       -48     367     -23

Total expenses                     -9856   -9111   -9529

                                                 

Operating profit (loss)              401    -332    -294

                                                 

Financial income                      -5      13      13

Financial expenses                  -128    -118    -110

                                                 

Profit (loss) before taxes           268    -436    -391

Income tax expense                    -4       0       0

Profit (loss) before minority        264    -436    -391

interest

Minority interest                     31      55      55

Net profit (loss)                    232    -491    -446









INCOME STAEMENT                                     

th. EEK                                             

                                   9m 2004  9m 2003   9m 2003

                                           proforma          

                                                 

Revenue                                             

Net sales                           428881  359519    365237

Other revenue                         2876     485       485

Total revenue                       431757  360004    365722

                                                    

Expenses                                            

Materials,raw materials,services   -146793 -147494   -149465

Change in inventories               -13294   -3124     -3124

Other operating expenses           -116138  -99097    -99057

Personnel expenses                 -126125 -120518   -120512

Depreciation of fixed assets        -16487  -16104    -16553

Other expenses                       -1634   -7483     -1264

Total expenses                     -420471 -393820   -389975

                                                    

Operating profit (loss)              11286  -33816    -24253

                                                    

Financial income                       197     546       546

Financial expenses                   -5572   -6324     -6161

                                                    

Profit (loss) before taxes            5911  -39594    -29868

Income tax expense                    -201     -21       -21

Profit (loss) before minority         5710  -39615    -29889

interest

Minority interest                      351     507       506

Net profit (loss)                     5359  -40122    -30395





INCOME STATEMENT                                   

th. EUR                                            

                                 9m 2004  9m 2003   9m 2003

                                          proforma      

                                      

Revenue                                            

Net sales                           27410    22977    23343

Other revenue                         184                  

                                                31       31

Total revenue                       27594    23008    23374

                                                   

Expenses                                           

Materials,raw                       -9382    -9427    -9553

materials,services

Change in inventories                -850     -200     -200

Other operating expenses            -7423    -6333    -6331

Personnel expenses                  -8061    -7702    -7702

Depreciation of fixed assets        -1054    -1029    -1058

Other expenses                       -104     -478      -81

Total expenses                     -26873   -25170   -24924

                                                   

Operating profit (loss)               721    -2161    -1550

                                                   

Financial income                       13       35       35

Financial expenses                   -356     -404     -394

                                                   

Profit (loss) before taxes            378    -2531    -1909

Income tax expense                    -13       -1       -1

Profit (loss) before minority         365    -2532    -1910

interest

Minority interest                      22       32       32

Net profit (loss)                     343    -2564    -1943







BALANCE SHEET                                                 

                                                             

th.EEK                                                       

                       30.09.2004 30.09.2003 30.09.2003 31.12.2003 31.12.2003

ASSETS                              proforma           proforma          

Current assets                                                

Cash and bank               7903    32254    32254     12836     12836

Shares and other             533      357      357       377       377

securities

Customer receivables       38707    64863    64863     45727     45727

Other receivables                                             

and prepaid expences       14193    20302    20302     13822     13822

Inventories               146669   157166   161258    150424    147846

Total current assets      208005   274942   279034    223186    220608

Non-current assets                                            

Long-term investments       8399     6022     6022      5394      5394

Tangible fixed assets      80031    89825    92647     87017     89741

Intangible fixed           27801    13783    13844     13779     13851

assets

Total non-current         116231   109630   112513    106190    108986

assets

TOTAL ASSETS              324236   384572   391547    329376    329594

                                                              

LIABILITIES AND OWNER`S EQUITY                               

Current liabilities                                          

Debt obligations           59677    94537    94537     69336     69336

Customer prepayments         127      150      150       260       260

Accounts payable           37197    53933    53933     53939     53939

Other tax liabilities      17624    10842    10842     10634     10634

Accrued expenses           12300    11196    11196     10515     10515

Total current             126925   170658   170658    144684    144684

liabilities

Non-current                                                  

liabilities

Long-term debt             70144    72397    72397     69482     69482

Provisions                    49      138      141        45        32

Total non-current          70193    72535    72538     69527     69514

liab.

TOTAL LIABILITIES         197118   243193   243196    214211    214198

                                                                      

Minority interest           8985     7438     7438      7119      7119

                                                                      

OWNER`S EQUITY            118133   133941   140913    108046    108277

Share capital (par         55874    54994    54994     54994     54994

value)

Share premium              43810    42490    42490     42490     42490

Other restricted           22885    22885    22885     22885     22885

equity

Retained profit           -16508    50939    50939     50939     50939

Profit for the              5359   -40122   -30395    -67447    -63031

acc.period

Exchange rate               6713     2755        0      4185         0

differencies

TOTAL LIABILITIES                                                     

AND OWNER's EQUITY        324236   384572   391547    329376    329594





BALANCE SHEET                                                  

                                                               

th.EUR                                                         

                        30.09.2004 30.09.2003 30.09.2003 31.12.2003 31.12.2003

                       

ASSETS                              proforma             proforma         

Current assets                                                 

Cash and bank                505      2061      2061      820      820

Shares and other              34        23        23       24       24

securities

Customer receivables        2474      4146      4146     2922     2922

Other receivables                                              

and prepaid expenses         907      1298      1298      883      883

Inventories                 9374     10045     10306     9614     9449

Total current assets       13294     17572     17834    14264    14099

Non-current assets                                             

Long-term investments        537       385       385      345      345

Tangible fixed assets       5115      5741      5921     5561     5735

Intangible fixed            1777       881       885      881      885

assets

Total non-current           7429      7007      7191     6787     6965

assets

TOTAL ASSETS               20722     24579     25024    21051    21065

                                                               

LIABILITIES AND OWNER`S EQUITY                                 

Current liabilities                                            

Debt obligations            3814      6042      6042     4431     4431

Customer prepayments           8        10        10       17       17

Accounts payable            2377      3447      3447     3447     3447

Other tax liabilities       1126       693       693      680      680

Accrued expenses             786       716       716      672      672

Total current               8112     10907     10907     9247     9247

liabilities

Non-current                                                    

liabilities

Long-term debt              4483      4627      4627     4441     4441

Provisions                     3         9         9        3        2

Total non-current           4486      4636      4636     4444     4443

liab.

TOTAL LIABILITIES          12598     15543     15543    13691    13690

                                                               

Minority interest            574       475       475      455      455

                                                               

OWNER`S EQUITY              7550      8560      9006     6905     6920

Share capital (par          3571      3515      3515     3515     3515

value)

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               343     -2564     -1943    -4311    -4028

acc.period

Exchange rate                429       176         0      267        0

differencies

TOTAL LIABILITIES                                              

AND OWNER's EQUITY         20722     24579     25024    21051    21065





Ülle Järv

Financial Director

+372 6302 731