Rakvere Lihakombinaat           FINANCIAL RESULTS             27.10.2004



FINANCIAL YEAR 2004, 9 MONTHS



AS Rakvere Lihakombinaat is the largest meat processing company in 

the Baltics. As of 30 September 2004 Rakvere Lihakombinaat Group 

had 1,154 employees (1,303 employees as of 30 September 2003).

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

Lääne-Virumaa, Sõmeru , Roodevälja Village.



The Group companies as at 30 September 2004:

                            Country      Participation  Participation 

                         of location        30.09.04       31.12.03

AS Rakvere Lihakombinaat 

(the parent company)            Estonia	

AS Ekseko                       Estonia        98,6%          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



Irrespective of the fact that the summer of 2004 was for the most 

part rainy and chilly, an increase in general consumption levels 

provided the conditions for an increase in the sales of meat products 

as well. The company sold a total of 1041 tons of summertime meat 

and meat products: BBQ sausages, wieners and frankfurters in Estonia 

between April and August. This constitutes a 222-ton, or 28% 

increase, compared to the same period last year.



Between April and August, we sold a total of 560 tons of BBQ 

sausages, wieners and frankfurters, a 36% increase compared to the 

same period in 2003, and a 13% increase compared to the results for 

2002. This summer’s sales hits included Rakvere BBQ sausage, BBQ 

sausage with cheese, and salami BBQ sausage with cheese. The new 

high-priced Grillmeister sausage series sold over 82 tons.

 

Total sales of summertime meat products in the domestic market 

amounted to 481 tons – an 18% increase compared to 2003, and a 54% 

increase compared to 2002. Shashlik and pickled ribs were the 

best-selling summertime meat products this year.



The price of the company’s main raw material – pork and beef – 

increased significantly in the third quarter. Above all, this was 

caused by a pork price increase in Europe, as well as a higher stock 

price for veal in the European Union compared to the domestic market 

price.



The higher price enhanced the contribution of the Rakvere Group 

company Ekseko – the biggest pig farmer in the Baltic states – in 

the generation of the Group’s profit. The investments made by the 

company, as well as high efficiency coupled with large production 

volume, increased the Group’s profit at the expense of primary 

production in proportion to the pork stock price. 



Regardless of the increased expenditure on raw material, the 

tightening competition between meat processors and the continual 

tightening of requirements established for suppliers has kept the 

retail price of meat products stable so far. The activities of retail 

chains in the Baltic states have become more coordinated.   



The measures taken by the Lithuanian subsidiary Klaipedos Maisto 

Produktai in the second quarter for increasing efficiency and 

cutting costs enabled the company to become more profitable during 

this period.

 

Latvian subsidiary Rigas Miesnieks replaced its CEO at the end of 

the third quarter – Valdis Gailitis, the chairman of the board, was 

replaced by Toomas Koovit, the director of Technology and Production 

for Rakvere Meat Processing Plant Ltd. Several sales staff 

discontinued their employment. The primary tasks of the new CEO 

include raising efficiency and profitability. The launch of a new 

logistics centre at the end of the second quarter was on schedule; 

the company has improved its customer service.



This year’s business environment has been quite stable, compared to 

last year when several restrictions were established by the Baltic 

states, hindering the regular operations of the Rakvere Group. An 

increased sales volume and the exploitation of EU-bound exports for 

the improved management of the company’s raw material flow enabled 

the company to earn a significantly bigger profit than during the 

same period last year.





3. Sales and profit



The net sales of Rakvere Lihakombinaat Group in the first 9 months 

of 2004 totalled 927,4 million kroons or 59 274 th. euros (855,6 

million kroons or 54 685 th. euros in 2003). 

The sales volume was 32,5 th. tons (including by-products)  in the 

Baltic States. This constitutes a 8,8 % increase compared to last 

year.

The net profit of Rakvere Lihakombinaat Group was 74,6 million 

kroons or 4 766 th. euros (in 2003  33,9 million kroons or 2 170 th. 

euros). 



Main financial indicators of Rakvere Lihakombinaat Group, millions 

of kroons (th. euros)



                      9months 2004   9months 2003   12months 2003



Net sales            927,4 (59 274)   855,6 (54 685)  1 166,3 (74 543)		

Operating expenses   847,5 (54 169)   815,1 (52 098)  1 115,9 (71 321)   

Operating profit      79,9  (5 105)    40,5  (2 587)     50,4  (3 222)		 	      

Net profit            74,6  (4 766)    33,9  (2 170)     39,8  (2 546)	     



Investments           87,5  (5 589)    59,0  (3 770)     89,7  (5 734)





4. Forecast



According to the estimate of the management of the company, the price 

of pork and beef will remain at the third quarter’s level at the end 

of 2004. The management believes that the company’s integrated 

preliminary production and processing, together with a continual 

commitment to increasing internal efficiency, will guarantee Rakvere 

Group’s success in the future. Ekseko’s share in the Group’s profit 

will increase during the period of high raw material prices.



The formation of retail trade into pan-Baltic chains has an 

increasing effect on meat processing companies. For instance, the 

expansion of VP Market in Estonia provides Lithuanian manufacturers 

with the means for entering the local market. The standardisation of 

requirements established for suppliers of different countries is 

bound to tighten the competition among meat processors in the Baltic 

states.



Since the Rakvere Meat Processing Plant Group is represented in all 

Baltic states, the company has prepared itself for such competition. 

At the same time, the export markets opened in the European Union 

enables the company to better manage its raw material flow and 

optimise sales profit. 



A continual increase in meat consumption, which is mainly focused 

through retail chains, provides good grounds for an increase in the 

company’s sales volume. In addition to a wide range of seasonal 

products for winter, the company plans to launch, in the autumn, a 

wider range of sliced products. Despite the constantly tightening 

competition and increase in the price of raw materials, the 

company’s plans of increasing its sales volume are bound to ensure 

the future success of the company’s operations.



Olle Horm

Chairman of the Management Board 

Rakvere Lihakombinaat AS





RAKVERE LIHAKOMBINAAT GROUP 				

BALANCE SHEET 				

                       in Thousands of kroons    in Thousands of euros

ASSETS                   30.9.2004 31.12.2003    30.9.2004 31.12.2003

				

Current assets				

Cash and bank              37 058     33 026        2 368   2 111

Trade receivables          86 426     86 733        5 524   5 543

Tax receivables             1 886      8 543          121     546

Other short-term 

receivables                11 011      4 840          704     309

Inventories                98 292     88 046        6 282   5 627

Biological assets          76 163     65 377        4 868   4 178

Total current assets      310 836    286 565       19 867  18 315

				

Non-current assets				

Long-term receivables and 

investments                35 602        967        2 275      62

Tangible fixed assets     466 952    437 731       29 844  27 976

Other intangible assets     3 478      3 296          222     211

Goodwill                      692        826           44      53

Total non-current assets  506 723    442 821       32 384  28 301

				

TOTAL ASSETS:             817 559    729 385       52 251  46 616

				

LIABILITIES AND OWNERS’ EQUITY				

				

Current liabilities				

Loans and lease payables   29 247      4 355        1 869     278

Supplier payables          79 275     71 241        5 067   4 553

Tax payables               14 448     10 116          923     647

Deferred tax                1 718      1 698          110     109

Other current liabilities  25 100     21 833        1 604   1 395

Total current liabilities 149 787    109 243        9 573   6 982

				

Long-term loans and 

lease payable              96 862    124 339        6 191   7 947

Pension liabilities           746        738           48      47

Total liabilities         247 395    234 320       15 811  14 976

				

Minority interest           3 704      3 628          237     232

				

Owners’ equity				

Share capital             377 217    377 217       24 108  24 108

Mandatory legal reserve    11 726      9 734          749     622

Retained earnings         177 848    105 269       11 367   6 728

Unrealised translation 

differences                  -331       -783          -21     -50

Total owners’ equity      566 460    491 437       36 203  31 408

				

TOTAL LIABILITIES AND 

OWNERS’ EQUITY :          817 559    729 385       52 251  46 616





RAKVERE LIHAKOMBINAAT GROUP

INCOME STATEMENT

                       in Thousands of kroons    in Thousands of euros

Revenue                9 months 04 9 months 03  9 months 04 9 months 03



Net sales                  927 440    855 635      59 274    54 685

Other revenue                5 068      6 336         324       405

Total revenue              932 509    861 971      59 598    55 090

				

Change in work-in-progress and 

finished goods               6 916     -4 153         442      -265

Change in fair value of 

biological assets           10 786     -1 272         689       -81

Materials, consumables 

and supplies              -590 682   -542 534     -37 751   -34 674

Other operating expenses  -124 906   -119 224      -7 983    -7 620

Personnel expenses        -111 310   -113 457      -7 114    -7 251

Depreciation and write-downs 

of non-current assets      -42 374    -37 932      -2 708    -2 424

Other expenses              -1 059     -2 918         -68      -186

				

Operating profit            79 879     40 482       5 105     2 587

				

Financial income/expenses				

Net foreign exchange 

gain/loss                     -146       -745          -9       -48

Interest and other 

financial income             1 398      1 974          89       126

Interest and other 

financial expenses          -6 301     -7 782        -403      -497

Total financial 

income/expenses             -5 049     -6 553        -323      -419

				

Profit before taxes         74 830     33 929       4 783     2 168

Minority interest             -258         19         -16         1

Net profit                  74 572     33 948       4 766     2 170

				

Earnings per share            1,98       0,90       0,126     0,058







Olle Horm

Chairman of the Board

+372 32 29 221