AS BALTIKA                      Corrective release                    21.10.2005



CORRECTION IN THE TABLE OF 9M RESULTS 



There was a mistake in the headings of columns of the 9m income statement tables. 

The time period indicated in the headings should read 3Q and 9m.



The revised release follows.



Triin Palge

Head of investor relations

+372 630 2886





--------------------------------------------------------------------------------



AS BALTIKA                      Financial results                     21.10.2005



Consolidated financial results, 9 months 2005



HIGHLIGHTS, 9m 2005

- Group sales increased 14.4% yoy to EEK 490.6mln

- Retail sales up 28.8% yoy

- Gross margin at 50.9% (45.0% in 9m 2004)

- Operating profit EEK 45.9mln (EEK 11.3mln in 9m 2004)

- Operating margin at 9.4% (2.6% in 9m 2004)

- Net profit EEK 46.3mln (EEK 5.4mln in 9m 2004)

- Net margin at 9.4% in 9m 2005 and at 10.1% in 3Q 2005



Chairman of the Board, Meelis Milder: “In the third quarter, a number of key

events took place for Baltika Group. In terms of our business performance we

reached a new level: we achieved net margin of above 10% in a quarter where

profitability is traditionally under pressure due to the end of season

clearance sales in July and August. Another event of great consequence

occurred at the end of September when our long-term partner and major

shareholder Baltic Republics Fund exited from the company. Baltic Republics

Fund successfully sold its 34.56% stake in Baltika to domestic and

international financial investors. One of the buyers was also OÜ BMIG, owned

by the executives of Baltika, that increased its stake in the company to

22.78%. We believe that the new shareholders’ structure is supportive of our

goal to further increase the value of the company.”



Baltika Group’s net profit in the third quarter amounted to EEK 18.2 million

(EUR 1.2mln) and the 3Q net margin rose to 10.1%. In 3Q of last year, the

Group’s net profit totalled EEK 3.6 million (EUR 232 thousand). Baltika’s

third quarter sales increased 12.9% yoy while retail sales posted a growth of

almost 20% and wholesale increased 17.0% compared with the corresponding

period of last year. The sales totalled EEK 180.1 million (EUR 11.5mln). The

Group’s gross margin in 3Q was at 49.3% (43.0% in 3Q 2004). Operating margin

reached 10.7% taking operating profit to EEK 19.2 million (EUR 1.2mln) from

last year’s level of EEK 6.3 million (EUR 401 thousand).



Cumulative nine month sales of Baltika Group totalled EEK 490.6 million (EUR

31.4mln), up 14.4% yoy. Retail sales grew 28.8% and wholesale remained almost

at the same level (+0.6% yoy) compared with the same period last year. The

Group’s gross and operating margins in the first nine months of 2005 increased

to 50.9% and 9.4%, respectively (45.0% and 2.6% in 9m 2004). Nine-month net

profit expanded to EEK 46.3 million (EUR 3.0mln) from EEK 5.4 million (EUR

0.3mln) in 9m 2004.



SALES

Sales breakdown by segment



EEK million         3Q 2005  3Q 2004   Change   9m 2005  9m 2004   Change

                                                                         

Retail sales          128.4    107.3    19.7%     380.8    295.6    28.8%

Wholesale              48.8     41.7    17.0%      99.5     98.9     0.6%

Subcontracting         0.02     10.1   -99.8%       0.6     33.3   -98.3%

Other sales             2.8      0.4   644.7%       9.7      1.0   881.4%

Total                 180.1    159.5    12.9%     490.6    428.9    14.4%



1 EUR = 15.6466 EEK



Due to the establishment of a joint venture on the basis of Baltika’s

production unit Baltika Tailor OÜ in November 2004, the consolidated sales

results do not include subcontracting figures starting from December 2004.

Thus, in comparable terms, net sales of the first nine months of this year

grew by 21.7% yoy. Comparable net sales of 3Q 2005 expanded by 18.9% yoy.



On the back of the strong sales results of this year Baltika raised the

minimum sales target for 2005 from EEK 620 million to EEK 640 million.



RETAIL SALES

In the first nine months of 2005, retail sales of Baltika expanded by 28.8%

yoy and reached EEK 380.8 million (EUR 24.3mln). The average retail space grew

8% yoy in the first nine months while sales efficiency (sales/m2) increased

19% yoy. Like-for-like sales (sales on comparable areas) increased 19% yoy in

9m and 20% in 3Q 2005.



The key words to characterise the third quarter in retail are the end of

season clearance sale in July and August and the beginning of the new season.

Baltika successfully combined the summer clearance sale in July with the start

of the sale of the new season’s products. August continued with very strong

retail sales growth as a result of the well timed launch of the new season’s

collections in full. September sales, however, were impacted by exceptionally

warm weather all over Baltika’s markets and thus the sales of overcoats and

heavy knitwear did not achieve their usual level. Altogether, 3Q retail sales

registered a growth of 19.7% vis-ą-vis the same period of last year.



Overall, our sales this year are positively impacted by higher store traffic

in Baltika stores if compared with the previous year. We notice strengthening

brand awareness in our markets and maturing of our brands, especially of our

newest brand Monton that was launched in the fall of 2002. The share of retail

sales in total sales revenues has increased to 78% in the first nine months of

2005 compared to 69% in the same period last year.



In terms of store concepts, the sales of Baltika’s fast fashion brand Monton

accounted for 54% of the total retail sales in 9m 2005 and amounted to EEK 206

million (EUR 13.2mln), up 24% on last year’s figure. The sales of CHR/Evermen

grew 50% yoy amounting to EEK 102 million (EUR 6.5mln) and the sales of

Baltman increased 28% yoy to EEK 40 million (EUR 2.6mln).



All the retail markets posted double digit sales growth in the nine-month

period except for the smallest market Poland (representing 8% of retail sales)

that maintained the last year’s sales level. Latvia posted the fastest sales

growth of 43% yoy to EEK 51 million (EUR 3.3mln). The largest retail markets

by sales were Estonia with EEK 106 million/EUR 6.8mln (+28% yoy), followed by

Lithuania (EEK 89mln/EUR 5.7mln, +18%) and Ukraine (EEK 68mln/EUR 4.3mln,

+32%). Baltika’s newest retail market Russia, launched in May 2004, generated

retail sales of EEK 38 million (EUR 2.4mln) in the first nine months of 2005.

As the retail sales started in May 2004, Russia’s nine month figures are not

comparable, however, third quarter sales posted a growth of 14% yoy in Russia.



SHOPS AND SALES AREA

As of the end of September, Baltika Group operated 79 shops in six countries,

with a total area of 11,702 m2. At the end of 3Q last year, Baltika’s retail

system comprised of 76 shops with a total area of 10,920 m2.



Number of shops by country



             30.09.2005  30.09.2004

Estonia              23          23

Latvia               10           9

Lithuania            19          16

Ukraine              12          12

Russia                7           8

Poland                8           8

Total shops          79          76

Total m2         11,702      10,920



In the third quarter Baltika opened three new stores, one Monton and two

CHR/Evermen stores. All these openings took place in Lithuania – two in the

city of Panevezys in a brand new shopping centre Babilonas and one in Vilnius

in the Mandarynas shopping centre. As the opening of the Tartu Kaubamaja

shopping centre (in Tartu, Estonia) was postponed by two weeks, Baltika’s new

stores in the respective centre will be also opened in October instead of

September i.e. in 4Q instead of 3Q. All in all, Baltika is proceeding in line

with the earlier announced plans to enlarge its retail system by 10-12 new

stores in the second half of 2005.



WHOLESALE

As in the second half of the year July, August and September are traditionally

strong wholesale months, the share of wholesale sales in Baltika’s total sales

increased to 27% in the third quarter. In the nine-month period, the share of

wholesale sales of own products made up 20% compared with the year ago figure

of 23%.



In the first nine months of 2005, the wholesale sales totalled EEK 99.5

million (EUR 6.4mln), being almost flat in comparison with the same period

last year (+0.6% yoy). Nine-month comparisons versus the previous year are

impacted by the acquisition of a 50.1% holding in the Russian retail company

in April 2004 as a result of which part of Baltika’s Russian wholesale sales

are recorded as retail sales starting from May 2004.



The annual comparison of the third quarter alone shows a strong growth of

17.0% in wholesale sales. As the changes in Russia took place in May last

year, the third quarter figures are fully comparable.



EARNINGS AND MARGINS

Baltika Group has achieved solid profitability improvements across the board

this year. In the first nine months, the Group’s gross profit margin expanded

to 50.9% from last year’s corresponding figure of 45.0%. Nine-month gross

profit increased by 29.3% to EEK 249.8 million (EUR 16.0mln).



In the third quarter, Baltika’s gross margin stood at 49.3% which is

considerably better than in the third quarter of last year (43.0%) but lower

than in the second quarter of this year (54.8%). Lower gross margin in 3Q

compared with 2Q is expected as the third quarter includes lower margin end of

season clearance sale. In addition, 3Q is a strong wholesale period and the

gross margin of wholesale trade is lower than that of retail operations.



Overall, the results were driven by growth of the retail system and improved

sales efficiency. More exact price policy, higher first price margins and

improved inventory management contributed to the gross profitability.



The Group’s nine-month operating profit totalled EEK 45.9 million (EUR

2.9mln). In the same period of previous year, operating profit amounted to EEK

11.3 million (EUR 721 thousand). Operating margin rose to 9.4% in the review

period from 2.6% in 9m 2004.



The Group’s net financial expenses were EEK -1.7 million (EUR -109 thousand)

including interest expenses of EEK 4.0 million (EUR 258 thousand). Interest

expenses declined by 20.6% over the year due to the decrease in total debt

obligations and the reduced cost of borrowing as well as lower usage of the

bank’s overdraft.



Net profit of the Group after taxes and minority shareholding amounted to EEK

46.3 million (EUR 3.0mln) in the first nine months of 2005. In the same period

last year, net profit stood at EEK 5.4 million (EUR 343 thousand). In the

review period net profit margin enhanced to 9.4% from 1.2% a year ago. 3Q 2005

recorded net margin at 10.1% (2.3% in 3Q 2004).



BALANCE SHEET

On 30 September 2005, the total assets of Baltika Group amounted to EEK 337.4

million (EUR 21.6mln), up 6.4% in comparison with the end of last year.



As of the end of 3Q, the Group’s total inventories stood at EEK 132.5 million

(EUR 8.5mln), declining by EEK 13.0 million (EUR 0.8mln) during the first nine

months of this year. The drop has mainly taken place in the inventories of

finished goods and merchandise. Reduction in inventories indicates improved

inventory management in the Group, which is also demonstrated by the enhanced

inventory turnover ratio (net sales/average inventories) that has increased

from 3.60 to 4.57 over the last year.



Stemming from the credit terms of wholesale sales, accounts receivables

increased by EEK 24.4 million (EUR 1.6mln) since the end of the last year,

reaching EEK 51.9 million (EUR 3.3mln). Traditionally, Baltika has a higher

accounts receivable balance during the strong wholesale periods such as the

first and third quarters. Accounts payable decreased by EEK 5.1 million (EUR

326 thousand) to EEK 26.1 million (EUR 1.7mln) in the first nine months of

this year.



At the end of the review period, the Group’s total interest bearing debt

amounted to EEK 102.6 million (EUR 6.6mln), including bank loans of EEK 71.3

million (EUR 4.6mln). Since the end of 2004, the Group’s borrowings from banks

have decreased by EEK 29.4 million (EUR 1.9mln), around half of which

represents repayment of loans and half comes from reduced usage of the bank’s

overdraft. The rest of debt comprises of convertible bonds and commercial

papers (EEK 18.3mln/EUR 1.2mln) and lease liabilities (EEK 13.0mln/EUR

0.8mln).



In the third quarter, the Group’s debt obligations grew by EEK 12.5 million

(EUR 0.8mln) as a result of acquiring of building lease (see the section

“Obtaining of building lease”). This sum was recorded under lease liabilities.

On the assets side, the acquisition increased the balance of investment

property and fixed assets.



As of the end of 3Q, the Group’s total net debt amounted to EEK 89.0 million

(EUR 5.7mln) and the net debt to equity ratio stood at 48.4%. This represents

a significant reduction from the 2004 year end level of 75.9%.



OBTAINING OF BUILDING LEASE

In August, OÜ Baltika TP (100% owned by AS Baltika and established for

carrying out of real estate developments) acquired building leases on two

plots of land belonging to AS Lasnamäe Tööstuspark (Lasnamäe Industrial Park).

As a result, Baltika TP leases 25,061 m2 of land in the Lasnamäe Industrial

Park with planning permission for industrial buildings. The cost of the

building lease for the first three years is EEK 3.76 million (EUR 240

thousand). After three years, the owner of the building lease will have an

option to purchase the land for EEK 11.28 million (EUR 721 thousand).



According to the current plans, Baltika intends to move its central warehouse

to the Lasnamäe Industrial Park in 2006. The production premises that are

located in the central district of Tallinn and belong to Baltika’s joint

venture OÜ Baltika Tailor should be relocated in 2007.



PERSONNEL

As of 30 September 2005, Baltika Group employed 1,626 people, including 905 in

production and 568 in retail; 428 people worked outside Estonia. At the same

time last year, the number of employees stood at 1,696, including 1,007 in

production and 541 in retail.



EXIT OF A MAJOR SHAREHOLDER AND CHANGE IN THE SHAREHOLDERS’ STRUCTURE

On September 28, Baltic Republics Fund sold its 34.56% ownership in AS Baltika

(2,012,400 shares in total). The price of the transaction was EUR 6.86 (EEK

107.34) per share. OÜ BMIG, owned by the executives of Baltika, acquired

250,000 shares (4.29% of Baltika) from the placement. As a result, the

ownership of OÜ BMIG in Baltika increased to 22.78% and it became the largest

single shareholder of the company. The remaining 1,762,400 shares were sold to

domestic and international institutional investors.



CHANGE IN INCOME STATEMENT FORMAT

From the beginning of 2005, Baltika uses a new income statement format. The

need to change the format arose from the Group’s strategy to transform from a

production company to a retail enterprise. The new format of income statement

allows for a better presentation of the financial position of Baltika as a

retail group. The income statements of the previous financial year are

restated to make them comparable with the new format. The new income statement

format is in accordance with the IAS 1 requirements pertaining to mandatory

entries and the presentation of financial statements.



KEY FIGURES OF THE GROUP (9 months 2005)



                                      30.09.2005   30.09.2004  Change, %

Sales (EEK mln)                            490.6        428.9      14.4%

Retail sales (EEK mln)                     380.8        295.6      28.8%

Share of retail sales in total sales         78%          69% 

Number of shops                               79           76       3.9%

Retail sales area (m2)                    11,702       10,920       7.2%

Gross margin, %                            50.9%        45.0% 

Operating margin, %                         9.4%         2.6% 

Net margin, %                               9.4%         1.2% 

Inventory turnover                          4.57         3.60      26.9%

Return on equity                           39.2%       -23.3% 

Return on assets                           18.1%        -8.1% 



Definitions of key indicators



Gross margin = (Net sales-COGS)/Net sales

Operating margin = Operating income/Net sales

Net margin = Net profit (attributable to parent)/Net sales

Inventory turnover* = Net sales/Average inventories

Return on equity* = Net profit /Average equity

Return on assets* = Net profit /Average total assets

*Based on 12-month average



1 EUR = 15.6466 EEK







CONSOLIDATED INCOME STATEMENT                                          

(unaudited, in EEK thousand)                                           

                                                                       

                                  3Q 2005  3Q 2004   9m 2005   9m 2004     2004

                                                                       

Net sales                         180,083  159,531   490,571   428,881  581,878

Cost of goods sold                 91,369   90,905   240,759   235,712  303,429

Gross profit                       88,714   68,626   249,812   193,169  278,449

                                                                       

Selling and marketing expenses    -51,070  -47,764  -147,831  -134,273 -185,126

Administrative expenses           -18,817  -14,798   -61,174   -48,852  -71,155

Other operating income              2,495      963     8,177     2,876    1,692

Other operating expenses           -2,094     -747    -3,090    -1,634   -5,073

Operating profit                   19,228    6,280    45,894    11,286   18,787

                                                                       

Financial income (expenses)          -665   -2,090    -1,699    -5,375   -4,771

 Financial income from               

 investments in JV                   -522        0       412         0     -714

 Financial income from other          

 investments                          956      -15     1,415       156    3,309         

 Interest expenses                 -1,249   -1,616    -4,039    -5,087   -6,683

 Foreign exchange gain (loss)         126     -423       131      -342   -1,501

 Other financial income                

 (expenses)                            24      -36       382      -102      818

                                                                       

Profit before income tax           18,563    4,190    44,195     5,911   14,016

Income tax                           -539      -64    -1,251      -201      947

Net profit                         18,024    4,126    42,944     5,710   14,963

                                                                       

Net profit attributable to           

minority interest                    -146      491    -3,386       351   -1,738

Net profit attributable to parent  18,170    3,635    46,330     5,359   16,701

                                                                       

                                                                       

Basic earnings per share             3.12     0.65      8.09      0.97     3.01

Diluted earnings per share           2.96     0.61      7.55      0.97     3.01







CONSOLIDATED INCOME STATEMENT                                          

(unaudited, in EUR thousand)                                           

                                                                       

                                  3Q 2005  3Q 2004   9m 2005   9m 2004     2004

                                                                       

Net sales                          11,509   10,196    31,353    27,410   37,189

Cost of goods sold                  5,840    5,810    15,387    15,065   19,393

Gross profit                        5,670    4,386    15,966    12,346   17,796

                                                                       

Selling and marketing expenses     -3,264   -3,053    -9,448    -8,582  -11,832

Administrative expenses            -1,203     -946    -3,910    -3,122   -4,548

Other operating income                159       62       523       184      108

Other operating expenses             -134      -48      -197      -104     -324

Operating profit                    1,229      401     2,933       721    1,201

                                                                       

Financial income (expenses)           -43     -134      -109      -344     -305

 Financial income from                

 investments in JV                    -33        0        26         0      -46

 Financial income from other           

 investments                           61       -1        90        10      211

 Interest expenses                    -80     -103      -258      -325     -427

 Foreign exchange gain (loss)           8      -27         8       -22      -96

 Other financial income                 

 (expenses)                             2       -2        24        -7       52

                                                                       

Profit before income tax            1,186      268     2,825       378      896

Income tax                            -34       -4       -80       -13       61

Net profit                          1,152      264     2,745       365      956

                                                                       

Net profit attributable to             

minority interest                      -9       31      -216        22     -111

Net profit attributable to parent   1,161      232     2,961       343    1,067

                                                                       

                                                                       

Basic earnings per share             0.20     0.04      0.52      0.06     0.19

Diluted earnings per share           0.19     0.04      0.48      0.06     0.19







CONSOLIDATED BALANCE SHEET                                  

(unaudited, in EEK thousand)                                

                                                            

                                     30.09.2005  30.09.2004  31.12.2004

ASSETS                                                           

Current assets                                              

Cash and cash equivalents                11,597       7,903      12,515

Held for trading investments              2,018         533         603

Customer receivables                     51,887      38,707      27,501

Other receivables and prepaid             

expenses                                  9,206      14,193      10,012

Inventories                             132,466     146,669     145,460

Total current assets                    207,174     208,005     196,091

Non-current assets                                          

Investments in joint ventures             1,507           0       1,095

Investment property                      13,456           0       7,500

Deferred income tax                       4,349       4,876       4,349

Other non-current assets                  4,459       3,523       2,837

Tangible fixed assets                    79,627      80,031      77,325

Intangible assets                        26,808      27,801      27,983

Total non-current assets                130,206     116,231     121,089

TOTAL ASSETS                            337,380     324,236     317,180

                                                            

EQUITY AND LIABILITIES                                      

Current liabilities                                         

Debt obligations                         29,557      59,677      74,504

Accounts payable                         26,052      37,197      31,154

Tax liabilities                          11,723      17,624      12,669

Accrued expenses                         12,877      12,300      10,515

Other current liabilities                   362         127         924

Total current liabilities                80,571     126,925     129,766

Non-current liabilities                                     

Long-term debt                           73,059      70,193      45,944

Total non-current liabilities            73,059      70,193      45,944

TOTAL LIABILITIES                       153,630     197,118     175,710

                                                            

SHAREHOLDERS' EQUITY                                        

Share capital (par value)                58,230      55,874      56,340

Share premium                            49,061      43,810      44,508

Mandatory legal reserve                   5,634       4,800       4,800

Other reserves                            3,898      18,085      21,983

Retained earnings                        13,076     -16,508     -16,508

Net profit for the period                46,330       5,359      16,701

Exchange rate differences                 4,264       6,713       6,622

Minority interest                         3,257       8,985       7,024

TOTAL EQUITY                            183,750     127,118     141,470

TOTAL LIABILITIES AND EQUITY            337,380     324,236     317,180







CONSOLIDATED BALANCE SHEET                                  

(unaudited, in EUR thousand)                                

                                                            

                                     30.09.2005  30.09.2004  31.12.2004

ASSETS                                                           

Current assets                                              

Cash and cash equivalents                   741         505         800

Held for trading investments                129          34          39

Customer receivables                      3,316       2,474       1,758

Other receivables and prepaid               

expenses                                    588         907         640

Inventories                               8,466       9,374       9,297

Total current assets                     13,241      13,294      12,532

Non-current assets                                          

Investments in joint ventures                96           0          70

Investment property                         860           0         479

Deferred income tax                         278         312         278

Other non-current assets                    285         225         181

Tangible fixed assets                     5,089       5,115       4,942

Intangible assets                         1,713       1,777       1,788

Total non-current assets                  8,322       7,429       7,739

TOTAL ASSETS                             21,563      20,722      20,271

                                                            

EQUITY AND LIABILITIES                                      

Current liabilities                                         

Debt obligations                          1,889       3,814       4,762

Accounts payable                          1,665       2,377       1,991

Tax liabilities                             749       1,126         810

Accrued expenses                            823         786         672

Other short-term liabilities                 23           8          59

Total current liabilities                 5,149       8,112       8,294

Non-current liabilities                                     

Long-term debt                            4,669       4,486       2,936

Total non-current liabilities             4,669       4,486       2,936

TOTAL LIABILITIES                         9,819      12,598      11,230

                                                            

SHAREHOLDERS' EQUITY                                        

Share capital (par value)                 3,722       3,571       3,601

Share premium                             3,136       2,800       2,845

Mandatory legal reserve                     360         307         307

Other reserves                              249       1,156       1,405

Retained earnings                           836      -1,055      -1,055

Net profit for the period                 2,961         343       1,067

Exchange rate differences                   273         429         423

Minority interest                           208         574         449

TOTAL EQUITY                             11,744       8,124       9,042

TOTAL LIABILITIES AND EQUITY             21,563      20,722      20,271







Ülle Järv

CFO

+372 630 2741



Triin Palge

Head of investor relations

+372 630 2886