CONSOLIDATED MANAGEMENT REPORT
1. Economic and legal environment
1.1. Effect of the economic environment
AS Kalev's results for the financial year 2006-2007 were affected by both
organisational changes and developments on domestic and export markets.
Regarding production inputs, unfavourable changes could be seen in certain raw
material prices; unlike in the previous period. The price of labour also showed
quick growth. Developments of important export markets for AS Kalev's products
ensured an increase in demand, similar to that in domestic demand, which was
backed by quick economic development.
The rate of growth in GDP and total demand in Estonia remained high in the
reporting period, exceeding the long-term balancing speed. Real GDP growth
significantly surpassed total production growth in the period, with
corresponding annual figures amounting to 11% and 16%. Regardless of the quick
economic growth in Estonia, the increase in production volumes in different
segments is quite imbalanced - the food and beverage industry has grown nearly
two times slower than the average for all fields of activity, with the growth of
dairy product volumes only slightly larger than the general inflation speed.
Total profitability indicators for the same period revealed a similar trend -
while the average indicator for the processing industry amounted to 8%, the
indicator for the food and beverage industry remained below 5%, and that of the
dairy industry at barely 2%.
At the same time, private consumption has shown an exceptional near -16% real
growth in the last 12 months. The demand for products manufactured by Kalev
Group companies has not increased that much. For example, domestic sales of food
products have, in current prices, increased by more than an annual 10%.
Contributors to the increase in consumption also included wage dynamics,
favourable loan market conditions and the real estate market. Consumer prices
have shown quite a growth for the third year in a row, exceeding an annual 6%,
and the general price increase has not ceased. Inflation in Estonia reflects the
rapid development of a small economy, the consequent "bottlenecks" as well as
the effect of EU economic integration and globalisation.
Real growth in wages has been rapid in Estonia, while tensions are brewing on
the labour market with regard to both skills and availability - for the
employer, such a full employment situation means limited options in a situation
where production capacities need to be increased. For this reason, Kalev Group
has made the necessary investments in order to control the changes caused by the
quick growth in the cost structure. General growth, however, shows that,
considering the slower growth in productivity indicators, the above changes
exert pressure on the competitiveness of Estonian companies. An increase in
domestic product exports has already slowed down, being two times smaller than
the growth in total GDP.
The cost of debt capital has shown a significant increase, compared to the last
financial year. As loan conditions have become stricter and less favourable,
this will have its effect on the demand for construction and capital goods, and
will fuel consumption. At the same time, we can detect signs of growing caution
- end-consumption is no longer growing as fast as income. With private
consumption, the most important contributor to total demand, making up
three-fourths of the final consumption in Estonia, economic growth is bound to
slow down. Customer priorities are also changing: surveys on the demand for
sweets indicate a price-sensitivity among Estonian buyers. At the same time, we
can also see signs of a major shift towards growth in the consumer awareness of
healthier eating habits.
Product price formation is based on the various factors of demand and supply. In
the given period, the producer prices of industrial products increased 8% in
Estonia, while that of food and beverage products increased by 7%. The cost
dynamics can be explained by the price increase of energy and raw materials, as
well as production factors. For example, the global price for cocoa beans,
translated into Estonian kroons, has increased by nearly 20% in the period, and
reached a four-year-high. Cocoa bean future prices (US dollars quoted on the
global market) reveal that the raw material prices are expected to rise by at
least 10% over the year. The milk buying-in price in Estonia has increased by a
little over 3% in the financial year, with a significant increase (nearly 10%)
seen from 1 July 2007. Packaging and transportation expenses have also
increased, having much to do with the increase in the price of raw materials.
Consequently, the profit expectations from the food industry have been affected
in both 2007 and 2008.
Changes in legal environment
Although the Estonian tax policy has moved towards reducing direct taxation and
increasing indirect taxation, local entrepreneurs still incur significant
expenses on staff recruitment. Changes in production factors also involve the
effect of personnel expenses on the company. In addition to state taxes,
personnel expenses are also affected by agreements concluded between employees
and trade unions. Nationwide minimum wage agreements concluded in the past three
years have raised the minimum wage in Estonia by 45% (including that on 1
January 2007, the minimum wage was raised by 20%). This increase has a direct
effect on overall wage increases. Under the conditions of a lack of skilled
workers, a relatively modest mobility of the labour market, limited growth in
production and the establishment of additional EU regulations, a material
increase in the minimum wage may exert an ever-increasing pressure on the
expenses of companies.
Even though the Government of the Republic approved the euro adoption plan
(according to which the euro would be adopted as the account currency, in
accounting, and contractual relations on 1 January 2007) in September 2005, it
is still unclear as to when the transition will be made. If Estonia fails to
fulfil the economic and legal requirements for countries who wish to join the
euro zone, the adoption will be postponed. Uncertainty regarding the future of
the adoption of the euro has also postponed related preparations for AS Kalev.
Deeming the current sugar market arrangement unsustainable, the European
Commission decided at the end of 2005, after six months of disputing, to reform
the sugar regime of the common EU agricultural policy. As a result of the
reforms implemented in July 2006, the minimum price of white sugar (which so far
had been three times higher than the global price) will be lowered by a total of
36% in the following four years (-20% in the first year of the reform, -27.5% in
the second year, -35% in the third year and -36% in the fourth year). The
standardisation of the EU sugar price with the global sugar price (i.e. price
reduction) serves the best interests of AS Kalev, since sugar constitutes an
important production input for the company.
In June 2007, the European Commission resolved to cancel all dairy product
export refunds. This measure is in line with the reforms in the EU common
agricultural policy, and is conditioned by a quick growth in the global prices
of raw materials. For instance, the price of both milk powder and butter has
reached an all-time high. At the same time, the European Commission does not
rule out the possibility of restoring its intervention in the dairy product
trade in the case of a reversal of market trends.
2. Overview of AS Kalev Group
AS Kalev pursues several fields of activity, including the manufacturing and
sale of foodstuffs, real estate-related activities, and media (publishing and
printing services). The company has long-term experience in the chocolate, sugar
and flour confectionery product segment as well as the dairy product segment.
Foodstuff production is carried out in five production plants located in
Põrguvälja (in Rae Municipality), Paide, Viljandi, Jõhvi and Kiviõli. As a part
of Kalev's sales activities, it is also pursued through a pan-Estonian retail
chain which consists of 15 candy stores and cafes. AS Kalev has also been
involved in real estate development and administration for a longer period of
time. AS Kalev has continually diversified its activities, branching out to the
media business, publishing and printing. Kalev's business activities according
to the Estonian Classification of Economic Activities (EMTAK) are provided in
the table below:
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| EMTAK code | Activity |
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| 15842 | Producing of chocolate and sugar confectionery product |
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| 15811 | Producing of bred |
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| 15511 | Processing of raw milk |
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| 70111 | Real estate development and sales |
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| 92349 | Other entertainment |
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| 22131 | Publishing magazines |
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| 22225 | Printing of advertising materials and business catalogues |
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A restructuring process was launched in the AS Kalev Group in the last financial
year. A significant portion of the results were already seen in the financial
year. At the end of the last financial year (in May 2006), AS Kalev Chocolate
Factory was established for the purpose of the manufacturing and marketing of
chocolate and sugar confectionery products. In September in the financial year
2006-2007, the AS Kalev Chocolate Factory also started marketing the pastry and
flour confectionery products of other group subsidiaries AS Vilma and AS Kalev
Jõhvi Tootmine. In addition, at the end of the last financial year as a part of
organizational restructuring, an event marketing division was disassociated from
AS Kalev and transformed into a separate company named OÜ Sugarstar. AS Kalev is
the sole shareholder of OÜ Sugarstar, which main business activity is providing
event marketing services to AS Kalev Group as well as outside the group and
which started its activity in financial year 2006-2007.
A new subsidiary was incorporated under the AS Kalev Group structure in the
first quarter of the financial year 2006-2007: AS Kalev Real Estate Company (AS
Kalev REC) acquired BCA Center, a private limited company which has a share
capital of 40 000 kroons and is fully owned by AS Kalev REC. Through the OÜ BCA
Center, AS Kalev REC participated in the Private Partnership for Tallinn Schools
Project competitions. Winning one of these competitions, OÜ BCA Center concluded
a contract on the right of superficies on registered immovables which
accommodate five schools. OÜ BCA Center obliged to reconstruct the real estate
objects (a total area of nearly 27 700 m2) and lease them out to the City of
Tallinn for a term of thirty years. The average rent was established at 155
kroons/m2, which includes the maintenance and periodical major repairs of the
school buildings and surrounding areas (administration, maintenance of technical
systems, and interior and exterior cleaning) over the term of the contract. The
investment obligation is secured by AS Kalev REC and must be fulfilled in the
second half of 2008 at the latest.
As the most renowned Estonian company and a major advertiser, AS Kalev has a
direct relationship with the media market. This is also the reason for the
expansion of the investment portfolio towards the press market. As a socially
active company, AS Kalev acknowledges its co-responsibility in the shaping of
public opinion, even though the company has no intentions of intervening in the
contents of the acquired publications. The company aims at creating additional
value for various publications. In the publishing and printing segment, AS Kalev
is expecting a long-term and stable profit from the relatively quickly growing
media market.
In the second quarter of the financial year, several new subsidiaries and
associated companies were incorporated into the group structure. AS Kalev
acquired a 19.4% stake in AS PR Põhjarannik. AS Kalev won the right to purchase
the company at an auction held on 21 November 2006, where AS Kalev was declared
the best bidder. AS PR Põhjarannik's main activities include publication,
printing services and the organisation of information dissemination. Among other
things, AS PR Põhjarannik issues the daily “Põhjarannik” in both Estonian and
Russian, with the paper issued covering a majority of north-eastern Estonia.
On 28 November, AS Kalev concluded a contract under which the company acquired
100% of the shares of AS Inreko Press. The main fields of activity of AS Inreko
Press include publishing and the organisation of public events and press events.
The company publishes journals and books (including, for instance, "Sporditäht"
and "Ärielu"). On 19 December 2006, AS Kalev concluded a contract under which
the company acquired all shares of OÜ Olliwood. OÜ Olliwood's main activities
include publishing - including, for instance, "Just" and "Basket", and the
children's publication "Muumi" - and the organisation of public and press
events.
The third quarter of the financial year saw the incorporation of a few more
subsidiaries and associated companies into the AS Kalev Group. On 20 February,
AS Kalev concluded a contract on the purchase and sale of an 80% stake in AS
Uniprint. AS Uniprint is involved with the provision of printing services - i.e.
various advertising and small publications, official documents and quality
journals. AS Kalev had previously concluded a contract under which the company
acquired 20% of the shares in the above public limited company. With the
transaction, AS Kalev thus effectively became the full owner of AS Uniprint.
Under the contract, AS Kalev had to pay a total of nearly 54.8 million kroons
for 80% of the shares, with 4 million kroons of the purchase price paid by AS
Kalev on the day of conclusion of the contract of sale. In April 2008, AS Kalev
will pay 24.1 million kroons of the transaction price, with nearly 26.7 million
kroons to be paid by 5 April 2009 at the latest. If the company pays for the
shares before the term indicated in the contract of sale, the purchase price
will be reduced by deducting an annual 6% of the purchase price for the period
of advance payment of the purchase price by AS Kalev. The right of ownership
over the shares will be transferred to AS Kalev on the day of payment of the
last instalment. Until the transfer of the right of ownership over the shares,
the sellers shall encumber the AS Uniprint shares which form the object of the
contract of sale for the benefit of AS Kalev. With the contract concluded on 3
January 2007, AS Kalev also acquired, in March, 50% of the shares of AS
Uniprint's subsidiary AS Unipress.
On 12 March 2007, AS Kalev concluded a contract under which the company acquired
all shares of AS Eksklusiiv. Under the contract, the ownership over 100% of the
shares was transferred to AS Kalev on 14 March 2007. AS Eksklusiiv's main field
of activity is the publication of “Avenüü“ and “Avenüü Professional“ journals.
On 11 April 2007, AS Kalev's subsidiary AS Kalev Paide Tootmine acquired 22 065
shares of Valmetek Invest AS - i.e. 34.4% of the total number of the company's
shares. AS Kalev Paide Tootmine now holds a 65.6% stake in Valmetek Invest AS,
since nearly one-third of the shares of the above company was already acquired
by AS Kalev Paide Tootmine in February 2006. AS Kalev Paide Tootmine will pay a
total of 27.96 million kroons for the acquired shares, with 5 million kroons of
the purchase price paid prior to the conclusion of the contract of sale of
shares, and 4.57 million kroons paid by the buyer on 1 June 2007.The remainder
of the purchase price must be paid in equal quarterly instalments from 1
September 2007 to 1 September 2008. An annual 10% interest rate will be charged
from AS Kalev Paide Tootmine on the unpaid part of the purchase price. The buyer
has the right to prematurely pay the purchase price or a part of the purchase
price.
The above acquisitions do not constitute related party transactions in the
meaning of the stock exchange rules.
On 17 May 2007, an entry was made in the commercial register on the
establishment of AS Kalev Meedia. The company is fully owned by AS Kalev, and
has a share capital of 400 000 kroons, which is divided into 40 000 shares with
a nominal value of 10 EEK per share. AS Kalev Meedia is AS Kalev's subsidiary,
which is involved in the media sector, managing and developing publishing
activities. AS Kalev Meedia will take over the publications of AS Inreko Press
and OÜ Olliwood (Ärielu, Sporditäht, Just, Basket, Muumi) and integrate all
media products to be acquired or developed in the future.
On 12 June 2007, AS Kalev Meedia concluded a contract under which the company
acquired all shares of OÜ Eesti Spordikanal. The rights associated with the
shares were transferred to the buyer upon the conclusion of the contract. AS
Kalev Meedia is now the sole shareholder of the company, holding one share with
a nominal value of 40 000 kroons. The main field of activity of OÜ Eesti
Spordikanal is TV program production and broadcasting. The company is still in
its early stages of developing into a TV channel. The acquisition of the above
share partially constitutes a related party transaction. Fifty percent of OÜ
Eesti Spordikanal was owned by Oliver Kruuda, General Manager of AS Kalev. Under
the contract of sale, AS Kalev Meedia will pay Oliver Kruuda the sales price of
the share which corresponds to the nominal value of the share - i.e. 20 000
kroons.
AS Kalev is the parent company of Kalev Group. The group also incorporates 19
other subsidiaries. The share of AS Kalev in these companies has been disclosed
in Note 22.
3. Economic activities and financial results
According to the results of the "Recognition and reputation of Estonian
companies" survey conducted by TNS Emor in April 2007 among nearly 50 local
companies for the eighth year in a row, AS Kalev remains the most reputable
company in Estonia. The results reveal that (similarly to previous years)
Estonians consider Kalev the most pleasant company. This means that Kalev ranked
first in the attitude scale. With an average score of 8.6 on a ten-point scale,
AS Kalev was elected the most reputable company for the fifth year in a row.
The economic activities of AS Kalev and the financial indicators of the group
for the financial year 2006-2007 were affected by several factors, of which
group restructuring, which was launched at the end of the last financial year,
product portfolio reorganisation and the effects of the external environment
proved to be the most significant. The consolidated net sales for the 12 months
of the financial year amounted to 925.7 million kroons (59.2 million euros). Net
sales have increased by 4% compared to the same period last year, with the
decrease in sales of dairy products having the biggest effect on total sales.
The consolidated net profit for the financial year 2006-2007 amounted to 30.4
million kroons (1.9 million euros), compared to 1.3 million kroons (0.1 million
euros) in the comparative period.
The net sales and net profit of AS Kalev Group companies for the financial year
2006-2007 have been brought out in the tables below (in thousands of kroons and
euros), separately for each company. Comparative data has been brought out for
13 companies. The financial indicators of the subsidiary Kalev Merchant Services
Ltd. have not been consolidated, since the balance sheet volume of the
subsidiary only makes up less than 0.5% of the parent company's turnover. Data
on associated companies has not been included in the tables. The data on AS
Kalev Paide Tootmine, AS Kalev Real Estate Company, AS Kalev Meedia and AS
Uniprint also include the corresponding financial results of their subsidiaries.
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| | Sales revenue | Net profit |
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| | 2006/2007 | 2005/2006 | 2006/2007 | 2005/2006 |
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| EEK | 12 months | 12 months | 12 months | 12 months |
--------------------------------------------------------------------------------
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| AS Kalev | 144 479 | 423 491 | -62 792 | 28 989 |
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| AS Kalev | 315 726 | 413 546 | 29 407 | -44 930 |
| Paide | | | | |
| Tootmine* | | | | |
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| AS Kalev | 87 518 | 75 363 | 79 373 | 127 496 |
| REC* | | | | |
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| AS Kalev | 40 575 | 32 753 | -3 877 | -3 728 |
| Jõhvi | | | | |
| Tootmine | | | | |
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| OÜ Maiasmokk | 7 121 | 7 255 | -916 | -3 099 |
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| AS Vilma | 29 503 | 36 064 | -1 316 | -1 342 |
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| AS Kalev | 452 182 | 0 | 23 614 | 0 |
| Chocolate | | | | |
| Factory | | | | |
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| OÜ Sugarstar | 3 613 | 0 | -1 065 | 0 |
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| AS Inreko | 3 853 | 0 | -288 | 0 |
| Press | | | | |
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| OÜ Olliwood | 4 911 | 0 | -1 852 | 0 |
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| OÜ Eksklusiv | 1 350 | 0 | -1 305 | 0 |
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| AS Kalev | 1 431 | 0 | -558 | 0 |
| Meedia* | | | | |
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| AS Uniprint* | 54 755 | 0 | 2 294 | 0 |
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* consolidated
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| | Sales revenue | Net profit |
--------------------------------------------------------------------------------
| | 2006/2007 | 2005/2006 | 2006/2007 | 2005/2006 |
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| EUR | 12 months | 12 months | 12 months | 12 months |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| AS Kalev | 9 234 | 27 066 | -4 013 | 1 853 |
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| AS Kalev | 20 179 | 26 430 | 1 879 | -2 872 |
| Paide | | | | |
| Tootmine* | | | | |
--------------------------------------------------------------------------------
| AS Kalev | 5 593 | 4 817 | 5 073 | 8 148 |
| REC* | | | | |
--------------------------------------------------------------------------------
| AS Kalev | 2 593 | 2 093 | -248 | -238 |
| Jõhvi | | | | |
| Tootmine | | | | |
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| OÜ Maiasmokk | 455 | 464 | -59 | -198 |
--------------------------------------------------------------------------------
| AS Vilma | 1 886 | 2 305 | -84 | -86 |
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| AS Kalev | 28 900 | 0 | 1 509 | 0 |
| Chocolate | | | | |
| Factory | | | | |
--------------------------------------------------------------------------------
| OÜ Sugarstar | 231 | 0 | -68 | 0 |
--------------------------------------------------------------------------------
| AS Inreko | 246 | 0 | -18 | 0 |
| Press | | | | |
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| OÜ Olliwood | 314 | 0 | -118 | 0 |
--------------------------------------------------------------------------------
| OÜ Eksklusiv | 86 | 0 | -83 | 0 |
--------------------------------------------------------------------------------
| AS Kalev | 91 | 0 | -36 | 0 |
| Meedia* | | | | |
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| AS Uniprint* | 3 499 | 0 | 147 | 0 |
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* consolidated
Important factors contributing to the results of the AS Kalev Group for the
financial year 2006-2007:
--------------------------------------------------------------------------------
| | % | EEK | EUR |
--------------------------------------------------------------------------------
| Increase in | 4.1% | 36 081 | 2 306 |
| revenue | | | |
--------------------------------------------------------------------------------
| Increase in | 227% | 47 912 | 3 062 |
| operating profit | | | |
--------------------------------------------------------------------------------
| Increase in | 16.7% | 84 643 | 5 410 |
| domestic revenue | | | |
--------------------------------------------------------------------------------
| Increase in | -12.7% | -48 562 | -3 104 |
| export revenue | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Increase in | -24.7% | -98 287 | -6 282 |
| revenue from | | | |
| dairy products | | | |
--------------------------------------------------------------------------------
| Increase in | 10.0% | 35 098 | 2 243 |
| revenue from | | | |
| confectionery | | | |
| products | | | |
--------------------------------------------------------------------------------
Important factors contributing to the growth in net profit of the AS Kalev Group
are as follows:
1) The near 33% increase in gross profit was conditioned by an increase (4.1%)
in revenue from goods produced by the company while total expenses decreased
(1.5%);
2) an annual 10% increase in revenue from confectionery products;
3) a reversal of the previous negative results from dairy product sales in a
situation where the segment turnover decreased by one-fourth;
4) a near one-third increase in profit from the real estate segment, compared to
the previous period.
AS Kalev has increased its gearing in the financing of its activities and
development. The company has issued short-term bonds. The group's financial
expenses have been increased by loan refinancing, bond redemption and new
mortgage loans. The purposes mainly involve financing activities in the field of
real estate administration and development.
As regards expense items, the biggest growth (43% compared to the last period)
can be seen in administrative and general expenses. This growth has been
conditioned both by the quick increase in personnel expenses and the information
and consulting expenses incurred in connection with the expansion of activities
(into media). The 27% increase in the personnel expenses of Kalev Group have
been largely conditioned by the inflational environment of the Estonian labour
market, which affected the whole market in the financial year.
The near 100% increase in the positive balance of other income and expenses,
which amounted to a total of 82.4 million kroons (5.3 million euros), was above
all affected by the re-valuation of real estate into its fair value by AS Kalev
REC. An overview of the risks (including both financial risks and non-financial
risks) affecting the economic activities of AS Kalev, and corporate risk
management, has been provided in Note 26.
Most important financial ratios of AS Kalev Group*:
--------------------------------------------------------------------------------
| | AS Kalev Group | |
--------------------------------------------------------------------------------
| | 01.07.2006-30.06.2007 | 01.07.2005-30.06.2006 |
--------------------------------------------------------------------------------
| Current ratio | 0.61 | 0.63 |
--------------------------------------------------------------------------------
| Financial gearing | 0.80 | 0.70 |
--------------------------------------------------------------------------------
| Asset turnover ratio | 0.79 | 1.14 |
--------------------------------------------------------------------------------
| Net profit margin (%) | 3.3% | -4.9% |
--------------------------------------------------------------------------------
| ROA (%) | 2.6% | 5.6% |
--------------------------------------------------------------------------------
* The financial ratios have been calculated based on the following methods:
Current ratio = current assets/current liabilities
Financial gearing = total liabilities/average total assets
Asset turnover ratio = revenue/average total assets
Net profit margin = net profit/revenue * 100%
Return on assets (ROA) = net profit/average total assets * 100%
4. Product market and sales
4.1. Confectionery products
According to the retail trade survey conducted by AC Nielsen (as of April/May
2007), AS Kalev Group is the firm leader of the Estonian chocolate and sugar
confectionery product market. The company's market share was nearly 37% as
regards turnover (an increase of 0.4 percentage points from last year) and 40.2%
as regards volume. Kalev's market share in the local biscuit market has
increased to 10.1%, moving the company up to second position; and the market
share in the white and dark bread market has increased to 3%. As a result of
active product development, the company launched a total of 65 new products in
the financial year 2006-2007, of which flour confectionery goods made up
two-thirds. The sales volume of new products made up 10% of total sales for the
period.
Three new flavours were launched in the Kalev brand chocolate series - Kalev's
tiramisu-flavoured milk chocolate with biscuit pieces (100g), Kalev's milk
chocolate with biscuit and plum pieces (100g) and Kalev's white chocolate with
biscuit and strawberry pieces (100g). One of the most popular flavours of the
series - white chocolate with rice crisp and blueberry pieces - was also
launched as a 200g tablet. Kalev also expanded its Bitter series, adding new
products Bitter dark chocolate with almonds (100g) and Bitter dark chocolate
with hazelnuts (50g). The children's chewing candy series Draakon saw the
addition of a new cherry yoghurt-flavoured Draakon, as well as the launch of the
new Draakon Mix (420g). New candies launched by Kalev included the
cocoa-flavoured wafer candies and cherry-flavoured jelly candy, with the latter
also launched in a 20g format. In addition, the product selection was also
expanded with the launch of the 35g Tallinn wafer candy. The gift box series saw
the addition of two new praline candies: "Kadriorg” (435g) and "Assortment of
praline candies” (150g). The Soufflé series was also expanded with the launch of
"Kalev Soufflé assortment” chocolate candies (235g) and Kalev Soufflé
vanilla-flavoured chocolate candies (155g). In addition to the launch of the
above new products, Kalev modernised the packages of several boxed candy
products.
In the pastry product and flour confectionery product segment, Kalev launched a
total of 19 different white and dark bread products under the "Linda" and
"Kalevipoeg" trademarks in the financial year 2006-2007, plus 6 plaited buns, 4
cakes and 2 new muffins under the "Linda" series. The traditional mould biscuit
series were complemented by toffee and chocolate-flavoured biscuits, with
"Kaeraküpsis" (220g) biscuits added to the confectionery biscuit series and
"Nisukliiküpsis" biscuits with fructose and strawberry pieces added to the
low-calorie biscuit series with healthy additives.
A new tart portfolio with 11 new products was launched under the Kalev
trademark. The popular Vilma flour mix series saw the addition of two new
products - the Vilma chocolate muffin powder (400g) and Vilma wafer powder
(380g).
4.2. Dairy products
The company manufactured a total of 11 453 tons of various dairy products from
the crude milk stored by AS Kalev Paide Tootmine in the financial year 2006-2007
- mainly cream, skimmed milk and milk powder as well as high-temperature
pasteurized milk. Whole milk and skimmed milk powder as well as cream made up
the majority (nearly 87%) of the total output. New products launched by AS Kalev
included cream powder.
Major changes in the period involved product sales prices. In the reporting
period, the internal EU prices for whole milk and skimmed milk powder were more
favourable for the producer, compared to the base period. For instance, the
average wholesale price of skimmed milk powder increased by nearly 30% in
Germany compared to July of last year (1995 EUR/ton last year; 2536 EUR/ton in
the reporting year). Similar trends, although smaller, can be seen in milk
powder prices in Europe. Influenced by the price rally on the global market, the
prices for skimmed milk and milk powder continued to rise (e.g. the average
wholesale price of skimmed milk powder at the end of the second quarter of 2007
was 3301 EUR/ton). For the producer these are positive trends, since the
increase in the price of raw materials is regulated by previous agreements.
Namely, AS Kalev's subsidiary AS Kalev Paide Tootmine concluded, for the first
half-year of 2007, crude milk buying-in contracts under which the company will
supply nearly 160 tons of crude milk a day. The negotiated price formation was
based on a co-operation model which considers a long-term partnership between
the parties and which was satisfactory for both dairy producers and processors.
Under the agreement, the price of crude milk will be formed on the basis of the
European average prices for milk powder, skimmed milk powder and butter.
4.3. Sales volume
The total sales volume of AS Kalev for the financial year 2006-2007 was 9990
tons in the confectionery product segment and 11 643 tons in the dairy product
segment. Thus, compared to the last financial year, the sales volume decreased
by 5.5% in the confectionery product segment and by 15% in the dairy product
segment.
90% of the confectionery products of Kalev Group were sold on the domestic
market, and 10% exported to different foreign markets. The total volume of
chocolate and sugar confectionery products sold amounted to 6030 tons. The
volume thus showed no material changes from the last financial year. In the
given period, 33% of the total export of chocolate and sugar confectionery
products went to Russia (i.e. a significant decrease from last year), 32% to
Latvia, 8% to Finland, 4% to Lithuania, and 6% to other countries, with total
sales in the Travel Retail segment amounting to 17%. The total export volume of
confectionery products decreased by 9% compared to the last financial year. This
was mostly conditioned by the near one-third decrease in Russian exports
compared to the last period.
AS Kalev Group's total volume of flour confectionery product sales, including
pastry products and biscuits, amounted to 3960 tons in the financial year
2006-2007, decreasing by 10% from the last year. Ninety-nine percent of the
flour confectionery products were sold on the domestic market, with the
remainder exported to the Baltic States and Russia.
The total volume of diary product sales - skimmed milk and milk powder,
high-temperature pasteurized milk, cream, and butter - amounted to 11 643 tons
in the given period, with 80% being exported to EU members and one-fifth sold in
Estonia. Similarly to previous periods, Germany remained the most important
export destination for dairy products, making up 84% of the total export of
dairy products (i.e. 66% of the total sales of dairy products).
4.4. Real estate activities
AS Kalev pursues real estate management and development activities through its
subsidiary AS Kalev Real Estate Company (hereinafter Kalev REC) and through its
subsidiaries and associated companies. In the real estate segment, the most
important project had to do with the development activities of the subsidiary OÜ
BCA Center in the reconstruction of five schools within the framework of the
Private Partnership for Tallinn Schools Project. Kalev REC also continued the
further development of ongoing real estate projects: the company completed the
19-apartment residential building in Marat Street in Tallinn and the
25-apartment building in Hommiku Street in Pärnu. From the above projects, 17
and 22 apartments had been sold by the end of the financial year, respectively.
According to the detailed plan, a 1800 m2 apartment building may be constructed
on the sold real estate in Kadriorg, Tallinn. Kalev REC's Bulgarian-based
subsidiary EOOD Stude REC launched the construction of a 6500 m2 apartment
building in Sofia. The building is scheduled to be completed in the spring or
early summer of 2008.
Although the company's real estate segment has so far focused on the development
of residential and commercial space, AS Kalev REC is paying increasing attention
to the public real estate market. With this purpose, the company has actively
participated in the so-called private partnership project competitions. Several
development project competitions were held in the public sector over the
financial year. The biggest projects included the auction of the right of
superficies on the so-called Kopli lines, organised by the City of Tallinn, and
the auction of the right of superficies on Pae Park in Lasnamäe. AS Kalev REC
came second in the first competition (though the winner failed to conclude a
contract with the City of Tallinn). The results of the second competition had
not been published as of the moment of the preparation of this Annual Report
(the terms and conditions of the competition were contested).
4.4. Media
AS Kalev became actively involved in the media market in the financial year
2006-2007: AS Kalev acquired several media companies with the aim of expanding
its investment portfolio into the relatively quickly-growing publishing and
printing segment. In the course of business expansion, AS Kalev acquired AS
Inreko Press (whose main publications include the gossip magazine "Ärielu“ and
the sport magazine "Sporditäht“), OÜ Ollywood (which publishes the tabloid
"Just“, the children's magazine "Muumi“ and the sports magazine "Basket“), AS
Ekslusiiv (which publishes the "Avenüü" and "Avenüü professional" magazines,
which are mainly designed for women), and OÜ Eesti Spordikanal (which aims at
launching a new television channel on the Estonian media landscape). According
to the Estonian Media Survey conducted by TNS Emor in the second quarter of
2007, "Just" had 45 000 readers, "Sporditäht" 30 000 readers, "Avenüü" 20 000
readers, "Muumi" 18 000 readers, "Ärielu" 8000 readers and "Basket" 8000
readers.
In order to bring AS Kalev's media activities under a single organisational
structure, AS Kalev Meedia was established on 18 May 2007. The aim was to
consolidate different publishing companies, allowing for the opportunity to
create synergy in the future, and to optimise activities and resources. AS Kalev
has specified the objectives and further development of the offered products in
the media segment. Future expectations have to do with achieving the growth
targets established for the published journals, as well as new media products,
including the launch of a new television channel.
During the reporting year, AS Kalev expanded its activities also to market of
printing services by acquiring shareholdings in AS Uniprint and AS Uniptress. AS
Uniprint, which is one of the leading printing companies in Estonia, produces
quality printed works for more than 15 years. Printing house of Uniprint is
producing diversified sector of advertising and small size printed works,
official templates and quality magazines. AS Unipint and Unipres has quality
and environmental quality certificates ISA 9001:2001 and ISO 14001:1998.
AS Uniprint which is specialized on quality printed sheets and AS Unipress,
which is specialized on printing periodicals are providing its services through
their branches also to Scandinavian and Russian clients. Thus, in addition to
its current solid and wide client base, these subsidiaries of AS Kalev can
contribute to satisfying the needs of Kalev Group for advertising and small
brochures and quality printed works.
5. Securities
The shares of AS Kalev have been listed in the secondary list of the OMX Tallinn
Stock Exchange since 1996. With a nominal value of 10 Estonian kroons (EEK 10)
per share, the company has listed 23 632 500 shares on the stock exchange.
Over 2.1 million shares of AS Kalev were traded in the period between 01.07.2006
and 30.06.2007, generating a turnover of 46.25 million kroons. With an average
of 10 transactions made with the shares per trading day, the highest price for
the share in the period was EEK 26.5, and the lowest price EEK 17.2. The closing
price of the last stock exchange day of the financial year of AS Kalev - i.e. on
29 June 2007 - was EEK 18.46. Compared to the end of the last financial year, AS
Kalev's market capitalisation decreased by 17.5%, amounting to 436.3 million
kroons as of 30 June 2007.
As of the end of the financial year 2006-2007, AS Kalev's biggest shareholders
(with a share of over 10%) included Citibank International Plc (Luxembourg
branch)/UBS Luxembourg S.A. (19.99% of the shares), customers of Skandinaviska
Enskilda Banken AB' (16.19%), Mailtec OÜ (10.24%), Nordea Bank Finland Plc.
(8.06%), Vipes Invest OÜ (7.49%), and ING Luxembourg S.A. (7.19%).
AS Kalev share price and turnover for the period 02.07.2006-29.06.2007 (source:
OMX Tallinn Stock Exchange)
6. Organisation and personnel
6.1. Organisational management
Kalev Group's strategic management is going according to plan and in accordance
with the new strategic choices. Consequently, the organisation adjusted to the
expansion into new segments, as well as the optimising of its product portfolio
and enhancement of profitability. In order to increase the efficiency of the
implementation of its strategy, AS Kalev has made improvements in terms of
better combining strategic and operative planning and enhancing transparency.
Several organisational changes were introduced at the end of the financial year
2006-2007 in order to improve the management of AS Kalev and enhance financial
transparency. As a result of these changes, the Jüri-based production facility
was turned into a separate subsidiary (AS Kalev Chocolate Factory). In addition,
AS Kalev established a separate subsidiary (OÜ Sugarstar) on the basis of its
event marketing department. New management board and supervisory board members
were appointed for the companies in connection with these changes. As a result
of the introduced changes, the Management Board of AS Kalev has taken on the
role of guide and supervisor, while maintaining its presence in the supervisory
boards of all subsidiaries.
The organisation has also expanded into a new segment - the media. OÜ Olliwood,
AS Inreko Press, and AS Eksklusiiv operate in the field of publishing, and
publish the “Just”, “Muumi”, “Basket”, “Sporditäht”, “Ärielu”, “Jalka”,
“Avenüü”, and “Avenüü Professional” magazines. Under the contracts of purchase
and the sale of shares, AS Kalev has acquired AS Uniprint and AS Unipress,
companies which operate in the field of printing, publishing various advertising
and small brochures, documents and quality magazines.
In the second half-year, the media companies OÜ Olliwood and AS Inreko Press
were incorporated under AS Kalev Group. As a result of the above organisational
changes, a new company - AS Kalev Meedia - was established within the group,
taking over the staff, assets and product management of the media companies.
6.2. Human resource management
AS Kalev Group employed an average of 748 people in the financial year 2006-2007
- 40 less than in the same period last year. However, since the acquisition of
the media companies added 30 people to the AS Kalev Group structure, the average
number of employees in the group, which has undergone organisational changes, is
778. The company conducted 56 recruitment competitions, with the staff flow
amounting to 27%. With the growing tension between supply and demand on the
Estonian labour market, the staff flow has increased and it is increasingly
difficult for the company to recruit new specialists and workers.
AS Kalev Group's personnel expenses made up nearly 13% of its operating
expenses, amounting to 123.2 million kroons in the financial year (increasing by
nearly 22% from the previous period). The significant increase in personnel
expenses has to do with the need to offer competitive remuneration in the
conditions of increasing wages on the Estonian labour market, as well as the
positions added in connection with the expansion into the media sector.
6.3. Quality management
AS Kalev Group companies pursue quality, thus continually contributing to
quality management. AS Kalev Paide Tootmine passed the ISO 2001:2000 regular
audit without any non-compliance (the company holds the corresponding
BVQI-issued quality certificates). AS Kalev waived itself from formal
re-certification and ISO certificates, while continuing the use of the quality
management system, and further development activities in the company.
7. Corporate Governance Recommendations
Exercising its management practices in legitimate manner, AS Kalev as a listed
company acts in accordance with Estonian legislation and the requirements of the
Tallinn Stock Exchange. AS Kalev acts in accordance with the following
principles: openness and the equal treatment of shareholders. The operative
information to the public and investors is delivered through the webpage of
Kalev Group: providing the users with all stock exchange news, financial
reports, historical background, information regarding production development,
affairs, campaigns etc. Since the group consist of several bigger subsidiaries,
the webpage also refers to relevant contact information. Kalev's webpage also
enables to register online orders from company's broad product portfolio and
send filled order to preferred place throughout Estonia.
The Management Board members, nominated by the parent company, are responsible
for operative management of business activities of the companies belonging to
the group. The Supervisory Board members are responsible for strategic
management of various business areas of the group. Outside of Estonia the
commercial customs are supervised by local management. Considering the small
number of management team, there has been no need for the establishment of
special committees or other supplementary management bodies. The internal
procedures necessary for the sustainable development of the group are regulated
by appropriate rules and prescriptions. The Management and the Supervisory Board
meetings are held on agreed regularity. Risk evaluation and risk management is
regularly performed by internal audit function and its findings are reported to
the management.
7.1. Corporate Governance Recommendations Report 2007
The purpose of the Corporate Governance Recommendations (effective since January
1, 2006) established by the Tallinn Stock Exchange and the Financial Supervision
Authority is to point out the rights of shareholders to get better distribution
of information and effective management of companies. In accordance with
Corporate Governance Recommendations (hereinafter “CGR”) AS Kalev presents
together with the annual report also a report where the Management Board
confirms their compliance with the CGR or explains the reasons for
non-compliance. AS Kalev has complied with the CGR while preparing the annual
report; however AS Kalev can not comply with some points of the CGR arising from
peculiarities of business of the company. Following are the points mentioned and
explanations for non-compliance:
2.2.1 ”The Management Board has more than one member and a Chairman is elected
amongst the members. The Management Board or Supervisory Board establish' the
area of responsibility for each member of the Management Board, defining as
clearly as possible the duties and powers of each board member. The principles
for co-operation between the members of the board is established. The Chairman
of the Supervisory Board concludes a service contract with each member of the
board.”
AS Kalev has a single manager, nominated by the Supervisory Board. With the
manager a service contract is concluded where also the duties, obligations and
responsibilities of the manager is defined.
The Management Board of majority of AS Kalev subsidiaries consist of two or more
members with whom respective service contracts have been concluded.
2.2.7 „Base wages, bonuses, resignation compensation, other payable benefits and
bonus schemes of each Management Board member as well as their essential
features are disclosed in clear and unambiguous manner on the website of the
Issuer and in the Corporate Governance Recommendations Report. Information
published is clear and unambiguous if it directly expresses the amount of
expense to the Issuer or the amount of foreseeable expense as of the day of
disclosure.“
The service fee of the Management Board member is received just by the manager
of AS Kalev according to the contract concluded by the Supervisory Board. The
Contract concluded with the manager of AS Kalev defines base wages (fixed amount
every month), however resignation compensations, bonuses or other additional
payments are not provided in the contract.
3.2.5 „The amount of remuneration of a member of the Supervisory Board is
published in the Corporate Governance Recommendations Report, indicating
separately base and bonus payments (incl. compensation for termination of
contract and other payable benefits).”
The Supervisory Board and its members of AS Kalev are as follows:
Heino Priimägi, who was nominated as a Supervisory Board member with the
resolution of AS Kalev shareholders on a General Meeting held on December 02,
2004; Ülo Suurkask, whose authority as Supervisory Board member was prolonged
until December 2, 2009 according to the resolution of AS Kalev General Meeting
held on December 08, 2006; Marko Kaha, who was nominated as a Supervisory Board
member with the resolution of AS Kalev shareholders on General Meeting held on
December 14, 2005.
Monthly salary (fixed amount every month) has been decided to the members of AS
Kalev Supervisory Board (see Note 22). No additional payments or supplementary
compensations are paid to the Supervisory Board of AS Kalev.
5.3 ”General strategy directions of the Issuer as also approved by Supervisory
Board are accessible to the shareholders on the Issuer's website.”
The Management of the group is on the opinion that strategy is a part of a
business secret and not a subject of disclosure. However, general directions and
material topics are covered in the management report which is a mandatory part
of the annual report.
5.6 ”The Issuer discloses the dates and places of meetings with analysts and
presentations and press conferences organized for analysts, investors or
institutional investors on its website. The Issuer enables the shareholders to
participate of the actions mentioned and discloses the presentations on its
website. The Issuer does not arrange meetings with analysts and presentations
for investors directly before deadlines of publishing financial reports”.
The group acts in accordance with the principle of equal treatment of
shareholders. Mandatory, important and price sensitive information is in the
first order disclosed in Tallinn Stock Exchange system and then on company's
webpage. In addition, every shareholder has the right to receive information
from the company at their own convenience, and arrange meetings.
However, the management of the company does not prioritize keeping the schedules
of shareholders' meetings since the information is limited to public only. The
same rule applies to all meetings, including those held immediately before
publishing the financial reports.
6.2. Election of the Auditor and auditing of the Annual Accounts
On the Annual General Meeting of the shareholders of AS Kalev on December 14,
2005, an auditor was chosen for the financial periods of 2005-2006 and
2006-2007. Based on the shareholders decision, the annual accounts of AS Kalev
for the designated period is audited by Ernst & Young Baltic AS. Information
about the auditor is obtainable on the auditor's website. Remuneration of the
auditor is stated in the audit contract and it was agreed between the parties
not to disclose the fees. According to the guidelines of the Financial
Supervision Authority “Public financial supervision over the rotation of
auditors of certain persons.“ from September 24, 2003, the company organizes
the rotation of the auditor, assuring the independence of the auditor and
replacing the executive auditor at least after every five years.
8. Main activity directions for the financial year 2007-2008
Several changes were introduced in the financial year in order to correct the
organisational structure of AS Kalev and to bring the structure into line with
the activity trends, thus ensuring an increase in the efficiency of the
company's core processes. AS Kalev also plans to continue these pursuits
throughout the entire organisation in the next financial year, aiming to enhance
general efficiency and transparency, and to acclimatize itself to the
significant changes. We must also take into consideration the factors preventing
a material improvement in the profit margin - the continual increase in
production expenses, backed by the price increase in inputs (labour market
restrictions, including a lack of labour and the consequent wage increase, and
an increase in energy expenses). As a result of the developments in the supply
of production factors, the company is, for instance, pursuing projects which
help to decrease the labour requirement for different processes. As the domestic
market is characterised by tight competition between domestic and foreign
companies, this sets restrictions on achieving the highest margin.
AS Kalev Chocolate Factory aims to remain the leader of the domestic market (as
regards monetary turnover) in both the sugar and chocolate confectionery
segment. The company continues to pursue its goal of increasing the
profitability of the sales of its most important products through assortment
optimisation and production efficiency enhancement. Product development will
play an important role. In the chocolate confectionery segment, the company will
focus on developing chocolate tablets, chocolate candy and boxed chocolate
candy. In the sugar confectionery segment, the focus will lie on chewing candy
and toffee. In general product development, the company is pursuing the
extension of expiry dates as well as the creation of healthy products and new
flavours.
In the pastry and flour confectionery sector, the company is continually
pursuing its goal of achieving a material increase in the white and dark bread
market share in the next few years, thus taking third position among Estonian
bakeries. The share of pastry products will increase in the flour confectionery
segment, with a continual focus to be paid to the biscuit and flour mix segment.
Regardless of some setbacks in the spring/summer of 2007, AS Kalev is also
optimistic about the foreign sector. In general the demand for export goods is
supported by the favourable situation on the target markets. In the export of
sugar and chocolate confectionery products, AS Kalev will focus in the next few
years on strengthening its position in the Baltic States. The chocolate
confectionery sector in particular is expected to show an increase in export
volumes. On other foreign markets, the company plans to maintain its existing
customer base and sales volumes, as well as the focus on Travel Trade.
Further activities in the dairy product sector will depend on the global market
as well as on AS Kalev's strategy in the sector, which has yet to be specified.
We expect to focus on product positioning, in order to guarantee sustainable
production in the conditions of the planned changes. In order to achieve the
established goals, we plan to review our product portfolio, and bring it into
line with the group strategy by considering the market situation.
AS Kalev's real estate activities are pursued through AS Kalev REC and its
direct subsidiaries. The quick growth in the real estate sector in Estonia has
allowed AS Kalev Group to actively pursue real estate development and
management. So far, the main attention has focused around residential and
commercial space development. In the future, the company also plans to develop
its activities in the public real estate sector. AS Kalev is set to change its
strategy in accordance with the dynamics of the sector and the occurrences on
the real estate market.
The next financial year will see significant changes in the media and printing
sector, a new field of activities for AS Kalev. In the media sector, the company
is planning to renew its current product portfolio, both in essence and form. AS
Kalev also plans to launch several new products in the next financial year,
including a new television channel. The general objective of AS Kalev Meedia is
to achieve a significantly stronger market position in the media sector.
Development of the printing sector is based on AS Uniprint and AS Unipress
opportunities of meeting the demand for printed marketing and other printed
products of the Kalev group and also of wider client base.
CONSOLIDATED INCOME STATEMENT
for the financial years ended June 30
--------------------------------------------------------------------------------
| | in thousand EEK | in thousand EUR* |
--------------------------------------------------------------------------------
| | 2007 | 2006 | 2007 | 2006 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Sales of | 917 616 | 884 230 | 58 646 | 56 513 |
| goods (incl. | | | | |
| sold | | | | |
| property | | | | |
| recognized | | | | |
| under | | | | |
| inventory) | | | | |
--------------------------------------------------------------------------------
| Sales | 3 460 | 2 244 | 221 | 143 |
| revenue from | | | | |
| services | | | | |
--------------------------------------------------------------------------------
| Rental | 4 629 | 3 149 | 296 | 201 |
| income | | | | |
--------------------------------------------------------------------------------
| Total net | 925 704 | 889 623 | 59 163 | 56 857 |
| sales | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Cost of | -734 235 | -745 734 | -46 926 | -47 789 |
| sales | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Gross profit | 191 470 | 143 889 | 12 237 | 9 196 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Other | 106 731 | 57 710 | 6 822 | 3 689 |
| operating | | | | |
| income | | | | |
--------------------------------------------------------------------------------
| Marketing | -117 675 | -103 153 | -7 521 | -6 593
| expenses | | | |
|
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Administrati | -87 221 | -61 012 | | -5 574 | -3 899 |
| ve expenses | | | | |
--------------------------------------------------------------------------------
| | | |
--------------------------------------------------------------------------------
| Other | -24 309 | -16 350 | -1 554 -1 045
| operating | | | | |
| expenses | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Operating | 68 996 | 21 084 | 4 410 1 348
| profit | | | | |
--------------------------------------------------------------------------------
-----------------------------------------------------------------------------
| Financial | 4 274 | 3 831 | 273 | 245 |
| income | | | | |
--------------------------------------------------------------------------------
| Financial | -42 562 | -23 621 | -2 720 | -1 510 |
| expenses | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Pretax | 30 708 | 1 294 | 1 963 | 83 |
| profit | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Income tax | -282 | 0 | -18 | 0 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Net profit | 30 426 | 1 294 | 1 945 | 83 |
| for the | | | | |
| financial | | | | |
| year | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| incl. net | 30 460 | 1 153 | 1 947 | 74 |
| profit | | | | |
| (loss) | | | | |
| attributable | | | | |
| to the | | | | |
| shareholders | | | | |
| of the | | | | |
| Parent | | | | |
--------------------------------------------------------------------------------
| minority | -34 | 141 | -2 | 9 |
| interests | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Basic and | 1.29 | 0.05 | 0.08 | 0.003 |
| diluted | | | | |
| earnings per | | | | |
| share for | | | | |
| net profit | | | | |
| (loss) | | | | |
| attributable | | | | |
| to the | | | | |
| shareholders | | | | |
| of the | | | | |
| Parent (in | | | | |
| EEK / in | | | | |
| EUR) | | | | |
--------------------------------------------------------------------------------
* In accordance with the rules of Tallinn Stock Exchange, the main financial
statements are presented also in euro (EUR), which represents unaudited
supplementary information that does not form part of the Group's consolidated
financial statements.
Notes to the consolidated financial statements set out on pages 25 to 66 form an
integral part of these financial statements.
CONSOLIDATED BALANCE SHEET
as of June 30
--------------------------------------------------------------------------------
| | in thousand EEK |in thousand EUR* |
--------------------------------------------------------------------------------
| | 2007 | 2006 | 2007 | 2006 |
--------------------------------------------------------------------------------
| ASSETS | | | | |
--------------------------------------------------------------------------------
| Current | | | | |
| assets | | | | |
--------------------------------------------------------------------------------
| Cash and | 17 337 | 10 080 | 1 108 | 644 |
| cash | | | | |
| equivalents | | | | |
--------------------------------------------------------------------------------
| Receivables | 148 050 | 134 930 | 9 462 | 8 624 |
--------------------------------------------------------------------------------
| Prepayments | 2 653 | 1 715 | 170 | 110 |
--------------------------------------------------------------------------------
| Inventories | 218 617 | 240 334 | 13 972 | 15 360 |
--------------------------------------------------------------------------------
| Total | 386 657 | 387 059 | 24 712 | 24 738 |
| current | | | | |
| assets | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Non-current | | | | |
| assets | | | | |
--------------------------------------------------------------------------------
| Long term | 3 733 | 7 230 | 239 | 462 |
| financial | | | | |
| assets | | | | |
--------------------------------------------------------------------------------
| Investment | 214 601 | 89 944 | 13 716 | 5 748 |
| properties | | | | |
--------------------------------------------------------------------------------
| Property, | 644 876 | 545 840 | 41 215 | 34 886 |
| plant and | | | | |
| equipment | | | | |
--------------------------------------------------------------------------------
| Intangible | 62 635 | 4 560 | 4 003 | 291 |
| assets | | | | |
--------------------------------------------------------------------------------
| Total | 925 846 | 647 574 | 59 172 | 41 388 |
| non-current | | | | |
| assets | | | | |
--------------------------------------------------------------------------------
| TOTAL ASSETS | 1 312 503 | 1 034 633 | 83 884 | 66 125 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| LIABILITIES | | | | |
| AND EQUITY | | | | |
--------------------------------------------------------------------------------
| Current | | | | |
| liabilities | | | | |
--------------------------------------------------------------------------------
| Borrowings | 348 317 | 240 464 | 22 262 | 15 368 |
--------------------------------------------------------------------------------
| Customer | 1 461 | 27 821 | 93 | 1 778 |
| prepayments | | | | |
--------------------------------------------------------------------------------
| Trade | 284 439 | 286 717 | 18 179 | 18 325 |
| accounts | | | | |
| payable and | | | | |
| other | | | | |
| payables | | | | |
--------------------------------------------------------------------------------
| Provisions | 0 | 3 200 | 0 | 205 |
--------------------------------------------------------------------------------
| Total | 634 217 | 558 202 | 40 534 | 35 676 |
| current | | | | |
| liabilities | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Non-current | | | | |
| liabilities | | | | |
--------------------------------------------------------------------------------
| Borrowings | 304 837 | 132 908 | 19 483 | 8 494 |
--------------------------------------------------------------------------------
| Total | 304 837 | 132 908 | 19 483 | 8 494 |
| non-current | | | | |
| liabilities | | | | |
--------------------------------------------------------------------------------
| Total | 939 054 | 691 110 | 60 017 | 44 170 |
| liabilities | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Equity | | | | |
--------------------------------------------------------------------------------
| Share | 236 325 | 236 325 | 15 104 | 15 103 |
| capital | | | | |
--------------------------------------------------------------------------------
| Mandatory | 4 020 | 4 020 | 257 | 257 |
| legal | | | | |
| reserve | | | | |
--------------------------------------------------------------------------------
| Revaluation | 111 108 | 116 315 | 7 101 | 7 434 |
| reserve | | | | |
--------------------------------------------------------------------------------
| Retained | 21 941 | -13 225 | 1 402 | -845 |
| earnings | | | | |
--------------------------------------------------------------------------------
| Equity | 373 395 | 343 435 | 23 864 | 21 950 |
| attributable | | | | |
| to the | | | | |
| shareholders | | | | |
| of the | | | | |
| Parent | | | | |
--------------------------------------------------------------------------------
| Minority | 54 | 88 | 3 | 5 |
| interests | | | | |
--------------------------------------------------------------------------------
| Total equity | 373 449 | 343 523 | 23 867 | 21 955 |
--------------------------------------------------------------------------------
| TOTAL | 1 312 503 | 1 034 633 | 83 884 | 66 125 |
| LIABILITIES | | | | |
| AND EQUITY | | | | |
--------------------------------------------------------------------------------
* In accordance with the rules of Tallinn Stock Exchange, the main financial
statements are presented also in euro (EUR), which represents unaudited
supplementary information that does not form part of the Group's consolidated
financial statements.
Notes to the consolidated financial statements set out on pages 25 to 66 form an
integral part of these financial statements.
CONSOLIDATED ANNUAL REPORT 2006/2007
| Source: Luterma
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