Commentaries of Baltica Brewery on the results of its financial activities in the 1^st half of 2003  

In the 1^st half of 2003 Baltica Corporation sold 8.0 mil hl of beer. Market share of the company comprised 21.1% by the end of the 1^st half of 2003. Export sales increased by 9% as compared to the 1^st half of the previous year and comprised 497 thousand hl.  

The major economic indices of the 1^st half of 2003 are as follows:  

Sharp rise in excise tax in the beginning of 2003 greatly affected the decrease in sales. As a result net sales lowered by 6% compared to those in 2002, which is 2% more than total sales decrease.  

The share of plastic bottles in the sales structure considerably increased (from 31% to 36%) in the 1^st half of 2003. High consumption of materials in the production of this kind of beer contributed to the fall of the company's profitability in the 1^st half of 2003. But the single unit cost was lowered due to the optimization of raw materials expenses.  

Two new company's brewing factories in Samara and Khabarovsk launched in the beginning of 2003 are currently operating as successfully as our other affiliates and produce high-quality products. “Samara” and “DV” brand occupy a decent place on the Russian market and their production fills 20 to 40% of manufacturing capacity of a corresponding factory.  

Sales system reorganization begun in 2003 is going on according to previous arrangements and it facilitates optimum contact with the customers and better control over product flow and prices. Increased sales come as a result of this reorganization: in the 2^nd quarter of 2003 the company's sales were 1.5 times as much as they were in the 1^st quarter. A record sales volume was achieved in July - over 1.9 hl, the highest among all the brewing companies ever.  

The company managed to eliminate the negative tendencies of the 1^st quarter in the sales development and catch up considerably with the results of the same period of the last year, which was rather successful. At present the company's objective is strengthening partnerships with its distributors and increasing the effectiveness of joint work.  

Increase in amortization charges due to great capital investments in the previous year and the rise of tariffs for energy consumption (15-30%) had a great effect on the decrease of company's profitability in the 1^st half of 2003.  

The company continued delivering its products to different regions. Transportation expenses rose due to a 31% rise of the cost of railway traffic.  

The company is still highly financially effective and has managed to considerably increase its economic indices as compared to the previous quarter. Operation profitability is now more than 25%.