The Hartwall group's net sales and earnings are growing vigorously

INTERIM REPORT 1/2000 THE HARTWALL GROUP'S NET SALES AND EARNINGS ARE GROWING VIGOROUSLY * Net sales EUR 163.9 million (+ 34.3%) * Operating profit EUR 19.4 million (+78.9%) * Profit before extraordinary items and taxes EUR 17.7 million (+79.9%) * Earnings per share EUR 0.15 (+52.2%) * Aggregate sales volume grew by 41% to 368.1 million litres In the first four-month period of the year 2000, the Hartwall Group's net sales grew by 34% compared with the corresponding period of the previous year. Net sales increased especially due to the strong growth in the sales volume of Hartwall's associated company Baltic Beverages Holding AB (BBH), which is engaged in business in Russia, Ukraine and the Baltic countries - this is also evident in the growth in euro-denominated net sales following the stabilisation of the trend in the exchange rates of BBH's main currencies, particularly the Russian rouble. The net sales of Hartwall's operations in Finland grew by 7.7% to EUR 86.3 million. The Group's operating profit, EUR 19.4 million, grew by 79%, rising to 11.8% of net sales. The growth in operating profit was also primarily attributable to BBH. As a result of the trend in exchange rates, the growth in operating profit as reported in local currencies was not diluted by translation differences to the same extent as previously. Earnings per share grew by 52%. In order to ensure the growth of BBH and to finance the project to centralise Southern Finnish production and storage operations, the share capital was raised in April by issuing 5.0 million Series A shares at a price of EUR 14.50. In Finland, the growth in the industry's aggregate market is expected to remain quite modest due to the high comparison figures for the previous year. The product groups that are assessed to have growth potential are cider, mineral water and soft drinks. BBH's strong growth in the first four-month period has been made possible by the growth of the aggregate market and BBH's increased production and distribution capacity. Taking into consideration the seasonal nature of the business, the general trend in the aggregate market in the remaining part of the year, and the growth opportunities allowed by BBH's present capacity, growth in the remaining part of the year is expected to slow down compared with the rate of growth during the review period. The Group's full-year operating profit is expected to improve on the previous year's figure, provided that the exchange rates do not weaken significantly during the remaining part of the year compared with the situation in the review period, as described in this report, and that weather conditions are normal in the summer season. Taxes will most likely grow, because at present there is no certainty about the extent to which tax relief might be received in Russia this year. Net profit is expected to be at last year's level. The Group's capital expenditures will most likely top last year's level both in Finland and BBH's area of operations. In Finland, construction investments related to the centralisation of production and storage operations in Southern Finland will continue, and BBH will continue to both raise capacity to ensure growth and develop its distribution systems. Helsinki, 30 May 2000 Oyj Hartwall Abp The Board of Directors THE BUSINESS ENVIRONMENT DEVELOPS FAVOURABLY In Finland, the trend in the national economy continued to be favourable during the review period. This trend was not, however, reflected in the brewing and soft drinks industry, whose sales volume did not improve on the previous year. As expected, stabilisation occurred in BBH's business territory. In Russia, particularly, economic development has supported the growth of the brewing industry, which continued to be strong during the review period (+33%). The market has also expanded in Ukraine (+38%), while growth in the Baltic countries ranged from 11% in Estonia to 19% in Lithuania. NET SALES ROCKETING During the review period, the Hartwall Group's net sales grew by 34.3% to EUR 163.9 million (122.0). The major factor behind the increase in net sales was BBH's strong volume growth, 74%, whose euro-denominated value was up 85% to EUR 77.6 million (41.9) in spite of the weakening of the average exchange rates of the main currencies. Fewer than 10 percentage points of this growth came from acquisitions. The net sales of Hartwall's business operations in Finland grew by 7.7% to EUR 86.3 million (80.1). Changes in the sales structure, coupled with price hikes, increased net sales by about 6% while the sales volume remained at the previous year's level. Hartwa-Trade's share of the growth in net sales was about 2%. Breakdown of net sales, EUR million 1-4/2000 1-4/1999 Change, % 1-12/1999 Hartwall 86.3 80.1 7.7 276.4 BBH (50 %) 77.6 41.9 85.1 190.6 Total 163.9 122.0 34.3 467.0 OPERATING PROFIT UP 79% The Group's operating profit for the January-April period grew to EUR 19.4 million (10.8), or 78.9% higher than the comparable figure for the previous year. At the same time, the share of net sales that represented operating profit rose to 11.8%, while it was 8.9% a year earlier. Breakdown of operating profit, EUR million 1-4/2000 1-4/1999 Change, % 1-12/1999 Hartwall 3.8 3.4 11.6 27.0 BBH (50 %) 15.6 7.4 109.5 49.6 Total 19.4 10.8 78.9 76.6 BBH's operating profit doubled to EUR 15.6 million (7.4), and its share of net sales improved by 2.3 percentage points to 20.1% (17.8). The operating profit of the Finnish operations was EUR 3.8 million (3.4), or 11.6% higher than last year and 4.4% (4.2) of net sales. The improvement of BBH's profitability was influenced by the decrease in unit costs following sales growth and more cost-effective operating procedures, as well as the implementation of price hikes. However, operating profit was burdened by the weakening of the external value of the Russian rouble and Ukrainian hrivna, as measured with the average rates, with the former being devalued by 7% and the remaining by 24%. On the other hand, no significant translation differences related to working capital materialised, as the rouble exchange rate used in the financial statements remained at the same level as the rate applied in the 1999 financial statements. The operating profit of operations in Finland was depressed by the increase in marketing expenses compared with the previous year, which was caused primarily by the launch of the company's own cider brand, and the higher organisation and equipment costs in the cold drink business. Net financial expenses grew due to the higher interest level and the increase in the average net debt compared with the previous year. Share issue-related expenses are recorded directly as a deduction from shareholders' equity. The Group's profit before extraordinary items and taxes grew by 79.9% to EUR 17.7 million (9.8). In relative terms, the growth of taxes exceeded that of pre-tax profits, rising to a normal level, as the tax relief received in Russia did not recur during the review period. The Group's net profit after the deduction of minority interest grew by 53.3% to EUR 9.3 million (6.1), with earnings per share growing by 52.2% to EUR 0.15 (0.10). STRENGTHENING THE BALANCE SHEET STRUCTURE The Group's gross capital expenditures during the review period amounted to EUR 46.2 million (50.5). Finnish operations accounted for EUR 10.8 million (23.7) of this amount and BBH for EUR 35.4 million (26.7). The major sites in Finland were the Lahti logistics centre and drink vending and dispensing equipment. Of BBH's investments, EUR 6.1 million went for financing acquisitions and EUR 29.1 million for operational sites. The share issues carried out towards the end of the review period served to strengthen shareholders' equity by a gross amount of EUR 72.8 million. The equity ratio rose to 55.9% (46.6) following the issues. Likewise, the gearing ratio declined to 33.1% (55.7), with net debt amounting to EUR 128.7 million (140.1) at the end of the review period. GROUP STRUCTURE A new unit that was linked to the BBH Group during the review period was the Pikra brewery in Krasnoyarsk, Russia, in which BBH has a 50% stake. During the review period, BBH did not increase its holdings in the breweries it owns. In its consolidated financial statements, BBH has consolidated the breweries it owns using the monetary-non-monetary method. In the Baltic countries, the company has changed over to the conventional method of using the average rate for the period in the translation of items in the profit and loss account and the rate on the closing date of the period in the translation of balance sheet items. Balance sheet values as per 31 December 1999 are used as starting values. A STRONG TREND IN THE GROUP'S SALES VOLUME The Hartwall Group's aggregate sales in the January-April period amounted to 368.1 million litres (261.8 million litres). This growth is attributable to BBH, whose sales increased by 74%. Million litres Change, % Finland 108.0 +2 % Exports and duty-free 10.4 -13 % BBH (50 %) 249.7 +74 % Total 368.1 +41 % Hartwall Upcider is the success story of the first period During the first months of the year, Hartwall retained its position as Finland's leading brewery player with its 45.0% (44.6%) aggregate market share. Hartwall was the market leader in both alcoholic beverages (45.4% market share) and non-alcoholic beverages (44.5% market share). Aggregate sales by the brewing industry in the January-April period remained at the previous year's level, amounting to a total of 240.9 million litres (240.2 million litres). Hartwall's position strengthened, particularly in ciders, where sales grew by 85.5% to 4.1 million litres. Hartwall Upcider, which the company launched at the turn of the year, achieved a 30.8% market share during its first four months on the market. At the same time, cider sales by the industry grew by 18.5%. Hartwall's soft drinks product group also continued to grow. Hartwall's aggregate share of the Finnish soft drinks market was 43.5%. The market share of Hartwall's own soft drink brands was 23.6% in the first months of the year and that of PepsiCo Inc's products was 19.9%. All in all, Hartwall sold 38.2 million litres of soft drinks (36.8 million litres). In the mineral waters segment, Hartwall increased its market share to 49.9% (46.7%). Hartwall's sales of mineral waters totalled 8.8 million litres (7.7 million litres). In beers, Hartwall maintained its position as Finland's largest brewer with its 46.6% market share, although its hold declined by 1.6 percentage points in the January-April period. During the same period, beer consumption in Finland contracted by 1.8%. In the first part of the year, Hartwall sold 54.6 million litres of beer (57.6 million litres). The long drink market fell by 5.3% in Finland during the first months of the year. Hartwall retained its market leadership in this segment with its market share of 58.4%, including the Cool Drinks International products marketed by Hartwall. In March, Hartwall launched a new 0.3 litre glass bottle for soft drinks and mineral waters. The bottle is sold primarily in restaurants, cafés, hotel minibars and cash-and-carry shops. The new bottle is returnable and refillable. Oyj Hartwall Abp and Schweppes International Limited have renewed their co-operation agreement concerning the manufacture, marketing, sale and distribution of Schweppes mixers in Finland. The new agreement is valid until the end of 2004. Schweppes products account for about 2% of Hartwall's soft drink sales. BBH's buoyant volume growth continues The strong volume trend of Baltic Beverages Holding AB (BBH) continued in the January-April period. BBH's aggregate sales increased by 74% to 499 million litres (287 million litres). Of the aggregate growth, under 10 percentage points came from acquisitions. In the January-April period, BBH sold 485 million litres of beer (279) and 14.7 million litres (8.0 million litres) of mineral waters and soft drinks. BBH strengthened its position in all markets with the exception of Estonia. Concurrently, the beer markets in all of BBH's territory experienced vigorous growth. In Russia, sales volume increased by 77% to 397 million litres. In the same period, the Russian beer market grew by 33%. BBH holds a 25% (20%) share of the Russian beer market. Sales of Medovoe beer, which is packaged in a PET bottle and was launched last year by Baltika, have remained good. Another factor that has significantly furthered BBH's Russian sales is the efficient and comprehensive new distribution system, which is under development and has been partially put into operation. In Ukraine, BBH's aggregate sales volume was 46 million litres (20.4 million litres). The company's market share grew to 17% (13%), while the Ukrainian market was up 38%. In Ukraine, the line business operations of BBH's breweries have been reorganised under a centralised organisation. The Kolos brewery changed its name to the Lvivska Pivovarnia brewery. In March, BBH entered into a co-operation agreement with PepsiCo Inc concerning the bottling, sale and distribution of Pepsi products in Ukraine. These co-operative efforts started on 1 April 2000 and draw on BBH's country-wide distribution network, thus strengthening the company's position in the Ukrainian beverage market. BBH and PepsiCo have worked together in the Baltic countries since 1 January 2000. In the Baltic countries, BBH's aggregate sales volume grew from 42 million litres to 56 million litres. The Baltic beer markets have also grown during the first four months of the year: in Estonia by 11%, in Latvia by 14% and in Lithuania by 19%. BBH's market share was 48% (50%) in Estonia, 46% (42%) in Latvia and 41% (32%) in Lithuania. Brewery modernisation investments have continued at Pikra and Chelyabinskpivo in Russia and Lvivska Pivovarnaya in Ukraine. Investment programmes geared towards increasing capacity are being carried out at the Russian breweries Tulskoye Pivo, Yarpivo and Baltika-Don. In addition, a new plastic bottle line is being installed in the Latvian Aldaris brewery for the bottling of soft drinks and water destined for the Baltic market area. PERSONNEL The Hartwall Group employed an average of 5,711 people (4,491). The figure includes 50% of BBH's personnel. Hartwall's share of this figure exclusive of BBH was 1,311 people (1,312). BBH employed (100%) an average of 8,799 people (6,358). 30 April 2000 30 April 1999 Change Hartwall 1,348 1,356 -8 BBH ( 100 %) 8,952 6,475 2,477 DECISIONS TAKEN BY THE ANNUAL GENERAL MEETING Oyj Hartwall Abp's Annual General Meeting of 29 March 2000 decided, in line with the proposal by the Board of Directors, that a dividend of FIM 1.00 (FIM 0.90) be paid on the Series A share and FIM 0.97 (FIM 0.88) be paid on the Series K share. The meeting re-elected the previous members to the Board of Directors. Björn Mattsson, honorary mining counsellor, was elected as a new Board member. The auditors were also re-elected. The Annual General Meeting decided to sell the shares on the company's grand total account for securities on behalf of the shareholders. The Annual General Meeting also authorised the Board of Directors to decide on raising the share capital through one or more rights issues of no more than 6 million shares. SHARES AND SHARE CAPITAL In April, the company performed two share issues in two stages such that the remaining stage was implemented only at the beginning of May. In April, the share capital was raised by a total of EUR 1,004,780 by floating 5,023,900 Series A shares at a price of EUR 14.50 per share, and in gross terms shareholders' equity strengthened by EUR 72.8 million. In the first issue, the Board of Directors, on the basis of the authorisation granted by the Annual General Meeting, targeted 4,000,000 shares at Finnish and foreign institutional investors. The issue included the option to subscribe for 300,000 additional shares. In the second issue, on the basis of a decision taken by an extraordinary meeting of shareholders on 20 April, 1,100,700 Series A shares were targeted at Pripps Ringnes AB. Of the subscribed shares, 1,023,900 shares were approved on 20 April and the 76,800 remaining shares on 3 May, when an additional subscription in line with the aforementioned option was also approved. The approval of the subscriptions in the second stage in May, a total of 376,800 shares, raises the share capital by a further EUR 75,360 and, in gross terms, strengthens shareholders' equity by EUR 5.5 million. Following these issues, the Board of Directors still has an authorisation to raise the share capital through a rights issue of 1,700,000 shares. After the issues performed in April, the number of Series A shares and the votes conferred by them as of 30 April 2000 were both 58,173 900. As there were no changes in the number of Series K shares, the combined total of both share series rose to 65,573,900 shares and the corresponding number of voting rights to 206,173,900 votes. Share turnover during the review period amounted to 2,863,409 shares, valued at EUR 50 million, representing 5.3% of the total number of Series A shares. The share price ranged from EUR 14.15 to EUR 18.60, hitting a high in 3 April 2000 and its low in 28 January 2000. The average price was EUR 16.40 and the price on the last day of the review period was EUR 16.40. At the end of the review period, 35% (31.5%) of the Series A shares were owned by foreigners. There were 7,236 (9,022) shareholders. THE GROUP's FULL-YEAR OUTLOOK In Finland, the growth in the industry's aggregate market is expected to remain quite modest due to the high comparison figures for the previous year. The product groups that are assessed to have growth potential are cider, mineral water and soft drinks. BBH's strong growth in the first four-month period has been made possible by the growth of the aggregate market and BBH's increased production and distribution capacity. Taking into consideration the seasonal nature of the business, the general trend in the aggregate market in the remaining part of the year, and the growth opportunities allowed by BBH's present capacity, growth in the remaining part of the year is expected to slow down compared with the rate of growth during the review period. The Group's full-year operating profit is expected to improve on the previous year's figure, provided that the exchange rates do not weaken significantly compared with the situation in the review period and that weather conditions are normal in the summer season. Taxes will most likely grow, because at present there is no certainty about the extent to which tax relief might be received in Russia this year. Net profit is expected to be at last year's level. The Group's capital expenditures will most likely top last year's level both in Finland and BBH's area of operations. In Finland, construction investments related to the centralisation of production and storage operations in Southern Finland will continue, and BBH will continue to both raise capacity to ensure growth and develop its distribution system. CONSOLIDATED PROFIT AND LOSS ACCOUNT EUR million 2000 % 1999 % 1999 % Jan.- Jan.-Apr. Jan.-Dec. Apr. Net sales 163.9 100.0 122.0 100.0 467.0 100.0 Other operating 2.0 1.2 0.7 0.4 6.5 1.4 income Operating costs 130.3 79.5 100.5 76.9 357.4 76.5 Depreciation 16.3 9.9 11.4 6.1 39.5 8.5 Operating profit 19.4 11.8 10.8 17.3 76.6 16.4 Financial income and -1.7 -1.0 -1.0 -0.7 -3.5 -0.8 expenses Profit/loss before 17.7 10.8 9.8 16.7 73.1 15.7 extraordinary items Extraordinary income 0.0 0.0 0.0 -0.6 0.0 0.0 and expenses Profit/loss before 17.7 10.8 9.8 16.1 73.1 15.7 taxes Taxes -4.8 -2.9 -2.0 -5.3 -15.4 -3.3 Minority interests -3.5 -2.1 -1.7 -2.7 -11.8 -2.5 Net profit 9.3 5.7 6.1 8.1 45.9 9.8 Gross capital 45.0 50.5 125.2 expenditure Personnel, average 5 711 4 491 5 341 Earnings/share, EUR 0.15 0.10 0.76 Total assets 696.1 539.9 614.4 Fixed assets 434.4 356.5 393.4 Current assets 261.7 183.4 220.9 Shareholders' equity 324.0 200.4 245.1 Minority interests 64.9 51.0 55.4 Obligatory provisions 5.1 7.9 5.9 Deferred tax 16.1 15.9 16.0 Non-current creditors 100.9 61.1 63.0 Current creditors 185.2 203.5 229.0 Equity per share, EUR 5.30 3.30 4.03 Equity ratio, % 55.87 46.58 49.00 Gearing, % 33.10 55.70 47.20 CONTINGENT LIABILITIES (EUR million) 30 Apr. 2000 30 Apr. 1999 31 Dec.1999 Mortgages for own commitments Real estate mortgages 53.95 44.25 53.72 Leasehold on property 2.37 2.37 2.37 Equipment 48.51 4.73 45.83 Stocks 0.94 0.05 0.86 Corporate mortgages 25.23 25.23 25.23 Total 131.00 76.63 128.01 Guarantees for other commitments Guarantees Management - - - Shareholders 0.03 0.03 0.03 Associated companies 6.68 2.69 6.36 Others 2.00 2.10 2.04 Repurchase commitments 1.51 1.30 1.85 Total 10.23 6.12 10.26 Leasing commitments Real estate leasing Next year 1.80 1.58 1.61 Remaining commitment 5.48 5.72 4.29 Other leasing commitments *) Next year 8.01 6.51 7.55 Remaining commitment 17.00 13.64 16.55 Repurchase commitments 1.28 1.33 1.30 Total 33.57 28.78 31.30 Total, all 174.80 111.54 169.55 *) Finance leasing agreements are included in the consolidated balance sheet Derivative contracts, 30 April 2000 Receivables denominated in foreign currency, totalling EUR 39.3 million, have been hedged with financial futures contracts. The exchange rate and interest differences of the financial futures contracts have been periodised in the interim financial statements. Average personnel is calculated as the average numbers of personnel counted at the end of each month. Earnings/share = Profit/loss before extraordinary items less minority (EPS), EUR interest less taxes The adjusted average number of shares for the year Taxes have been calculated as a share of the profit for the period under review in accordance with the tax rates in force. Equity/share, EUR = Shareholders' equity The adjusted number of shares on the balance sheet date Equity ratio, % = Shareholders' equity + minority interests Total assets less advances received Gearing,% = Interest-bearing liabilities less cash and bank Shareholders' equity + minority interests The figures in the interim report have not been audited. For additional information, contact: Jussi Länsiö, Managing Director, tel. +358 9 540 2328 Markku Sirén, Financial Director, tel. +358 9 540 2384 Sent by: OYJ HARTWALL ABP Marie-Louise Wiklund Corporate Communications Manager tel. +358 9 540 2440 fax + 358 9 540 2528 marie-louise.wiklund@hartwall.fi Distribution: HEX Oy Principal media http://www.hartwall.fi ------------------------------------------------------------ Please visit http://www.bit.se for further information The following files are available for download: http://www.bit.se/bitonline/2000/05/30/20000530BIT00020/bit0001.doc http://www.bit.se/bitonline/2000/05/30/20000530BIT00020/bit0002.pdf