Vilkyskiu Pienine

Quarterly Report • May 26, 2008

Vilkyskiu pienine AB

Interim consolidated financial statements for 3 month of 2008

VILKYSKIU PIENINE AB 3
CONSOLIDATED BALANCE SHEET REPORT 4
CONSOLIDATED PROFIT AND LOSS REPORT 5
CONSOLIDATED CASH FLOW STATEMENT 6
CONSOLIDATED STATEMENTS ON CHANGES IN EQUITY 7
EXPLANATORY NOTE 8
IMPORTANT EVENTS 10

Vilkyskiu pienine AB

About the company

Company name	AB Vilkyskiu pienine
Share capital	11 943 000 LTL
Headquarters	Vilkyskiai, Pagegiu municipality
Phone	+370 441 55330
Fax	+370 441 55242
E-mail	centras@cheese.lt
Legal form	Public limited company
Registration date	10 December 1993
Re-registration date and place	30 December 2005, Taurage Registry center
Company registry code	277160980
Internet address	http://www.cheese.lt

Vilkyskiu pienine AB board of directors

The company's board of directors consists of: Gintaras Bertasius, Sigitas Trijonis, Rimantas Jancevicius, Ramunas Sniepis, Linas Strelis and Andrej Cyba. General Director – Gintaras Bertasius

Accounting standards

Consolidated Vilkyskiu pienine AB (company code 277160980) financial reports are prepared in line with IFRS (International Financial Reporting Standards)

Consolidated balance sheet report

Thou LTL	Notes	3 months	3 months	Year 2007	Year 2006
		of 2008	of 2007
Assets
Tangible non-current assets	6	47457	46252	46 252	38 126
Goodwill		1033	1033	1 033	1 033
Intangible assets	7	32	41	41	28
Deferred tax assets	15	27	27	27	23
Long-term receivables		955	950	950	62
Total non-current assets		49504	48303	48 303	39 272
Inventories	9	21573	16452	16 452	13 543
Receivables	10	12550	13675	13 675	11 057
Cash and cash equivalents	11	587	1055	1 055	891
Total current assets		34710	31182	31 182	25 491
Total assets		84214	79485	79 485	64 763
Shareholders' equity
Share capital	12	9353	9353	9 353	9 353
Reserves		9262	9355	9 355	9 683
Retained earnings		12124	13442	13 442	4 967
Total shareholders' equity		30739	32150	32 150	24 003
Minority part		22	42	42	51
Total shareholders' equity		30761	32192	32 192	24 054
Liabilities
Interest-bearing liabilities	13	23872	18177	18 177	16 680
Capital subsidies	14	4534	4607	4 607	1 441
Deferred tax liabilities Total non-current liabilities	15	2635	2626	2 626	2 793
		31041	25410	25 410	20 914
Short-term interest-bearing	13	8344	9163	9 163	5 567
liabilities Income tax payable		959	1175	1 175	361
Trade and other amounts	16	13109	11545	11 545	13 867
payable Total current liabilities		22412	21883	21 883	19 795
Total liabilities		53453	47293	47 293	40 709
Total liabilities and shareholders'		84214	79485	79 485	64 763
equity

Consolidated profit and loss report

Thou LTL	Notes	3 months of 2008	3 months of 2007	Year 2007	Year 2006
Revenue	1	24352	27604	136 274	115 719
Cost of sales		-23333	-25350	-114 230	-102 262
Gross profit		1019	2254	22 044	13 457
Other operating income, net		-671	-23	21	87
Distribution expenses		-364	-579	-2 052	-1 921
Administrative expenses	2	-982	-1305	-6 321	-5 788
Operating profit before financial items		-998	347	13 692	5 835
Financial income		28	-6	93	73
Financial expenses		-452	-334	-1 468	-1 025
Net financial items	3	-424	340	-1 375	-952
Profit before tax		-1422	7	12 317	4 883
Tax payments	4	-25	4	-2 303	-1 009
Net profit		-1447	11	10 014	3 874
To:
Company shareholders		-1427	23	10 014	3 905
Minority interest		-20	-12	0	-31
Net profit		-1447	11	10 014	3 874
Profit attributed to 1 share	5		0,001	1,07	0,42

General Director Gintaras Bertasius

Consolidated cash flow statement

Thou LTL	Notes k.	3 months of 2008	3 months of 2007
Cash flow from operating activities
Profit before tax		-1447	7
Adjustments
Depreciation	6	1778	669
Amortization	7	8	18
Capital subsidies recognized in revenues	14	-73	-79
Interest expenses	3	423	370
Tax expenses	4	25	4
Cash flow from ordinary activities before changes in working capital		714	989
Change in inventories		-5121	6044
Change in receivables		1120	634
Change in trade and other amounts payable		1302	-6548
		-1985	1119
Interest expenses		-423	-370
Tax expenses		-216	-12
Cash flow from operating activities		-2624	737
Cash flows from financing activities
Acquisition of tangible non-current assets		-2720	-4268
Acquisition of intangible non-current assets			-2
Proceeds on sale of tangible non-current assets
Investments in subsidiary undertaking	8		0
Net cash flow from investing activities		-2720	-4270
Cash flows from financing activities
Loans received		6046	5108
Repayment of borrowings		-956	2314
Payments on financial lease obligation		-214	-610
Dividends paid
Subsidies			1133
Net cash flow from financing activities		4876	3317
Increase in cash and cash equivalents		-468	-216
Cash and cash equivalents as of January 1st		1055	891
Cash and cash equivalents as of March 31th		587	675

Consolidated statements on changes in equity

ho L T L, t u.	No tes	S ha re l i ta ca p	Re lu ion t va a re se rv e	Co lso m p u ry re se rv e	d Ea Re in ta e in rn g s	Eq i ty u	M in i ty or t p ar	l e To i ta ty q u
As f 2 0 0 1s t J 7 o an ua ry		9 3 3 5	8 6 7 4	9 9 1	9 6 4 7	2 0 0 3 4	5 1	2 0 4 5 4
f Ne i t p t ro					1 0 0 1 4	1 0 0 1 4		1 0 0 1 4
Tr fer fro an s m re se rv es			-3 4 4		4 2 3	7 9		7 9
fer Tr to an s re se rv es				1 6	1 6	0		0
de ds D iv i n					-2 0 5 7	-2 0 5 7		-2 0 5 7
ha f s bs d S iss i iar re ue o u y					8 8	8 8	1 4	1 0 2
ha he C in t ng es g ro up					2 3	2 3	-2 3	0
As f 3 1s De be 2 0 0 7 t o ce m r		9 3 5 3	8 4 2 0	9 3 5	1 3 4 4 2	3 2 1 5 0	4 2	3 2 1 9 2
f 2 0 0 8 As 1s t J o an ua ry		9 3 3 5	8 2 0 4	9 3 5	3 2 1 4 4	3 2 0 1 5	2 4	3 2 9 2 1
f Ne i t p t ro					-1 4 2 7	-1 4 2 7	-2 0	-1 4 4 7
Tr fer fro an s m re se rv es			-9 3		1 0 9	1 6		1 6
fer Tr to an s re se rv es
de ds D iv i n								-
As f 3 1s M h 2 0 0 8 t o ar c	1 3	9 3 5 3	8 3 2 7	9 3 5	1 2 1 2 4	3 0 7 3 9	2 2	3 0 7 6 1

General Director Gintaras Bertasius

Explanatory note

The total number of employees of Vilkyskiu pienine AB together with its controlled Modest UAB amounts to 464 employees.

Consolidated sales of Vilkyskiu pienine AB of the first quarter 2008 were 12 percent lower compared with the consolidated sales of the first quarter 2007.

In February - March 2007 Vilkyskiu pienine AB was launching an automated pasteurization system in the separation workshop, and therefore the company had to stop the production of cheese. During this period sale results did not reduce because the company put on the market cheeses that had been produced earlier. Moreover, the company sold raw mild, which had to be used for the production, as a result the sales of the first quarter of the last year increased by LTL 3.8 million. Without taking into account these income, the sales of the first quarter 2008 were increasing almost by 2.5 percent.

Consolidated loss of Vilkyskiu pienine AB of the first quarter 2008 amounted to LTL 1.4 million. Negative result was determined by the increase of raw milk price, which jumped by 43 percent compared with the first quarter 2007, whereas raw milk amounts to 70 percent of cheese cost price.

Tables bellow summarizes key consolidated indicators of production and trade volumes of Vilkyskiu pienine AB Group.

	Income from main products sales, thou. LTL	2007 I quarter	2008 I quarter
Cheese		17 958	18 615
Butter		838	627
Cream		2 677	3 112
Whey		1 444	1 296
Other income		4 687	702
Total income		27 604	24 352

	Quantity of main products sold, tons	2007 I quarter	2008 I quarter
Cheese		1 965	1 500
Butter		138	109
Cream		701	735

	Main products average prices, LTL/t	2007 I	2008 I
		quarter	quarter
Cheese		9 139	12 410
Butter		6 072	5 752
Cream		3 819	4 234

The situation currently is changing due to declining prices of raw produce in the markets, moreover, the prices of production under the sale are stabilizing, and this will increase the demand of dairy products.

Important events

From the 1st of January 2008 shares of Vilkyskiu pienine AB have been quoted in the Official List of Vilnius Stock Exchange.

On the 31st of January 2008 Vilkyskiu pienine AB has concluded the contract on the purchase of 99.09 percent of shares of Kelmes pienine AB. In March Vilkyskiu pienine AB received the permission from the Competition Board to acquire up to 100 percent of shares of Kelmes pienine AB

On the 4th of March 2008 Vilkyskiu pienine AB was issued ISO Certificates of Quality Management and Food Safety Management. ISO 22000 Standard of Food Safety Management System demonstrates that food safety risk is controlled in the entire food management chain of Vilkyskiu pienine AB.

ISO 9001 Standard of Quality Management specifies requirements for quality management systems, including documentation requirements and requirements for processes of planning, management of recourses, product realization, measurement, analysis and improvement. This certificate demonstrates that a company is capable of managing and improving the quality of its supplied products and services, and its production meets with requirements of customers and law.

On the 7th of March 2008 the Extraordinary General Meeting of Shareholders decided to increase Company's authorized capital by issuing a new emission of 2,590,000 shares, with the redemption price of a new emission not lower than LTL 5.40 per share. The money received form the increase of the authorized capital was used to acquire Kelmes pienine AB.

The Extraordinary General Meeting of Shareholders decided to increase the quantity of Board members of Vilkyskiu pienine AB to 6 members, electing Linas Strelis and Andrejus Cyba, who is the representative of Finasta UAB, as new members.

General Director Gintaras Bertasius