Vilkyskiu pienine AB

Interim consolidated financial statements for the 12 months of 2010

CONFIRMATION OF RESPONSIBLE PERSONS 2
GENERAL INFORMATION 3
CONSOLIDATED STATEMENT OF FINANCIAL POSITION 4
CONSOLIDATED INCOME STATEMENT 5
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 6
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (CONTINUED) 7
CONSOLIDATED STATEMENT OF CASH FLOWS 8
EXPLANATORY NOTES 9

Confirmation of Responsible Persons

Following the Article No. 22 of the Law on Securities of the Republic of Lithuania and Rules on Preparation and Submission of Periodic and Additional InJormation of the Lithuanian Securities Commission, we Gintaras Bertasius, General Director of Vilkyskiu pienine AB and Vilija Milaseviciute, Finance Director of of Vilkyskiu pienine AB hereby confirm that, unaudited interim condensed consolidated financial statements for the twelve months of 2010, prepared in accordance with Intemational Financial Reporting Standarts, give a true and fair view of the assets, liabilities, financial position and profit or loss of Vilkyskiu pienine AB group.

General Director -r*1 - Gintaras Bertasius Finance Vilija Milaseviciute

The financial statements were approved and signed by the Management on 28 February 201L.

General information

Name of the Issue	Public Company "Vilkyškių pieninė"
Authorized capital	LTL 11 943 000
Registered office	Vilkyškiai, Pagėgiai municipality
Telephone number	8-441 55330
Fax number	8-441 55242
E-mail address	[email protected]
Date and place of registration	The 10th of May 1993
Date and place of re-registration	The 10th of December 2005, Tauragė Branch of Public Institution Center
	of Registers
Code in the Register of Enterprises	277160980
Internet address	http://www.cheese.lt

Vilkyskiu pienine AB Board

Gintaras Bertasius (Chairman) Sigitas Trijonis Rimantas Jancevicius Vilija Milaseviciute Andrej Cyba Linas Strelis

Vilkyskiu pienine AB Management

General Director
Chief operation officer
Finance Director
Technical Director
Stock Director
Production Director

The Group consists of the following companies:

Vilkyskiu Pienine AB, the parent company
Modest AB, the subsidiary
Kelmes Pienine AB, the subsidiary.

The parent Company is engaged in production and sales of different types of cheese. Also, it produces and sells whey, raw milk and cream.

The Company has a subsidiary Modest AB, which is engaged in milk processing and production of dairy products. The Company holds 99.7% voting rights of the subsidiary. Modest AB specialises in production of fermented cheese, cottage cheese and other cheese products.

Company also has a subsidiary - Kelmes Pienine AB, which is engaged in milk processing and production of dairy products. The Company holds 99.09% voting rights of Kelmes Pienine AB. Kelmes Pienine AB specialises in production of fresh dairy products.

At 31 December 2010 the Group had 755 employees (31 December 2009 - 735).

Consolidated statement of financial position

Thousand Litas	31 12 2010	31 12 2009

Assets
Property, plant and equipment	65 674	66 248
Intangible assets	398	608
Goodwill	23 875	23 875
Long-term receivables	1 487	1 421
Total non-current assets	91 434	92 152
Inventories	16 950	18 512
Trade and other receivables	14 273	14 820
Cash and cash equivalents	358	395
Total current assets	31 581	33 727
Total assets	123 015	125 879
s Equity
Share capital	11 943	11 943
Share premium	11 396	11 396
Reserves	8 252	8 624
Retained earnings	18 097	7 048
Total equity attributable to the shareholders of the Company	49 688	39 011
Non-controlling interest	155	88
Total equity	49 843	39 099
Liabilities
Interest-bearing loans and lease liabilities	22 279	39 266
Government grants	8 479	8 203
Deferred tax liabilities	2 739	2 301
Total non-current liabilities	33 497	49 770
Interest-bearing loans and lease liabilities	18 421	15 990
Trade and other payables, including derivatives	21 254	21 020
Total current liabilities	39 675	37 010
Total liabilities	73 172	86 780
Total equity and liabilities	123 015	125 879

Consolidated income statement

Thousand Litas
	2010.01.01-	2009.01.01-	2010.10.01-	2009.10.01-
	2010.12.31	2009.12.31	2010.12.31	2009.12.31

Revenue	244 273	159 318	65 202	43 680
Cost of sales	-215 763	-134 289	-57 693	-37 818
Gross profit (loss)	28 510	25 029	7 509	5 862

Other operating income, net	460	-201	-67	332
Distribution expenses	-7 683	-7 048	-2 156	-1 991
Administrative expenses	-7 524	-6 528	-1 355	-1 908
Operating result	13 763	11 252	3 931	2 295

Finance income	2 124	66	2 059	0
Finance costs	-3 511	-3 346	-2 047	-624
Net finance costs	-1 387	-3 280	12	-624

Profit (loss) before tax	12 376	7 972	3 943	1 671

Income tax expense	-504	-1 249	-130	-1 429
Net profit (loss) for the year
	11 872	6 723	3 813	242

Attributable to:
Shareholders of the Company	11 805	6 690	3 778	230
Non-controlling interest	67	33	35	-12
Net profit (loss) for the year	11 872	6 723	3 813	242

Basic earnings per share (Litas)	0,99	0,56	0,32	0,02
Diluted earnings per share (Litas)	-	-	-	-

Consolidated statement of changes in equity

Equity, attributable to the shareholders of the Company Thousand Litas Share capital Share premium Revaluation reserve Legal reserve Retained earnings Total Noncontroll ing interest Total equity Balance at 1 January 2009 11 943 11 396 7 588 935 -81 31 781 55 31 836 Comprehensive income for the period Net profit (loss) - - - - 6 284 6 284 40 6 324 Other comprehensive income Allocated from reserves - - -317 - 317 0 0 Increase of revaluation reserve, net of tax - - -165 - - -165 - -165 Total other comprehensive income - - -482 - 317 -165 - -165 Total comprehensive income for the period - - -482 - 6 601 6 119 40 6 159 Contributions by and distributions to owners: Total contributions by and distributions to owners - - - - - - - - Changes in the Group without losing control Other changes in the Group - - - - - - - - Total contributions by and distributions to owners Balance at 30 September 2009 11 943 11 396 7 106 935 6 520 37 900 95 37 995 Balance at 1 October 2010 11 943 11 396 7 106 935 6 520 37 900 95 37 995 Comprehensive income for the period Net profit (loss) - - - - 406 406 -7 399 Other comprehensive income Allocated from reserves - - -122 - 122 0 - 0 Increase of revaluation reserve, net of tax - - 705 - - 705 - 705 Total other comprehensive income - - 583 - 122 705 - 705 Total comprehensive income for the period - - 583 - 528 1 111 -7 1 104 Contributions by and distributions to owners: Total contributions by and distributions to owners - - - - - - - - Changes in the Group without losing control Other changes in the Group - - - - - - - - Total contributions by and distributions to owners Balance at 31 December 2009 11 943 11 396 7 689 935 7 048 39 011 88 39 099

Consolidated statement of changes in equity (continued)

Thousand Litas	Share capital	Share premium	Revalu ation reserve	Legal reserve	Retained earnings	Total	Non controll ing interest	Total equity
Balance at 1 January 2010	11 943	11 396	7 689	935	7 048	39 011	88	39 099
Comprehensive income for the period Net profit (loss) Other comprehensive	-	-	-	-	8 027	8 027	32	8 059
income Allocated from reserves	-	-	-328	-	328	0	-	0
Increase of revaluation reserve, net of tax	-	-	49	-	-	49	-	49
Total other comprehensive income	-	-	-279	-	328	49	-	49
Total comprehensive income for the period	-	-	-279	-	8 355	8 076	32	8 108
Contributions by and distributions to owners: Dividends					-1 194	-1 194		-1 194
Total contributions by and
distributions to owners Changes in the Group without losing control Other changes in the Group	-	-	-	-	-1 194 -	-1 194 -	-	-1 194 -
Total contributions by and distributions to owners	-	-	-	-	-	-	-	-
Balance at 30 September 2010	11 943	11 396	7 410	935	14 209	45 893	120	46 013

Balance at 1 January 2010	11 943	11 396	7 410	935	14 209	45 893	120	46 013
Comprehensive income for the period Net profit (loss)	-	-	-	-	3 778	3 778	35	3 813
Other comprehensive income Allocated from reserves	-	-	-110	-	110	0	-	-
Increase of revaluation
reserve, net of tax Total other comprehensive	-	-	17	-	-	17	-	17
income	-	-	-93	-	110	17	-	17
Total comprehensive income for the period	-	-	-93	-	3 888	3 795	35	3 830
Contributions by and distributions to owners:
Dividends	-	-	-	-	-	-	-	-
Total contributions by and
distributions to owners	-	-	-	-	-	-	-	-
Changes in the Group without losing control
Other changes in the Group	-	-	-	-	-	-	-	-
Total contributions by and
distributions to owners	-	-	-	-	-	-	-	-
Balance at 30 September 2010	11 943	11 396	7 317	935	18 097	49 688	155	49 843

Consolidated statement of cash flows

Thousand Litas

	2010.01.01- 2010.12.31	2009.01.01- 2009.12.31
Cash flows from operating activities
Net profit (loss) Adjustments:	11 872	6 723
Depreciation of property, plant and equipment	6 348	6 471
Amortisation of intangible assets	297	260
Amortisation of grants	-717	-723
(Profit) loss on disposal of property, plant and equipment	57	904
(Profit) loss on disposal of investment	-371	-
Income tax expense	504	1 249
Interest expenses, net	1 694	3 079
	19 684	17 963
Change in inventories	1 562	2 089
Change in long-term receivables	-66	-188
Change in trade and other receivables	545	4 882
Change in trade and other payables	-42	-3 875
	21 683	20 871
Paid interest	-1 694	-3 079
Paid income tax	-	-
Net cash flows from (used in) operating activities	19 989	17 792
Cash flows from investing activities
Acquisition of property, plant and equipment	-5 432	-2 402
Acquisition of intangible assets	-87	-450
Proceeds from sale of property, plant and equipment	558	519
Net cash flow used in investing activities	-4 961	-2 333
Cash flows from financing activities
Loans received	2 337	515
Repayment of borrowings	-17 201*	-15 806
Dividends paid	-1 194	-
Capital grants received	993	32
Net cash from (used in) financing activities	-15 065	-15 259
Increase (decrease) in cash and cash equivalents	-37	200
Cash and cash equivalents at 1 January	395	195
Cash and cash equivalents at 31 December	358	395

*Repayment of the borrowings includes change of overdraft facility of 3 227 tLTL during 2010

Explanatory notes

1. Accounting principles

Consolidated financial statements of Vilkyskiu pienine AB are prepared following International Standards of Financial Accountability.

The interim condensed consolidated financial statements for the 12 months of 2010 have been prepared in accordance with IAS 34 Interim Financial Reporting.

The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Consolidated annual financial statements for the year 2009

2.Main financial indicators

	January – December 2010	January – December 2009
Revenue (Thousand Litas)	244 273	159 318
EBITDA (Thousand Litas)	20 869	18 049
EBITDA margin (%)	8.5	11.3
Operating result (Thousand Litas)	13 763	11 252
Operating result margin (%)	5.6	7.1
Profit (loss) before tax (Thousand Litas)	12 376	7 972
Profit (loss) before tax margin (%)	5.1	5.0
Profit (loss) per share (litas)	0.99	0.56
Number or shares (vnt)	11 943 000	11 943 000

3. Segment information

Revenue per geographical zones:

Thousand Litas	January – December 2010	January – December 2009	Change
Lithuania	91 626	74 782	22.5%
European Union	84 431	67 763	24.6%
Russia	62 661	15 060	4.2 times
Other countries	5 555	1 713	3.2 times
	244 273	159 318

Sales revenue in 2010 has increased 53% compared with same period of the last year. There are several reasons of increase:

1. increase in production, i.e. we have processed more raw milk (about 30 per cent);
1. increased quantities of export;
1. because of the increase in demand of production, in the beginning of the year we have reduced a part of the stock;
1. sale price of exported production has increased about 30%

4.Inventories

31 December 2010	31 December 2009
	14 683
	194
	3 624
	11
16 950	18 512
	12 369 357 3 518 706

5. Events

On 2nd of November 2010 Modest AB, the subsidiary of Vilkyskių pieninė AB increased its share capital by addition cash contributions. The share capital has been increased from 617 118 LTL till 5 617 118 LTL by Vilkyskių pieninė AB.

6. Post balance sheet events

The quality of Lithuanian cheeses has been acknowledged by the Russians – as many as three products of AB Vilkyškių Pieninė received prizes at the exhibition Prodexpo 2011 held on 7–11 February in Moscow. Prodexpo is the largest international specialised exhibition of food industry, drinks and raw materials in Eastern Europe. The cheese Prussia received the gold medal in the international competition The best product 2011 while cheeses Legend and Žalgiris received prizes in the competition The choice of Russia's trade chains 2011.

On 8 February, during the competition The choice of Russia's trade chains 2011, representatives of the largest Russia's trade chains, following a tasting of products, selected the products they liked most which were awarded diplomas of the trade forum Strategic Russia's trade objectives in the 21st century. The traders of one of the most important export partners of Lithuania have been particularly impressed with two cheeses of Vilkyškių Pieninė – Žalgiris, a hard cheese with a sharp taste and Legend, a hard cheese with the odour and taste of pasteurised cream.

Lithuanian products have also received acclaim in the special competition The best product 2011 which took place behind the closed doors. A special commission of tasters, having evaluated the products presented for the competition with regard to their sensory characteristics, external design and packaging, decided to award the gold medal to Prussia, a cheese of the Goudos type produced by AB Vilkyškių Pieninė.

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