30.03.1999, Tallinna Farmaatsiatehas, TLN

TALLINNA FARMAATSIATEHASE AS

ANNOUNCEMENT

30.03.99

 

COMMENTARY TO THE 1998 UNAUDITED FINANCIAL RESULTS 

 

The 1998 net sales of Tallinna Farmaatsiatehase AS amounted to 83.6 

million EEK, which is only 48% of the respective result on 1997 (171.4 

million EEK). On unaudited data, the consolidated loss of TFT AS in 

1998 amounts to ca 93 million EEK (1997 profit was 28 million EEK).

 

The main reasons behind the loss are significant changes on the TFT’s 

main export market Russia and other CIS states, where the economic 

crisis caused the payment difficulties or bankruptcy for several 

clients of TFT. When the export volume in 1997 amounted to 154 million 

EEK (ca 90% of total turnover), then in respective figure for 1998 was 

only 68 million EEK (ca 82% of total turnover).

 

Liberal sales policies in the first half year and incompetent 

evaluation of financial risks resulted in transfer of more than ca 13 

million EEK worth of accounts to the uncollectible receivables account. 

The main share of the operating expenses were spent on marketing; 

regardless of the 2-times decline in turnover, the respective figure 

was at the same level as in 1997, i.e. ca 17 million EEK. Compared with 

the lower sales and production volumes, the share of other operating 

expenses was relatively high - ca 60 million EEK (the respective figure 

in 1997 was 40 million EEK). The relatively high level of current and 

non-current liabilities proceeded in ca 11 million EEK of financial 

expenses, which is ca 1.5 times more than in 1997. After revaluation of 

the foreign currency balances of the accounts receivable and accounts 

payable, the loss from the exchange differences totaled ca 16 million 

EEK; the respective figure for 1997 was ca 12 million EEK.

 

In the course of the reorganization process (started by the new 

Management Board, appointed in August 1998), the volume of the 

company’s earlier expenses proceeding from higher turnover and 

production volume was adjusted to real, i.e. lower sales volumes. The 

volume of operating expenses, including personnel expenses, were 

decreased significantly. The number of employees in the beginning of 

the year (ca 330) was decreased to the level of 220 by the end of the 

year.

 

The production volume in 1998 declined proportionally with turnover. 

When in 1997, ca 45 million packing units were produced, then this 

figure in 1998 was ca 22 million units, i.e. only 48% of the level of 

1997. The most substantial decline occurred in ampoule production - ca 

2.4 times; the lowest change was in tablet production, 66% of the 1997 

level. In cooperation with the parent company Grindex, the active sales 

in the Baltic in CIS countries will be recovered. In May 1999, Tallinna 

Farmaatsiatehas will celebrate its 85th anniversary. TFT has acquired 

the ISO 9002 quality certificate.

 

 

ARNO KASENIIT

MEMBER OF THE MANAGEMENT BOARD

TEL +372 612 0201