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Concern Kalina

July 1, 2004

JSC Concern Kalina’s rating has raised to “ruBBB+”

Standard&Poor’s company has raised its Russia national scale corporate rating on JSC Concern Kalina, Russia's largest cosmetics manufacturing company, to 'ruBBB+' from 'ruBBB-‘ as a result of stable indices of the operational activity, improved financial characteristics and successful IPO.

According to credit analysts of Standard & Poor’s the rating increase reflects strong positions of the Concern as the leader in several segments of the Russian market of cosmetics, its high profitability and improved ability to generate free operational cash flow which together with moderate financial politics from the point of view of new acquisitions and ability to control total debt strengthen credit financial characteristics.

At the same time Concern “Kalina” has sold unprofitable production assets in CIS countries and reconsidered its strategy of growth which is now focused on organic sales growth, brands’ promotion and new promising brands’ acquisition.

It is also pointed out in Standard & Poor’s press - release that the rating level remains constrained due to intensifying competition with international cosmetics producing companies at the Russian market, increasing advertising costs, susceptibility to foreign currency risk because of high level of expenses, nominated in euro and US dollars and of planned debt nominated in US dollars. A season factor and changeability of the cosmetics and individual grooming producing branch were also taken into account..

Financial indices of the Concern have improved due to IPO proceeds amounting to 25 mln. dollars which also has strengthened liquidity indices of the company. IPO proceeds together with internally generated funds will be used to finance growth strategy of the Concern.

“Kalina’s” liquidity remains at a high level and is provided by 29 mln. dollars of funds and 24 mln. dollars of available confirmed bank credit lines with 14 mln. dollars received from EBRR and 6 mln. dollars subject to repayment. Increased free cash flow will be partially used for acquisition of new brands.

For additional information please contact Sergei Kazantsev, Press Secretary, on + (7 3432) 658 306; e-mail: pressa@kalina.org

This announcement is only for circulation to persons to whom it may lawfully be issued in circumstances in which Section 21(1) of the Financial Services and Markets Act 2000 does not apply to the Company.

This announcement is not an offer for sale of securities in the United States. The securities referred to herein may not be sold in the United Sates absent registration or an exemption from registration under the U.S. securities Act of 1933, as amended. Kalina does not intend to register any portion of the offering of the securities in the United States or to conduct a public offering of the securities in the United States. Any offer of the securities to be made in the United States will be made only by means of an offering memorandum, which will contain detailed information about the company and its management and financial statements. Copies of this announcement are not being made and may not be distributed or sent into Canada or Japan.

 

 

 

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