News

9 June 2006 VIZ Steel

Novolipetsk Steel (NLMK) Agrees to Acquire 100% Interest in VIZ Stal

Novolipetsk Steel, NLMK (LSE: NLMK), the leading Russian steel producer, is pleased to announce that it has agreed to acquire 100% of the issued share capital of VIZ Stal, the second largest Russian electrical steel manufacturer, for USD 550 million. The acquisition is to be financed in full from NLMK’s existing cash funds.

Based in Ekaterinburg, VIZ  Stal is a rolling facility which specializes exclusively in electrical steels.  VIZ Stal produces cold-rolled electrical steel sheet, and has a 56% share of the Russian grain-oriented steel market and about 11% of the world market. VIZ Stal’s production capacity is approximately 200,000 tonnes of electrical steel per annum.
Sales revenue of VIZ Stal for the first half of 2006 is estimated at USD 250 million. The EBITDA margin for the same period is expected to exceed 50%.  NLMK has a long-standing relationship with VIZ Stal, being its supplier of hot-rolled coils. The acquisition will make NLMK number one in Russia and among the top three in the world market for electrical steel.

For NLMK, the acquisition of VIZ Stal is an important step in the development of high value-added product portfolio. NLMK’s management has already identified substantial synergies with the newly acquired asset and expects to improve VIZ Stal’s cost structure while enhancing the modernization and efficiency of its production facilities.

Mr. Vladimir Lisin, NLMK’s Chairman and controlling shareholder, commented:
“At a time of an increasing competition for quality assets, the acquisition of VIZ Stal allows NLMK to become a major player in the electrical steel business. The electrical steel market offers one of the highest profit margins in the industry. This acquisition is in line with the key element of NLMK’s strategy - our ‘profits before tonnes’ approach.”