17 April 2007
Preliminary Results for the Year Ended 31 December, 2006
OJSC Novolipetsk Steel (“NLMK”, “the Group”), the LSE-listed leading Russian steel producer, today announced its preliminary consolidated US GAAP results for the year ended 31 December 2006.
- Strong 2006 financial performance:
- Sales revenues amounted to USD 6,045.6 million (+38% year-on-year)
- Cash flow from operating activities was USD 1,585.1 million
- EBITDA* amounted to USD 2,631.2 million (EBITDA margin 44%)
- Net profit was USD 2,066.0 million (+50% year-on-year)
- Cash and cash equivalents of USD 665.2 million as of 31 December, 2006
- In 2006, NLMK continued its dynamic development through further integration into key raw materials, acquisition of rolling facilities in our company’s core markets, and optimization of existing Group structure.
Vertical integration in raw materials segment:
- Acquisition of 94% stake in Altai-koks, the largest independent coke producer in Russia. The asset has been consolidated into NLMK’s financial statements since April 2006. This stake was acquired for USD 636.4 million.
Acquisition of rolling facilities in core markets:
- Acquisition of DanSteel A/S, the Danish steel re-roller, for USD 104 million, from the company under common control. DanSteel A/S has been consolidated into NLMK’s financial statements since December 2005.
- Acquisition of VIZ-Stal, the second-largest electrical steel manufacturer in Russia, for USD 550.7 million. VIZ-Stal has been consolidated into NLMK’s financial statements since August 2006.
Optimization of the existing Group structure:
- Disposal of 12% interest in Lebedinsky GOK for USD 400 million in January 2006.
- Increase of share ownership in LLC NTK up to 100%, in July 2006. LLC NTK is the key logistics provider for the Group, responsible for transportation of the Group’s supplies of raw materials and delivery of steel products to customers in Russia and abroad.
- Disposal of a 92% interest in iron ore producer KMA Ruda for USD 302.5 million in September 2006. Proceeds from the disposal are to be invested in the development of the Group’s key iron ore asset, Stoilensky GOK.
- Resolution to dispose of energy assets in December 2006. NLMK’s energy holdings were classified as non-core investments by the NLMK Board of Directors.
- Creation of a joint venture with the Duferco Group. This joint venture includes one steel making plant and five steel rolling facilities in Europe and the USA as well as a network of steel service centers. In 2006, joint venture companies produced 2.0 million tonnes of crude steel and 4.5 million tonnes of rolled steel. NLMK acquired its 50% interest in this joint venture for approximately USD 805 million. The purchase price is subject to a post-closing adjustment based on the results of the audited financial statements of the joint venture companies for the fiscal year ended 30 September, 2006.
- Capital expenditure, including acquisition and construction of property, plant and equipment, in 2006 amounted to USD 618.7 million
- Approval of phase two of the Technical Upgrade Programme (2007 – 2011), with total planned investment of USD 4.4 billion. This program will ensure sustainable