LSRG.L Regulatory News (LSRG)

17 Mar 2008 08:12

Open Joint-Stock Company LSR Group17 March 2008 NOT FOR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES, AUSTRALIA, CANADA OR JAPAN For immediate release17 March 2008St. Petersburg LSR Group Acquires a Leader in the Ural Market of Construction and Building Materials and Establishes its LSR-Urals Business Unit On March 14, as part of LSR's geographical expansion strategy, the Board of LSRGroup approved a EUR 57 million deal to acquire 87% stake in the Betforreinforced concrete company in Yekaterinburg. Betfor is to be included in theconstruction business segment of OJSC LSR Group. To control the reinforcedconcrete maker as well as the other land assets previously acquired in theregion, LSR Group has decided to set up a new business unit, LSR-Urals. LSR Group is buying the Betfor company from the NOVA-GROUP Urals-based holdingcompany pursuant to an agreement with NOVA-GROUP on the acquisition of a seriesof building materials and real estate assets in Yekaterinburg. Currently, LSRGroup is conducting due diligence of a number of other NOVA-GROUP assets withthe prospect of potentially acquiring them but it has not committed itself tobuy any yet and does not consider it appropriate to disclose any details of suchacquisitions at the present stage. Betfor Reinforced Concrete Factory is the largest prefabricated constructioncompany in Yekaterinburg manufacturing prefab construction panels (with acapacity of 200,000 sq.m a year). In addition, the company has manufacturingfacilities to turn out reinforced concrete products (120,000 cub.m a year),aerated concrete (120,000 cub.m a year), concrete and dry mixes (50,000 cub.m ayear). In 2007, Betfor's market share of the panel construction segment inYekaterinburg was 78.6%. Betfor has been No.1 prefab construction company forseveral years now. The company is also one of the market leaders in building materials production.Thus, according to its own estimates, its share of the Yekaterinburg andSverdlovsk Oblast market is 30.2% for aerated concrete, 37.4% for reinforcedconcrete products, and 5.1% for ready-mix concrete and mortar. Betfor's revenues for 2007 accounted for around 26% of the revenues and 32% ofthe EBITDA of LSR Group's construction business segment over the same period. By now, LSR Group has already acquired approximately 60 ha of land inYekaterinburg and is planning to develop the plots building entirely new economyclass residential neighbourhoods there. The acquisition of ZAO Betfor, the majorplayer in the panel construction and building materials segments of theYekaterinburg and Sverdlovsk Oblast market, will enable LSR Group to implementthese projects in time and at high quality. Igor Levit, the CEO and a member of the Board of Directors of OJSC LSR Group,has commented as follows: "The acquisition of ZAO Betfor combined with the earlier purchased plots of landin Yekaterinburg will help LSR Group to implement its plans towards establishingreal estate development, construction and building materials divisions in theUral region to be managed by LSR-Urals Business Unit headquartered inYekaterinburg. Thus, we are replicating our company's unique business model inthe market of Yekaterinburg and Sverdlovsk Oblast so strategically important forus. In addition, the new acquisition will materially expand the LSR'sconstruction segment and provide for a significant improvement of EBITDA in thesegment." As of today, the investments of LSR Group to promote operations in the Uralregion, including the acquisitions of land plots and Betfor, total approximatelyEUR 114 million (around USD 178 million) and fully comply with the statementsof LSR Group regarding the use of proceeds obtained through the IPO the companyimplemented last autumn. It may be noted, that the population of Yekaterinburg today is approx. 1.3million people. By its volume of construction the region ranks fourth afterMoscow (including the Moscow Oblast), St. Petersburg and Kazan. The constructionmarket in Yekaterinburg has been rapidly growing over recent years: e.g. a totalof 900,000 sq.m of housing were completed in 2007, nearly 170,000 sq.m (23%growth rate) more than in 2006 (732,700 sq.m). In 2006, the growth of housingconstruction compared to the 2005 volume (approx. 640,000 sq.m) was 14%. According to the reports of DTZ, as of late 2007 the cost per sq.m of economyand business class residential property in the primary market was USD2,150-2,500 while the average monthly wages were 16,000 roubles (by thisindicator Yekaterinburg holds third place in Russia). In 2007, Standard & Poorsassigned a BB rating to Yekaterinburg, with a stable outlook. For reference: OJSC LSR Group is a diversified construction company founded in 1993 andoperating in a number of complementary market segments. Its core business areasare building materials, construction and real estate development. The Groupincludes enterprises for extraction and processing of aggregates, productionand transportation of building materials, and housing construction - from massmarket large-panel housing to elite property built after designs made by leadingdomestic and foreign architects. LSR Group has operations and offices in a number of cities in the LeningradOblast, in St. Petersburg, Moscow, Yekaterinburg, Lithuania, Latvia, Estonia,Ukraine and Germany. LSR Group employs over 15,000 people. In, 2005 and 2006 the revenues of LSRGroup (according to IFRS statements) were RUB 13,085.5 million and RUB 21,110.8million respectively. For the six months of 2007 the Group's revenues amountedto RUB 16,062.0 million compared to RUB 9,336.4 million for the same period lastyear. In July 2007, Moody's Investors Service assigned a B1 rating to LSR Group;outlook - stable. In November 2007, OJSC LSR Group implemented an IPO. InDecember 2007, LSR Group was bestowed a National Award in the field of businessas 'The Company of the Year' in the 'Construction' category. NOVA-GROUP Construction Holding Company is a dynamically developing group ofcompanies having, similarly to LSR Group, two core businesses: 1. Production ofBuilding Materials; 2. Real Estate Development and Construction. Groupcompanies produce crushed stone, concrete, reinforced concrete products, aeratedconcrete, windows, as well as engage in real estate development, architecturaland engineering design work, construction and subsequent property management.NOVA-GROUP brands are well-known in the market of Yekaterinburg and SverdlovskOblast. For more details please contact: Press Service, LSR Group+7 (812) 314-1044press@lsrgroup.ruwww.lsrgroup.ru Legal disclaimer: NOT FOR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES,AUSTRALIA, CANADA OR JAPAN ... Some of the information in these materials may contain projections or otherforward-looking statements regarding future events or the future financialperformance of the Company. You can identify forward looking statements by termssuch as "expect", "believe", "anticipate", "estimate", "intend", "will","could," "may" or "might" the negative of such terms or other similarexpressions. The Company wishes to caution you that these statements are onlypredictions and that actual events or results may differ materially. TheCompany does not intend to update these statements to reflect events andcircumstances occurring after the date hereof or to reflect the occurrence ofunanticipated events. Many factors could cause the actual results to differmaterially from those contained in projections or forward-looking statements ofthe Company, including, among others, general economic conditions, thecompetitive environment, risks associated with operating in Russia, rapidtechnological and market change in the industries the Company operates in, aswell as many other risks specifically related to the Company and its operations. Neither these materials nor any copy of it may be taken or transmitted into theUnited States, Australia, Canada or Japan. These materials do not constitute orform part of any offer or invitation to sell, or any solicitation of any offerto purchase nor shall it (or any part of it) or the fact of its distribution,form the basis of, or be relied on in connection with, any contract therefor.The offer and the distribution of these materials and other information inconnection with the listing and offer in certain jurisdictions may be restrictedby law and persons into whose possession any document or other informationreferred to herein comes should inform themselves about and observe any suchrestriction. Any failure to comply with these restrictions may constitute aviolation of the securities laws of any such jurisdiction. These materials are not an offer for sale of any securities in the UnitedStates. Securities may not be offered or sold in the United States absentregistration or an exemption from registration under the U.S. Securities Act of1933. The Company has not registered and does not intend to register anyportion of any offering in the United States or to conduct a public offering ofany securities in the United States. This communication is directed only at (i) persons who are outside the UnitedKingdom or (ii) persons who have professional experience in matters relating toinvestments falling within Article 19(1) of the Financial Services and MarketsAct 2000 (Financial Promotion) Order 2005 (the "Order") and (iii) high net worthentities, and other persons to whom it may lawfully be communicated, fallingwithin Article 49(2) of the Order (all such persons together being referred toas "relevant persons"). Any investment activity to which this communicationrelates will only be available to and will only be engaged with, relevantpersons. Any person who is not a relevant person should not act or rely on thisdocument or any of its contents. 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