NLMK.L Regulatory News (NLMK)

21 Apr 2008 07:01

OJSC Novolipetsk Steel21 April 2008 21.04.2008 Preliminary Results for the Year Ended 31 December, 2007 Novolipetsk Steel ("NLMK", "the Group"), the LSE-listed leading Russian steelproducer, today announced its preliminary consolidated US GAAP results for theyear ended 31 December 2007. Key financial highlightsUSD, million 2007 2006 Change, %Revenue 7 719.1 6 045.6 28%Gross profit 3 742.0 2 971.3 26%Operating income 2 998.4 2 243.3 34%EBITDA* 3 366.2 2 631.2 28%EBITDA Margin(%) 44% 44%Net profit** 2 247.3 2 066.0 9%Net profit ex. one-off items 2 184.9 1 596.5 37%EPS 0.3750 0.3447 9% * EBITDA = Net income (post share of minorities) + income tax +/- interestexpense/(income) + depreciation +/- losses/(gains ) on disposals of property,plant and equipment +/- losses/(gains) on financial investment +/- losses/(gains) from discontinued operations + impairment losses + accretion expense onasset retirement obligations; ** Net profit during 2006 is increased by one-off non-operating factors, mainlyproceeds from disposal of stakes in Lebedinsky GOK and KMA Ruda in 2006. Recent Developments In 2007, NLMK continued its dynamic development through the implementation ofthe 2nd Phase of the Technical Upgrading Program, optimization of the existingGroup structure and continuation of its dynamic M&A activities: The 2nd Phase of Technical Upgrading Program aims to enhance, modernize andraise the efficiency of production facilities. The investment capex for 2007 -2011 is expected at the level of USD4.4 billion. Capital expenditure, includingthe acquisition and construction of property, plant and equipment amounted toUSD 957.7 million in 2007. NLMK started the implementation of following projectsduring the reporting period: Blast furnace and steelmaking segment: • NLMK has signed contract on the supply of two new ladle furnaces forthe Company's main site in Lipetsk. • NLMK has signed contract on the construction of Blast Furnace No.7with 3.4 million tonnes capacity. This project will enable the production ofcrude steel at NLMK's main site to increase to 12.4 million tonnes by 2012. Rolling segment: • NLMK has started construction of the third pre-painting line with anannual capacity of 200,000 tonnes. After the project completion, NLMK willincrease coating capacity to 1.1 million tonnes, including 0.6 million tonnes ofpre-painted steel. • NLMK has started construction of two new transformer and dynamosteel rolling mills, each with an annual capacity of 110,000 tonnes, and onehot-dip-galvanizing line of 300,000 tonnes capacity. • NLMK has upgraded its reversing cold rolling mill for the productionof electrical grain-oriented steel to raise its capacity from 67,000 to 130,000tonnes. • NLMK has commissioned a new 300,000 tpy pickling line for hot rolledtransformer and carbon steel at the main production site in Lipetsk. Optimization of the existing Group structure: • Disposal of shareholdings in energy assets for USD 78.7 million inFebruary 2007. Proceeds from the transaction were directed to the modernizationand development of in-house energy facilities. • Disposal of the Company's 54.88% stake in Lipetskcombank for USD47.7 million in June 2007. M&A transactions: • In December 2007, NLMK acquired a 50%+1 share stake in Maxi-Group.The acquisition price is approximately USD 558 million. Maxi-Group comprisesseveral enterprises from collecting and processing scrap to manufacturing longproducts. The production facilities of existing sites comprise billets (2.4million tonnes), rebar (1.3 million tonnes) and metal-ware (0.55 milliontonnes). The Scrap Collection division includes 300 scrap collection yards withtotal capacity of 3.0 million tonnes. Logistics segment and service centers: • NLMK's subsidiary NTK, which ensures the timely supply of rawmaterials for metallurgical processes and the shipment of finished products toboth domestic and international customers, increased its fleet of rented andowned railcars to 2,809. • In November 2007, NLMK entered into an agreement with TBEA, themajor Chinese transformer producer, to create a joint service centre to process(cutting and packing) and sell transformer and dynamo steels in China. Theservice centre project is aimed at increasing sales volumes and service qualityin the rapidly developing Chinese market. Joint venture with Duferco Group: • The combined annual crude steel production of joint venturefacilities as of September 2007 is 2.2 million tonnes while sales of finishedproducts were 4.8 million tonnes. • Duferco U.S. Investment Corporation, wholly-owned subsidiary ofSteel Invest & Finance S.A. (Luxembourg), acquired Sharon Coating (former WinnerSteel) based in Pennsylvania, USA. The acquisition price was approximately USD212 million. Winner Steel is one of the largest independent galvanized steelproducers in the United States. Its operations are located on a single site inPennsylvania and include three galvanizing lines with combined annual capacityof more than 1.0 million tonnes. • The coke production facilities at Carsid S.A. were shut down. NLMKnow supplies 100% of the coke requirements of the Duferco JV facilities. • The total capex and acquisition costs for the year ended September2007 were EUR 345.2 million. Dividends The Board of Directors recommends a 2007 total dividend payment of RUR 3.0 perordinary share (1 GDS = 10 ordinary shares). Taking into account the interimdividend payment of RUR 1.5 per ordinary share (approved by the EGM held on 28September, 2007) the Board is recommending the payment of an additional RUR 1.5per ordinary share. The final dividend payment is subject to the approval of theannual shareholders meeting in June 2008. Commenting on the 2007 results, Alexey Lapshin, NLMK's President, said: "2007 proved to be a very successful year for NLMK. An increase in sales of highvalue-added products coupled with growing demand for steel products as well asongoing production costs control enabled NLMK to achieve a high level ofoperating profit. "Highly professional management and sustainable steel demand have encouraged thecompany's more efficient use of existing capacity: steel-making and rollingfacilities have been operating at almost 100% capacity." "The decrease of semi-finished product share in total sales volume and furtherdevelopment of high value-added product portfolio are key targets of NLMK'sstrategy. In 2007, the company has made a significant progress in this area. Thetotal sales during the year amounted to 9.2 million tonnes of steel productswhile the sales of high margin products, hot dip galvanized and grain-orientedsteel went up 13% and 45%. At the same time, the sales of semi-finished productsdecreased by 10%.These developments combined with upward pricing trends in keymarkets allowed us to remain profitability leader in the global steel industry." Commenting on the 2007 results, Galina Aglyamova, NLMK's CFO, said: "NLMK Group has demonstrated record financial results last year. Theconsolidated sales revenue for 2007 reached USD 7,719.1 million. All Groupsegments showed increase in production volumes and financial results. Theconsistent implementation of the company's growth strategy and utilization ofour competitive strengths helped us to achieve a record financial performance.EBITDA improved by 28% to USD 3 366.2 million, with an EBITDA margin of 44%" "The liquidity crisis at the end of last year did not affect NLMK's financialresults. During 2007, we continued to finance organic growth and acquisitions bygroup cash-flow. This year, we do plan to use debt to finance dynamicdevelopment of the company through asset acquisitions and capital expenditures.Given the company's robust financial position and high credit ratings we areconfident of the effectiveness of this approach." Outlook Prices for steel products continued to grow in Q1 and Q2 of 2008 following theincrease in raw material costs. We currently anticipate a mid-year flattening ofsteel prices. In 2008, steel production volume at our main production site in Lipetsk isexpected to reach 9.4 million tonnes. As a result of the increase in productionvolumes, price growth and Maxi-Group consolidation we expect revenues to grow upto 60% year-on-year. According to our preliminary estimates, EBITDA could exceedthe 2007 level by 35-40%. MANAGEMENT COMMENTS In 2007 the sound financial performance of the Company was underpinned by afavorable pricing environment in the steel markets and by the investmentprojects implemented as a part of the 2nd Phase of the Technical UpgradingProgram. The production results of Novolipetsk Steel and its main subsidiarieswere in line with the planned production volumes. Last year, the NLMK Group substantially increased sales of high value-addedproducts. The commissioning of the new hot-dip galvanizing line enabled theGroup to increase the production of coated steel up to 819,000 tonnes, a 49,000tonnes (+6% year-on-year). The consolidation of VIZ-Stal since August 2006contributed to the growth of electrical steel production to 723,000 tonnes,which is 157,000 tonnes higher than in 2006 (+28% year-on-year). Afterconsolidation of Maxi-Group (since December 2007) NLMK's product range includeslong products and metal-ware. In December 2007, Maxi-Group produced 0.08 milliontonnes of steel products. The strong pricing environment and increased sales of high value-added productswere the main factors that resulted in a substantial growth of sales revenue andfinancial results as compared to 2006. Thus, sales revenue in 2007 amounted toUSD7,719.1 million (+28% year-on-year), operating profit USD2,998.4 million(+34% year-on-year), and EBITDA USD3 366,2 (+28% year-on-year). If the impact of one-off activities is excluded, the Company's net profit in2007 would grow by 37%. However, taking into consideration asset disposals in2006 (Lebedinsky GOK and KMA Ruda) as well as in 2007 (Lipetskcombank andProkopievskugol Group), net profit in 2007 amounted USD2,247.3 milliondemonstrating 9% increase as compared to the previous year. In 2007, net cash flows received from operating activities amounted to USD2,523.9 million, which exceeds the 2006 result by 59%. The Group generatesstrong operating cash flow, demonstrating its high level of financialsustainability. Steel Segment USD, million 2007 2006 Change, % Revenue from external customers 6,946.1 5,586.7 24% Revenue from intersegmental operations 24.4 26.1 -6% Gross profit 2,891.8 2,513.5 15% Operating profit 2,362.8 2,108.4 12% Profit before minorities 1,772.5 1,934.2 -8% The steel segment is the key segment of the Group. The steel segment comprisesNovolipetsk Steel, DanSteel A/S, a hot-rolled thick plate producer, andVIZ-Stal, a producer of electrical steel as well as a range of servicecompanies. The steel segment's share of consolidated revenue from externalcustomers was over 90%. In 2007, the steel segment produced 9.1 million tonnes of crude steel, 3.2million tonnes of commercial slabs and 5.3 million tonnes of rolled products. Revenue from external customers in 2007 amounted to USD 6,946.1 million, anincrease of 24% year-on-year, operating profit USD 2,362.8 million (+12%year-on-year). The major reasons for this improvement are the growth of pricesfor its main products and the consolidation of VIZ-Stal. Long Products Segment USD, million 2007 2006 Change, % Revenue from external customers 62.3 - - Revenue from intersegmental operations 0.0 - - Gross profit 8.8 - - Operating profit 1.6 - - Profit before minorities -31.8 - - The long products segment comprises Maxi-Group, which was consolidated withinthe NLMK Group from December 2007. The enterprises that make up the Maxi-Groupfocus on collecting and processing scrap, producing steel and manufacturing longproducts. In 2007, Maxi-Group produced 1.8 million tonnes of crude steel (including 0.01million tonnes produced in December 2007), 0.6 million tonnes of long products(including 0.08 million tonnes produced in December 2007), and 0.3 milliontonnes of metal-ware (including 0.01 million tonnes produced in December 2007). Mining Segment USD, million 2007 2006 Change, % Revenue from external customers 105.4 91.0 16% Revenue from intersegmental operations 783.4 523.6 50% Gross profit 588.2 349.3 68% Operating profit 523.2 297.3 76% Profit before minorities 443.1 242.5 83% In 2007, NLMK's mining segment comprised Stoilensky GOK, Dolomite and Stagdok.These companies mainly supply raw materials to NLMK's production facilities inLipetsk and also sell limited volumes outside the Group. Iron ore producer Stoilensky GOK, the principal mining company within the Group,produced 11.6 million tonnes of iron-ore concentrate (+0.3 million tonnes or 3%year-on-year) and 1.7 million tonnes of sinter ore (+0.4 million tonnes or 27%year-on-year) in 2007. The mining segment's revenue from external customers grew by 16% year-on-year,and amounted to USD 105.4 million. This growth is mainly attributable to priceincrease for the main products. Intersegmental sales in 2007 rose by USD259.9 million reaching USD783.4 million.This increase resulted from price rises and volumes of iron ore concentrateshipped to NLMK's production facilities in Lipetsk. As 88% of the mining segment's sales in value terms are internal sales, thesegment's share of NLMK's consolidated external revenue in 2007 was only 1%. Coke-chemical Segment USD, million 2007 2006* Change, % Revenue from external customers 517.3 252.7 105% Revenue from intersegmental operations 167.4 83.7 100% Gross profit 205.7 76.4 169% Operating profit 113.6 23.9 375% Profit before minorities 78.8 8.0 889% * Coke-chemicals financial results for 2006, recognized since OJSC Altai-koksconsolidation in Q2 2006 The coke-chemical segment comprises Altai-koks and its subsidiaries, which wereconsolidated within the Group from Q2 2006. In 2007, Altai-koks produced 3.8million tonnes of 6% moisture coke. In 2007, the coking segment's revenue from external customers was USD517.3million, while operating profit amounted to USD113.6 million. The year-on-yearfinancial growth is caused by increased production capacities after putting intooperation new coke battery No.5 at the end of 2006 and different periods ofconsolidation. In 2007, Altai-koks export sales volumes, including sales to CIS countries,amounted to 1.7 million of dry coke. Last year, the company shipped 0.8 milliontonnes of dry coke to the main production site in Lipetsk. The coke-chemical segment's share of 2007 consolidated revenue is 7%. Other Segments USD, million 2007 2006 Change, % Revenue from external customers 88.0 115.2 -24% Revenue from intersegmental operations 41.9 107.4 -61% Gross profit 48.6 36.7 32% Operating profit 4.7 -174.7 Profit before minorities 155.6 -149.1 Revenue from other operating segments primarily includes revenue from threeoperational units, the results of which do not exceed threshold values. Thesesegments include sea port services, financial services, banking (in H1 2007) andinsurance services, as well as coal mining and refinement by the ProkopievskugolGroup of Coal Companies (in Q2/Q4 2006 and in Q1 2007). In 2007, the gross profit from other segments amounted to USD 48.6 million, anincrease of 32% year-on-year. Income before minority interests rose in 2007 amounting to USD155.6 million,which is primarily attributable to the waiver of the Prokopievskugol obligationsfor the repayment of a loan within the framework of debt restructuring. Theadditional driver was the recognition of financial results on the disposal ofthe Prokopievskugol Group of Coal Companies and Lipetskcombank, recorded in the"Gain from disposal of subsidiaries" line. Consolidated financial results In 2007, the Group's consolidated sales revenue amounted to USD 7,719.1 million(+28% year-on-year). The increase in revenue and profit was primarily driven bythe following: • Increase in prices for products, sold by NLMK Group; • Change in steel products sales structure, i.e. high value-added product share growth; • Consolidation of Altai-koks (since April 2006), VIZ-Stal (since August 2006), Maxi-Group (since December 2007); • Change in terms of NLMK's export deliveries: since March 2006 sales prices include costs of transportation to the customer, border crossing points and port stations. Operating profit in 2007 amounted USD 2,998.4 million (+34% year-on-year). 2007EBITDA achieved USD 3,366.2 million (+28% year-on-year). EBITDA margin in 2007reached 44% and remained at 2006 level. Consolidated balance sheet As of 31December, 2007, the Group's assets amounted to USD 13,075.9 million,representing 50% growth year-on-year, attributable to the consolidation inDecember, 2007 of the Maxi-Group assets and strong financial performance of theGroup. The Group's capital structure included 69% equity capital as at the year-end, adecrease of 9 percentage points due to the consolidation of the financialliabilities of Maxi-Group companies. The year-end Debt/EBITDA proportion was 0.48, demonstrating the Group's soundfinancial situation. Return on assets (ROA) amounted 21% in 2007, while Return on Equity (ROE) was28%. The ratios decreased compared to the previous year due to the disposal ofLebedinsky GOK and KMA Ruda in 2006, while in 2007 there were no materialdisposals. Cash flow The favorable pricing situation and increase in high value-added products salescontributed to the significant increase in operating cash flow. In 2007, netcash received from operations amounted to USD 2,523.9 million, which constitutes59% growth year-on-year. In 2007, net cash received from operations was 2.6 times higher than cash usedfor investments and PPE construction. The cash outflow for investment activities amounted to USD 1,267.6 million, withthe major investment item being the acquisition and construction of PPE (USD957.7 million). Moreover, the Group acquired some securities and granted loanto NLMK - Duferco joint venture (Steel Invest and Finance (SIF)), which is dueto be paid back in 2008. Despite the consolidation of Maxi-Group in December 2007, the transaction costswill be recognized in 2008 financial statements. Net cash used in financial activities in 2007 amounted to USD 829.7 million.Cash outflow on financial activity is attributable to shareholders dividendpayments (USD 703.0 million) as well as loan repayment (USD 451.8 million). USD268.8 million of loans drives the major cash inflow from financial activity. Cash and cash equivalents as at the 2007 year-end amounted USD 1,154.6 million. Disclaimer: This announcement may contain a number of forward-looking statements relatingto, among others, the financial condition and results of operations of theCompany. Such forward-looking statements involve a number of risks anduncertainties that could cause actual results to differ materially from thosesuggested by them and are based on assumptions regarding the Company's presentand future business strategies and the environment in which the Company and itssubsidiaries operate both now and in the future. Forward-looking statementsspeak only as at the date of this announcement and save as required byapplicable legal and/or regulatory requirements the Company expressly disclaimsany obligation to release publicly any updates or revisions to anyforward-looking statements. CONSOLIDATED FINANCIAL STATEMENTS PREPARED IN ACCORDANCE WITH ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES OF AMERICA AS AT AND FOR THE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005 CONSOLIDATED BALANCE SHEETS As at As at December As at December December 31, 2007 31, 2006 31, 2005 ASSETS Current assetsCash and cash equivalents 1,154,641 665,213 1,924,148Short-term investments 153,462 37,261 27,040Accounts receivable and advances given, 1,696,451 1,150,492 708,515netInventories, net 1,236,433 856,940 559,250Other current assets, net 147,191 331,322 208,920Restricted cash - 8,372 7,979 4,388,178 3,049,600 3,435,852Non-current assetsLong-term investments, net 818,590 810,350 31,470Property, plant and equipment, net 6,449,877 3,988,128 2,415,001Intangible assets, net 189,084 199,030 21,086Goodwill 1,189,459 559,703 173,357Other non-current assets 40,754 110,179 133,747 8,687,764 5,667,390 2,774,661Total assets 13,075,942 8,716,990 6,210,513 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilitiesAccounts payable and other liabilities 1,394,934 664,319 565,983Short-term borrowings 1,536,570 248,782 5,282Current income tax liability 70,686 80,350 40,639 3,002,190 993,451 611,904Non-current liabilitiesDeferred income tax liability 585,567 537,647 300,712Long-term borrowings 73,225 48,153 45,341Other long-term liabilities 316,616 194,872 45,505 975,408 780,672 391,558Total liabilities 3,977,598 1,774,123 1,003,462 Commitments and contingencies - - - Minority interest 106,813 133,425 92,576 Stockholders' equityCommon stock, 1 Russian ruble par value - 221,173 221,173 221,1735,993,227,240 shares issued andoutstanding at December 31, 2007, 2006 and2005Statutory reserve 10,267 10,267 10,267Additional paid-in capital 52,395 1,812 1,812Accumulated other comprehensive income 1,181,546 589,986 72,129Retained earnings 7,526,150 5,986,204 4,809,094 8,991,531 6,809,442 5,114,475Total liabilities and stockholders' equity 13,075,942 8,716,990 6,210,513 CONSOLIDATED STATEMENTS OF INCOME For the year For the year For the year ended December ended December ended December 31, 2007 31, 2006 31, 2005 Sales revenue 7,719,061 6,045,625 4,375,806 Cost of salesProduction cost (3,569,331) (2,716,434) (2,048,828)Depreciation and amortization (407,699) (357,941) (282,876) (3,977,030) (3,074,375) (2,331,704) Gross profit 3,742,031 2,971,250 2,044,102 General and administrative expenses (214,836) (188,648) (101,351)Selling expenses (442,657) (325,361) (62,371)Taxes other than income tax (79,977) (57,215) (36,356)Accretion expense on asset retirement (6,190) (19,765) -obligationsImpairment losses - (136,916) - Operating income 2,998,371 2,243,345 1,844,024 Loss on disposals of property, plant and (27,285) (3,582) (11,579)equipment(Losses) / gains on investments, net (23,522) 400,696 2,771Interest income 99,751 111,789 98,708Interest expense (31,417) (29,692) (15,377)Foreign currency exchange, net 80,495 (74,975) (9,805)Gain from disposal of subsidiaries 83,122 - -Other expenses, net (22,688) (26,526) (16,468) Income from continuing operations 3,156,827 2,621,055 1,892,274before income tax and minority interest Income tax (837,003) (706,605) (497,273) Income from continuing operations before 2,319,824 1,914,450 1,395,001minority interest Minority interest (23,490) (25,773) (21,080) Equity in net earnings / (net losses) of (50,312) 501 3,701associate Income from continuing operations 2,246,022 1,889,178 1,377,622 Discontinued operations Gain from operations of discontinued 1,261 228,499 3,773subsidiary (including gain on disposal of$227,524 in 2006)Income tax - (51,714) - Income from discontinued operations 1,261 176,785 3,773 Net income 2,247,283 2,065,963 1,381,395 Income from continuing operations per share(US dollars)basic and diluted 0.3748 0.3152 0.2299 Income from discontinued operations per share(US dollars)basic and diluted 0.0002 0.0295 0.0006 Net income per share (US dollars)basic and diluted 0.3750 0.3447 0.2305 CONSOLIDATED STATEMENTS OF CASH FLOWS For the year For the year For the year ended December ended December ended December 31, 2007 31, 2006 31, 2005 CASH FLOWS FROM OPERATING ACTIVITIESNet income 2,247,283 2,065,963 1,381,395Adjustments to reconcile net income to netcash provided by operating activities:Minority interest 24,592 25,773 21,080Depreciation and amortization 407,699 357,941 282,876Loss on disposals of property, plant and 27,285 3,582 11,579equipmentLosses / (gains) on investments, net 23,522 (400,696) (2,771)Gain on disposal of discontinued subsidiary (83,122) (227,524) -Gain from operations of discontinued (1,261) - -subsidiaryEquity in (net earnings) / net losses of 50,312 (501) (3,701)associateDeferred income tax expense / (benefit) 37,925 (38,732) (3,677)Stock-based compensation - - 1,132Impairment losses - 136,916 -Accretion expense on asset retirement 6,190 19,765 -obligationsOther 16,348 21,386 (3,984)Changes in operating assets and liabilitiesIncrease in accounts receivable (92,033) (141,359) (91,585)Increase in inventories (200,074) (159,995) (53,270)Increase in other current assets (43,633) (16,905) (33,208)Increase in loans provided by the subsidiary (106,260) (69,776) (69,142)bankIncrease / (decrease) in accounts payable and 242,830 (23,125) 121,031other liabilities(Decrease) / increase in current income tax (33,700) 32,376 (33,990)payableNet cash provided by operating activities 2,523,903 1,585,089 1,523,765CASH FLOWSFROM INVESTING ACTIVITIESAcquisitions of subsidiaries, net of cash - (1,347,545) -acquired of $14,127Purchases of equity investments - (805,503) -Cash acquired in business combination 24,038 - -Proceeds from adjustment of the original 37,089 - -purchase price of subsidiariesProceeds from disposal of discontinued - 302,526 -operationsProceeds from sale of property, plant and 12,278 15,565 10,706equipmentPurchases and construction of property, plant (957,719) (618,677) (580,198)and equipmentProceeds from sale of investments 11,606 465,274 72,872Purchase of investments (199,469) (54,758) (42,722)Loan issued (134,300) - -Disposal of subsidiaries, net of cash disposed (60,063) - -of $106,800Movement of restricted cash (1,020) 339 (3,122)Net cash used in investing activities (1,267,560) (2,042,779) (542,464) CASH FLOWSFROM FINANCING ACTIVITIESProceeds from borrowings and notes payable 268,844 224,870 20,143Repayment of borrowings and notes payable (451,802) (183,305) (13,866)Capital lease payments (3,066) (379) -Proceeds from disposal of assets to the 78,469 - -company under common controlContributions from controlling shareholders - - 33,185Payments to controlling shareholders for - (104,000) -common control transfer of interests in newsubsidiariesDividends paid to previous shareholder of - (83,547) -acquired subsidiaryDividends paid to minority shareholders of (19,146) (20,228) (1,390)existing subsidiariesDividends to shareholders (702,983) (766,646) (384,973)Net cash used in financing activities (829,684) (933,235) (346,901)Net increase / (decrease) in cash and cash 426,659 (1,390,925) 634,400equivalentsEffect of exchange rate changes on cash and 62,769 131,990 (58,867)cash equivalentsCash and cash equivalents at the beginning of 665,213 1,924,148 1,348,615the periodCash and cash equivalents at the end of the 1,154,641 665,213 1,924,148period Supplemental disclosures of cash flowinformation: Cash paid during the year for:Income tax 702,688 611,408 434,885Interest 26,318 28,781 13,623 Non cash operating activities:Offset of income tax payable with VAT 111,271 99,115 96,427receivable Non cash investing activities:Capital lease liabilities incurred 448,731 8,460 - Non cash investing and financing activities asa result of:Transfers of subsidiary interests from common - - 30,797control parties reflected as capitalcontribution, net of cash received of $33,185in 2005Fair value of net assets acquired from third 533,468 1,347,545 -parties in new subsidiaries, net of cashacquired of $25,047 in 2007 and $14,127 in2006 CONSOLIDATED STATEMENTS OF Common Statutory Additional Accumulated Retained TotalSTOCKHOLDERS' EQUITY AND stock reserve paid-in other earnings stockholders'COMPREHENSIVE INCOME capital comprehensive equity incomeBalance at 221,173 10,267 680 242,387 3,745,984 4,220,491 December 31, 2004 Comprehensive income: Net income - - - - 1,381,395 1,381,395 Other comprehensive income: Net unrealized gain on a - - - 7 - 7change in valuation ofinvestments Cumulative translation - - - (170,265) - (170,265)adjustment Comprehensive income 1,211,137 Stock-based compensation - - 1,132 - - 1,132 Dividends to shareholders - - - - (382,267) (382,267) Transfers of subsidiary - - - - 63,982 63,982interests from controllingshareholders Balance at 221,173 10,267 1,812 72,129 4,809,094 5,114,475December 31, 2005 Comprehensive income: Net income - - - - 2,065,963 2,065,963 Other comprehensive income: Net unrealized loss on a - - - (1,177) - (1,177)change in valuation ofinvestments Cumulative translation - - - 519,034 - 519,034adjustment Comprehensive income 2,583,820 Dividends to shareholders - - - - (784,853) (784,853) Payments to controlling - - - - (104,000) (104,000)shareholders for commoncontrol transfer ofsubsidiary interests Balance at 221,173 10,267 1,812 589,986 5,986,204 6,809,442December 31, 2006 Comprehensive income: Net income - - - - 2,247,283 2,247,283 Other comprehensive income: Cumulative translation - - - 15,562 - 15,562adjustment, attributable toassociate Cumulative translation - - - 575,998 - 575,998adjustment Comprehensive income 2,838,843 Dividends to shareholders - - - - (707,337) (707,337) Earnings from disposal of - - 50,583 - - 50,583assets to the company undercommon control Balance at 221,173 10,267 52,395 1,181,546 7,526,150 8,991,531December 31, 2007 For further information: NLMK Anton Bazulev +7 495 915 1575 Financial Dynamics Jon Simmons +44 207 831 3113 This information is provided by RNS The company news service from the London Stock Exchange