NLMK.L Regulatory News (NLMK)

Press-release

30 March 2011

NLMK FY2010 US GAAP Results

NLMK, the LSE‐listed leading Russian steel producer, today announces its consolidated US GAAP results for the 12 months ending 31 December, 2010.

NLMK posted impressive FY2010 results, confirming its status as one of the most efficient global steelmakers. The Company's diversified product mix, sustainable vertical integration and tight cost control along the entire value chain were among the key performance drivers.

Sales revenue rose by 36% to $8,351 million driven by recovering prices and growing high value added product sales as well as by substantial growth in output. FY2010 EBITDA grew 63% to $2,349 million and the EBITDA margin further improved reaching 28%, 5 p.p. up year-on-year. Net income stood at $1,255 million, 5.8 times up on FY2009. Capex grew 31% to $1,463 million.

In 2011 NLMK may further increase its output around 10%. This growth will be achieved mainly through the launch of the new blast furnace and convertor scheduled for mid-2011.

Q1 2011 sales will largely remain flat at around 3 million tonnes. According to our preliminary estimates, the EBITDA margin is expected to be in the range of 20-25%.

FY2010 and Q4 2010 KEYHIGHLIGHTS

 This announcement may contain a number of forward-looking statements relating to, among others, the financial condition and results of operations of the Company. Such forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by them and are based on assumptions regarding the Company's present and future business strategies and the environment in which the Company and its subsidiaries operate both now and in the future. Forward-looking statements speak only as at the date of this announcement and save as required by applicable legal and/or regulatory requirements the Company expressly disclaims any obligation to release publicly any updates or revisions to any forward-looking statements.

The full version of the US GAAP 12M 2010 financial statements and presentation are available on the Company's website at www.nlmk.com 

About NLMK

NLMK is one of the world's leading producers of steel with 2010 output of over 11.5 million tonnes, revenue of USD8.4 billion and the EBITDA margin of 28%. The key production facilities located in Russia, the EU and USA employed around 60,000 people.

The Company produces a wide range of steel products, including slabs and billets, hot‐rolled, thick hot‐rolled plates, cold‐rolled, galvanized and electrical steel (transformer grain‐oriented steel and dynamo steel), as well as rebar, wire‐rod and metal‐ware. In 2010 NLMK delivered its products to customers from 70 countries.

NLMK shares are traded in Russia on MICEX and RTS, and GDRs - on the London Stock Exchange.

Conference call details

NLMK is pleased to invite the investment community to a conference call with the management of NLMK:Wednesday, March 30, 201110:00 (New York)15:00 (London)18:00 (Moscow)To join the conference call, please, register on-line:https://eventreg1.conferencing.com/webportal3/reg.html?Acc=493939&Conf= 177716¬

or dialInternational Call-in Number: +44 (0)20 7162 0025   US Call-in Number: +1 877 491 0064   Conference ID: 891756*We recommend that participants register on-line to avoid waiting in a queue or to start dialing in 5-10 minutes prior to ensure a timely start to the conference call.The conference call replay will be available through 7 April 2011International Replay Number: +44 (0) 207 031 4064   US Replay Number: +1 954 334 0342   Replay Access Code: 891756It is recommended that participants download presentation in advance on NLMK's web-site www.nlmk.com Contacts:NLMKSergey Takhiev+7 495 915 1575  

MANAGEMENT COMMENTS

CFO comments

Ms Galina Aglyamova, Chief Financial Officer, said:

"NLMK has performed strongly this year, taking advantage of favourable market conditions and keeping production costs low. We once again confirmed our status as a highly sustainable business, both financially and operationally capable of moving ahead irrespective of the market fluctuations.

"We posted a 36% growth in revenues, which reached $8.4 billion. Efficient vertical integration and tight cost control resulted in a 63% EBITDA growth and improvements in EBITDA margin reaching 28% or a 5 p.p. increase sequentially.

"In 2010 the Group continued with the previously announced Capex projects, effectively balancing the use of its own and borrowed funds.

"NLMK maintains a low level of debt with a comfortable maturity profile and strong liquidity position. Financial covenants on our lines of credit have a sustainable safety margin.

"Based on NLMK's development plans, we expect significant production growth in 2011-2012, providing us with an opportunity to further increase profit.

"Our operating benchmarks for Q1 2011 remain unchanged - steel output will reach around 3 million tonnes. EBITDA margin is expected in the range of 20-25%."

Record production and sales

2010 production

NLMK took advantage of the recovery in its sales markets, reaching unprecedented production volumes of 11.6 million tonnes (+10%). The Group's capacity utilization rates exceeded 90%, including around 100% at Novolipetsk (Lipetsk-based main production site).

Q4 2010 production

Output was in line with the previous quarter at around 2.9 million tonnes. A timely switch to blooming South-East Asian markets allowed for sustained high utilization rates and sales despite the traditional curb in demand towards the end of the year. High demand for semis was additionally driven by intensified traders' activity in view of the expected price growth.

2010 sales

NLMK increased sales to the domestic and developed markets that boast higher margins.

Steel product sales totaled 11.7 million tonnes (+11%), with the highest growth registered for domestic market deliveries (+28% to 3.7 million tonnes) on the back of growing demand from construction and machine-building sectors. Local to international sales ratio changed in favor of Russian market to 32%/68%.

HVA sales grew significantly, including HDG (+76%), dynamo (+66%), transformer steel (+29%) and metal ware (+17%). HDG sales jumped following the launch of the new HDG line at Novolipetsk that increased its galvanized capabilities. Slab sales increased by 11% mostly due to larger deliveries to Duferco JV's rolling facilities (Steel Invest and Finance, or SIF), as well as an overall recovery in demand for this type of product.

A gradual recovery in developed economies - Europe and North America, for machine-building in particular, allowed increased deliveries to these NLMK's traditional markets. Sales to Europe, including SIF assets, totaled 3 million tonnes (+51%), while 1.4 million tonnes (+108%) went to North America.

Sales to the Middle East and Asia &Pacific contracted by 20% and 48%, respectively, rolling back to the historical average following local sales peaks in these regions in 2009.

Q4 2010

Sales breakdown by region remained largely unchanged on a quarterly basis. A slight decrease in sales to North America (-0.3 million tonnes) was balanced out by an equivalent growth in sales to Asia &Pacific that continued to demonstrate stable demand.

Development Program

A solid volume of liquid assets coupled with the high level of operating cash flow allowed the Company to continue its investment program in line with the schedule. The sum of organic investments made during the last 5 years is about $6 billion.

2010 highlights

In 2010 the Company continued the implementation of its Technical Upgrade Program, which aims to increase crude and rolled steel output, raise product quality, improve production efficiency and increase the output of high value‐added products. About $1.5 billion was spent for these purposes in 2010.

Steelmaking and rolling facilities

The Lipetsk production site continued with its key investment projects, including the construction of Blast Furnace #7, modernization and expansion of its steelmaking operations and projects to further increase energy self-sufficiency at the Novolipetsk.

The Blast Furnace project has entered its final stages - with over 80% of the project completed. The launch of the facility (which will have an annual capacity of 3.4 million tonnes) is expected in the middle of 2011.

We continued construction of the new (and sixth) convertor at the Lipetsk site. The launch of the facility will facilitate a 12.4 million tonne steelmaking capacity at the Lipetsk plant. The launch of the converter is also expected in the middle of 2011.

One of the strategic priorities for the Company is to oversee improvement in the quality of our products. Last year we continued construction of ladle-furnaces and a vacuum degasser in order to perform secondary steelmaking processes to expand our product mix.

The Long Products Division increased its rolling capacities in Berezоvskiy. The newly launched facility is a 1 million tpa rolling mill producing re-bar and wire-rod.

In 2010 the Group continued construction of the Kaluga mini-mill with a steelmaking capacity of 1.5 million tpa. During the year, in line with the schedule we started installing steelmaking equipment. At the end of the year about 35% of the project was completed, the facility is expected to be operational in 2012.

The Company continued its modernization of the transformer steel capacities and, in accordance with plans, will start the production of high permeability transformer steel in 2011. The expected annual capacity of the facility will be approximately 60,000 tonnes. Furthermore, production of this type of transformer steel will be mastered at VIZ-Stal where the annual capacity of this type of steel is expected to reach 70,000 tonnes in 2014. Therefore in 2014 the total high permeability steel capacity of NLMK will be at about 130,000 tonnes, or 40% of the overall transformer steel capacities.

Coking coal assets development

In 2011 the Company plans to complete afeasibility study for the Zhernovskoe-1 coking coal deposit in the Kemerovo region, Siberia. According to preliminary estimates the mine life is expected to yield over 20 years worth of GZh and Zh coking coal grades with an annual output of 3.6 million tonnes of coal concentrate.

Realization of this project located in the close proximity to the coke-chemical assets of Altai-Koks will allow the supply of over one third of the Group's coal needs. Completion of the project is expected in 2014.

In the beginning of 2011 NLMK obtained a license to develop the third mining area in the Usinsk coal deposit (Usinks-3) located in the north of the Komi Republic. The deposit has over 227 million tonnes of on-balance reserves of high-quality hard coking coal (grades Zh and 2Zh). NLMK plans to build a mining facility with annual output of 2.7 million tonnes of coking coal concentrate by 2018.

Expansion of iron ore operations

We continue to develop our upstream operations in order to remain effectively integrated in major raw materials. To maintain full self-sufficiency in iron ore even after incremental growth in steelmaking capacities, early this year the Company approved the construction of a pelletizing plant at Stoilensky, its fully owned subsidiary, with a capacity of 6 million tpa. The pelletizing plant is expected to be operational in 2014.

During the Stoilensky's pelletizing plant construction, Lipetsk production site requirements in pellets are covered by the suppliers under long-term contracts.

Scrap processing capacities growth

Last year we boosted our captive scrap processing capacities through the acquisition of VMI Recycling Group with 0.5 m tpa of scrap processing capabilities. The value of the deal is around $28 million. The company operates in the Moscow region, which has one of the largest scrap reservoirs in the country and the acquired company will become a key scrap supplier to our Kaluga plant, an EAF mini-mill that is expected to start operations in 2012.

Improvement in energy self-sufficiency

NLMK is building a new power plant at its main site in Lipetsk as a part of its strategy to increase self-sufficiency in electric energy. This facility will be fueled with by-product gases from Blast Furnace operations. When implemented this project will increase captive power generation by 45% and will increase energy self-sufficiency at the Lipetsk plant up to nearly 60%.

2011 capex

We will continue to implement the projects comprising our Technical Upgrade Program in 2011. The total capex this year may reach $2 billion.

Debt management and liquidity

As of 31 December 2010, the total debt of the Group was $2,624 million while net debt amounted to $1,454 million. The debt is mostly represented by 3‐year Russian exchange traded bonds issued in the end 2009 - beginning 2010 as well as by $1.6 billion 5 year loan attracted in 2008 with the interest rate LIBOR + 1.2%.

In December 2009 the Group signed a Euro524 million financing facility agreement guaranteed by Export Credit Agencies with a maturity of 7‐10 years and interest rate of EURIBOR+1.53%. In 2010 EURO321 million was received from this facility.

In July 2010 NLMK signed a loan agreement worth EURO125 million with the European Bank for Reconstruction and Development (EBRD) to finance its Energy Efficiency Program.

Summing up the results of 2010 - the Company continues to maintain a comfortable level of net debt where the Net debt/ EBITDA ratio is about 0.62.

Credit ratings

In March 2010 Standard & Poor's, the international rating agency, has raised its outlook for NLMK's BBB- corporate rating from "negative" to "stable" and revised its national scale rating from ruAA+ to ruAAA (the highest level of Standard and Poor's national scale).

In June 2010 Moody's Investors Service has changed the outlook for NLMK's Ba1 corporate family rating and the outlook on NLMK's Aa1.ru national scale rating to "positive" from "stable". Moody's notes that the company continues to demonstrate improving profitability, sound liquidity profile and conservative financial metrics.

Steel Invest and Finance S.A. (NLMK - Duferco JV)

Stable demand in Europe and the United States supported 2010 sales volumes of SIF which achieved 3.4 million tonnes (+22% year-on-year). Roughly 75% of SIF sales were directed to the machine-building sector. About 40% of the sales were represented by hot-rolled steel and pickled steel, 17% - by cold rolled steel, 18% - coated steel and 17% - thick plates.

2010 sales revenue of the JV was $2.8 billion. The EBITDA was $52 million.

In 2010 NLMK increased its slabs sales to the rolling facilities of SIF to 1.5 million tonnes (+25% year-on-year). In 2011 NLMK plans to increase its slab deliveries to the SIF assets to over 2 million tonnes.

Currently NLMK is in the agreement stage regarding the parameters of the deal to acquire SIF assets. This step will allow the Group to secure stable deliveries of steel products to established markets and diversify its product mix increasing flat product capacities by almost twofold.

CONSOLIDATED FINANCIAL RESULTS

Key drivers for 2010 performance:

·; Higher steel prices

The average selling price for steel products was $648/t (+26% year-on-year),which largely followed global market trends. The increase in prices was mainly driven by growing raw material prices forcing steel producers to compensate against growing production costs.

In Q4, prices moved up and this trend continued into the beginning of 2011. Taking into the account our production-sales cycle, the impact of the price increase will be reflected in Q1 2011 results.

·; Better product mix and geography of sales

In 2010 Company improved its sales mix portfolio. The share of HVA products increased to 30% of the overall sales driven by higher sales of coated steel (+38%) and electrical steel (+48%). The recovery in the local market was the key factor impacting this growth - the share of sales to the local market achieved 32% (+5 p.p. to 2009), while the sales revenue from the local market was 41% (+4p.p.).

In the reporting period the Company increased sales of slabs by 11%, the bulk of which (1.5 million tonnes) was sold to the SIF rolling facilities.

·; Higher production and sales volumes

NLMK achieved record production, delivering on its promise to grow finished steel output - 2010 production was up 10% reaching 11.6 million tonnes. We were able to achieve this growth by increasing utilization rates across the entire Group.

We added new downstream capacities that allowed increased output of the unique products primarily delivered to the local market.

A flexible sales strategy allowed the timely redirection of sales to the most favorable markets, increasing export sales by 4% to 8.0 million tonnes.

·; Higher raw material prices

Higher raw material prices resulted in increased production costs for all assets of the Group. However, this growth was partially compensated by the Company's efficient vertical integration.

In 2010 slab cash cost at the Lipetsk plant increased as a result of higher prices for coking coal and pellets - average market prices for these products nearly doubled in Russia

The billet cash cost at the Long Products Division and slab cost at the NLMK Indiana also increased following a 40-45%.growth in scrap prices in Russia and the United States.

In Q4 2010 slab cash costs remained largely flat at $330/t which is attributable to the lower priced inventory formed in preceding quarter.

Revenue

In FY2010 sales revenues reached $8,351 million (+36% year‐on‐year), attributable to higher sales volumes, optimized product mix and growth of average selling prices.

Q4 2010 revenue amounted $2,266 million (+2% quarter-on-quarter) which is mostly attributable to changes in the sales mix (higher sales of coated steel and electrical steel) and higher prices. However taking into account the delay in recognition of sales in our export operations due to the production-sales cycle, the increase in prices that took place in the end of Q4 2010 will be reflected in Q1 2011 financial results.

Production costs

FY2010 production expenses (excluding depreciation and amortization) amounted to $4,933 million (+34% year‐on‐year). The increase in expenses was mostly attributable to higher production volumes, higher prices for the coking coal, scrap and an increase of energy tariffs and tariffs for natural monopolies services.

Production expenses for Q4 2010 were 17% higher (quarter-on-quarter) and were also driven by growth in coking coal and scrap prices. Planned repair and maintenance works that took place during the quarter were an additional factor behind costs increase.

SG&A

In FY 2010 SG&A expenses (excluding impairment losses) increased by 4% to $1,095 million. The growth was largely factored by higher commercial expenses resulting from higher sales. Administrative expenses were lower 11% year-on-year due to among other factors management initiatives to reduce costs.

The Group recognized impairment losses of $58 million as a result of the Long Products Division goodwill revaluation. Goodwill impairment was related to the deterioration in the market conditions in the industry.

Stable sales volumes resulted in a nearly flat level of SG&A expenses in Q4 2010 (-2% quarter-on-quarter).

Operating profit

Higher sales volumes, improved product mix and better market conditions supported by stringent cost management nearly doubled operating profit to $1,795 million (+101%), while the operating profit margin increased to 21% (+7.7 p.p.)

In Q4 2010 operating profit amounted $334 million, a 41% decrease on a quarterly basis. This decline was mainly driven by the impairment losses for the Long Products Division and increased production costs.

EBITDA

FY2010 EBITDA totaled $2,349 million (+63%). The EBITDA margin was 28% (+5 p.p.). The Company remains one of the most profitable steelmaker in the world.

Q4'10 EBITDA totaled $493 million, a 29% reduction quarter‐on‐quarter that mainly resulted from the surge in raw material prices. The EBITDA margin was 22%.

Interest expenses

The significant year-on-year reduction of these expenses ($16 million in 2010, - 91% year-on-year) is attributable to their capitalization as part of construction in progress. The amount of capitalized interest expenses in 2010 was $173 million in contrast to $30 million in 2009 (see Note 8 of the Financial Statements).

Therefore the sum of interest charges in 2010 amounted to $189 million, a 5% reduction due to improved debt structure and lower average interest rates.

Net FX gain/loss

In FY2010, the net FX loss was $59 million (-24% year-on-year) which is mainly attributable to FX gains/losses received by the Group.

Net income

In FY2010 net income (attributable to the NLMK shareholders) grew more than five-fold to $1,255 million. Net income margin was 15% (+12 p.p. year-on-year). The substantial increase of profitability resulted from better financial performance of the Group and lower level of losses arising from associated companies results reflected in the NLMK Income statement.

Q42010 net income (attributable to NLMK shareholders) decreased by 71% to $149 million quarter‐on‐quarter. This decrease was attributable to the growth in product costs during the quarter and losses posted by associated companies.

Balance sheet

As of 31 December 2010 the Group's assets totaled $13.9 billion, an 11% increase compared to 31 December 2009. The key factors contributing to this increase were capital expenditures that resulted in fixed asset growth and increases in working capital. The return on assets in 2010 was 10% (+8 p.p. year-on-year).

On the back of growing production volumes and higher prices for raw materials and steel sales prices accounts receivable increased by 38% and inventories grew by 39%. These factors majorly impacted the growth of current assets that totaled $4.1 billion (+6% to the beginning of the year).

We have sufficient amount of liquid assets with an aggregate of the cash and cash equivalents and short‐term investments (majorly represented by ST bank deposits) standing at $1.2 billion.

The stockholders equity amounted to $9.7 billion, a $1billion (+11%) increase was largely attributable to the increase of retained earnings. The equity to total assets ratio was 70% and the return on equity was 14% (+11 p.p. to the beginning of the year).

Current liabilities of the Group stood at $1.7 billion mostly representing financial debt. ST debt stood at $526 million, which is 2 times less than the sum of liquid assets.

The Group historically reported very strong level of financial stability. Current liquidity ratio was 2.5 and acid ratio - 1.5.

The overall debt leverage is still one of the lowest in the industry. The total debt as of the end of 2010 was $2.6 billion (+5% to the beginning of the year), of which 80% is long term debt. An increase of the caption mainly relates to the attraction of the loan from EBRD (Euro125 million) and financing guaranteed by export credit agencies.

Net debt as at the end of the year was $1.5 billion. Net Debt to EBITDA was 0.62.

Cash flow

Cash flow from operating activities

Cash flow from operating activities in FY 2010 amounted to $1,431 million, +3% year‐on‐year. Comparatively low growth of operating cash flow is mainly explained by the increase of working capital on the back of growing prices for raw materials and steel products.

In Q4 2010 the operating cash flow amounted to $424 million (-24% quarter-on-quarter).

A sufficient volume of cash flow from the operating activities allows to perform a large scale of investments and maintain flexibility to use own and external funds without significant increase of the debt leverage.

Cash flow from investing activities

Cash outflow from investing activities in 12M 2010 amounted to $1,847 million (+4%). The bulk of the outflow was directed to the purchase of property plant and equipment ($1,463 million, +31%).

In 2010 NLMK made placements of available cash and cash equivalents to the ST bank deposits. This transaction was reflected on the captions "Purchase of investments and placement of bank deposits" (-$832 million) and "Proceeds from sale of investments and loans settled" (+$450 million).

Also in Q4 2010 investing cash flow also reflected the acquisition of VMI Recycling Group for $28 million.

In Q4 net cash flow from investing activities amounted to $296 million (-66% quarter-on-quarter), and cash flow from the purchase of property plant and equipment was $480 million (+29% quarter-on-quarter).

Cash flow from financing activities

Net cash used in financing activities in FY2010 totaled $79 million ($145 million in Q4 2010) resulting from net cash inflow from borrowings ($132 million), leasing expenses ($46 million) and dividend payments ($165 million).

The Group's cash position as at 31 December 2010 totaled $748 million. The reduction of the amount to the beginning of the year was attributable to the allocation of cash on the deposit accounts (recognized as the short term investments) and significant capital expenditures.

An aggregate of cash and cash equivalents and short‐term investments stood at $1.2 billion.

Segmental performance

The Group's financial performance is largely defined by the performance of the steel segment, which comprises Novolipetsk (Lipetsk site), VIZ‐Stal (a producer of grain-oriented electrical steel), DanSteel A/S (a thick plates producer), NLMK Indiana (the US‐based steel and flats producer), trading companies Novexco Limited, Cyprus and Novex Trading S.A., Switzerland, as well as a number of service companies.

During FY2010, the steel segment companies produced 9.8 million tonnes of steel (+11% year‐on year), including 3.6 million tonnes of commercial slabs (+5% year‐on‐year) and 5.7 million tonnes of flat products (+14%).

FY 2010 revenue from external customers amounted to $7,161 million, which was 35% higher year-on‐year driven by improved market conditions. Operating profit was $1,084 million (+38% year‐on‐year).

The capital expenditures amounted to $1.1 billion, a 25% increase.

On the back of stable sales the Q4 2010 sales revenue stood at the previous quarter level. However a seasonal weakening of demand on the local market and increased raw material prices resulted in lower operating profits (-36%) and profit after income tax (-18%).

In 2011 we plan to complete several important projects of our Technical Upgrade Program that will allow us to sufficiently improve the segment's operating results.

The Long products segment includes the Long Products Division companies: NSMMZ, UZPC, scrap collecting and processing facilities, and others. The core activities of these companies are scrap collection and processing, steel‐making (EAF-based) and long products and metalware manufacturing.

During FY 2010 the companies steel production was unchanged on a year-on-year basis standing at 1.7 million tonnes. The segment produced 0.2 million tonnes of billets, 1.2 million tonnes of long products, and 0.2 million tonnes of metal‐ware. Total FY2010 volumes of the Companies' ferrous and non‐ferrous scrap sales amounted to 3.1 million tonnes, including 2.9 million tonnes sold within the segment.

FY2010 revenue from external customers grew to $865 million (a 51% increase year‐on-year), operating loss reached $28 million. The segment's improved FY2010 financials are attributable to improved market conditions and improved product mix - higher sales of metallware.

The segment's capital expenditures increased by 40% and amounted to $254 million. Higher investments are attributable to the launch of the new rolling mill at NSMMZ (Berezovskiy mill) and the start of the Kaluga mini-mill construction works.

Seasonal decline in demand from the construction sector resulted in lower financial results in Q4 2010 with sales revenue declining 9% quarter-on-quarter. Operating profit was factored by a seasonal increase in scrap purchase prices that in turn was factored by active scrap restocking done by steelmakers during autumn.

We expect better operational and financial performance of the segment given optimistic expectations for the local construction market.

NLMK's Mining segment comprises Stoilensky, Dolomit and Stagdok. These companies mainly supply raw materials to NLMK's production facilities in Lipetsk and also sell limited volumes outside the Group.

In the reporting period, Stoilensky, the principal mining company within the Group, produced 12.1 million tonnes of iron ore concentrate (+11% year‐on‐year) and 1.8 million tonnes of sinter ore (+4% year‐on‐year).

The segment external revenue did not exceed 10% of overall sales as the bulk of the sales are directed to Novolipetsk.

Higher sales prices, better operational performance and low cost of production (cash cost per tonne of concentrate stood at $18) allowed sufficient increases across financial indicators. Sales revenue was almost twice as high and operating profit increased threefold.

Capital expenditures for the segment amounted to $126 million, +58% as a result of new project initiation. The project is aimed at increasing Stoilensky capacities in order to make the Group self-sufficient in iron-ore in fact of increasing steelmaking capacities at Novolipetsk.

The seasonal non-significant decline in the overall steelmaking industry impacted on the results of Q4 2010.

Management expects further increases in iron ore prices and increases in the segment's operating results that altogether will allow improvements in financial results and the efficiency of integration.

The Coke‐chemical segment comprises Altai‐koks and its subsidiaries. Altai‐koks is Russia's largest coke producer which, together with the coke production facility of Novolipetsk, makes the Group fully self-sufficient in coke.

In 12M 2010 the Segment produced 3.6 million tonnes of coke (hereinafter production data is presented on humidity 6% basis), a 13% growth year‐on‐year.

The Company supplied 2.3 million tonnes of coke to the Novolipetsk - the parent company which consumes the bulk of the coke output (70% of the Altai-koks sales).

Higher market prices for coke chemical products allowed improvements in operational and financial results - sales revenue from intercompany operations increased by 131%, operating profit was 4.4times higher.

In Q4 2010 financial results showed some deterioration factored by higher coking coal purchase prices and lower supplies to Novolipetsk.

In 2011 we expect better operational results from the Company and improved efficiency of vertical integration backed by increasing demand for coke from the Novolipetsk and surging raw material prices.

For reference (information on the Novolipetsk plant coke production results)*

In 12M 2010 Novolipetsk coke output totaled 2.5 million tonnes, a 2% growth year‐on‐year.

Total volume of coke produced by NLMK Group in 12M was 6.0 million tonnes (+8% year‐on‐year).

Appendix 1.

Investments projects

STEEL SEGMENT

LONG PRODUCTS DIVISION

MINING AND RAW MATERIAL PRODUCTION

Appendix 2

(1) EBITDA calculation

(2) Sales by region in 2009‐2010

(in '000 tonnes)

(3) Sales by products in 2009-2010(in '000 tonnes)

(4) Revenue by region

(5) Consolidated cost of production in 2008-2010

(6) Working capital in 2009-2010

1 Reporting periods of the company are Q1, 6M, 9M, and 12M.

2EBITDA calculation is presented in the Appendix 2

3Net profit attributable to NLMK shareholders

4 Net Debt / EBITDA is represented by net debt as at the end of the period and EBITDA is presented as Last 12 months EBITDA