NLMK.L Regulatory News (NLMK)

4 Sep 2007 07:02

OJSC Novolipetsk Steel04 September 2007 September 4, 2007 Novolipetsk Steel H1 2007 US GAAP results OJSC Novolipetsk Steel (NLMK), the LSE listed leading Russian steel producer,today announces its consolidated results for the first half of 2007. Highlights: Strong H1 2007 financial results - Sales revenues amounted to USD 3,609.1 million (+42% YoY)- Cash flows from operating activities were USD 1,366.9 million (2.6 times YoY)- EBITDA* amounted to USD 1,570.6 million (+59% YoY); EBITDA margin 44%- Cash and cash equivalents USD 1,348.6 million as at 30 June, 2007 Recent Developments: - Continued progress in implementing the Group's internal restructuring plan to divest assets classified as non-core asset according to a decision of NLMK'sBoard of Directors: • Disposal of stakes in energy assets for USD 78.7 million in February2007. Proceeds from the transaction were directed to the modernization anddevelopment of in-house energy facilities. • Disposal of the Company's 50% stake in OJSC Lipetskcombank for USD47.7 million. - Prokopievskugol Group of Coal Companies was sold to a Municipal State Companyrepresenting the City Administration of Prokopievsk for USD1 in April 2007. - Total capex in H1 2007 reached USD 395.4 million. In Q2 2007 the majorprojects under way within the Phase 2 of the Technical Upgrading Programme wereas follows: • Contract signed with Siemens VAI (Germany) to supply two new ladlefurnaces, each with 160 tonnes capacity, for BOF production at the Company'smain site in Lipetsk. The contract is valued at around EUR23 million. The newladle furnaces will substantially expand NLMK's product mix enabling the Companyto better supply the automotive industry, white goods producers and theelectrical engineering industry. • Upgrading the reversing cold rolling mill for production ofelectrical grain-oriented steel at the main production site in Lipetsk. Thiswill raise its capacity and enable an increase in the production of highvalue-added grades of grain-oriented steel with advanced magnetic properties. • NLMK signed an equipment supply agreement with Andritz AG (Austria)to supply two new grain- and non-grain-oriented steel rolling mills, each withan annual capacity of 110,000 tonnes and one hot-dip-galvanizing line of 300,000tonnes capacity. - At the Annual General Meeting held on 5 June, 2007 shareholders approved thetotal dividend for 2006 of RUR 3.0 per ordinary share. Including the interimdividend of RUR 1.5 per ordinary share already paid for the first six months of2006, the AGM approved the payment of an additional RUR 1.5 per ordinary share.(1 Global Depositary Share = 10 ordinary shares). - The Board of Directors, at the meeting held on 24 August 2007, recommended forthe approval by shareholders an interim dividend in respect of the first sixmonths of 2007 of RUR 1.5 per ordinary share. Payment of the dividend is subjectto shareholder approval at the Extraordinary General Meeting of NLMK on 28September 2007. - At the Annual General Meeting held on June 5, 2007, Bruno Bolfo, President ofDuferco Group, was elected to the Board of Directors of Novolipetsk Steel (NLMK)as an independent director. Currently, the Company's Board of Directors has fourindependent directors, or 50% of the total composition of the Board excludingthe Chairman, which corresponds to best practice corporate governance. Key financials for H1 2007 USD, million Q2 Q1 Change, % H1 H1 Change, % 2007** 2007** 2007 ** 2006**Revenue 1,858.9 1,750.2 6% 3,609.1 2,542.0 42%Gross profit 930.8 817.4 14% 1,748.2 1,147.0 52%Operating income 744.0 640.1 16% 1,384.1 921.7 50%EBITDA* 822.5 748.1 10% 1,570.6 990.0 59%EBITDA Margin(%) 44% 43% 44% 39%Net profit** 608.4 456.6 33% 1,065.0 943.8 13% * 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 disposal of subsidiaries + accretion expense on asset retirementobligations - gains on loan restructuring ** H1 2007 and Q1 2007 and H1 2006 are official reporting periods. Q2 2007numbers are derived by computational method. Commenting on NLMK's US GAAP H1 2007 results, Galina Aglyamova, Vice PresidentFinance & CFO, said: "NLMK has demonstrated strong financial results in H1 2007. The EBITDA marginstood at 44%, five percentage points higher than in H1 2006. Operating incomesurged 50% on a year-on-year basis. The company's sound performance was drivenby the favorable pricing environment in our core markets, asset consolidationand a well-balanced sales structure. "We believe NLMK Group should demonstrate strong financial results andstrengthen its position among world's most profitable steelmaking companies inthe remainder 2007. "At present, we observe signs of deterioration in steel market conditions thatmay result in possible price weakness towards the end of the year. However,NLMK's diversified sales structure, strong balance sheet and stable cash flowshould enable us to reduce these risks and secure the company's operationalstability." Management comments In recent years, NLMK has maintained its position as one of the most efficientsteel producers in the world. The main drivers contributing to the Company'sefficiency were both the favorable pricing environment in the steel market andimplementation of the 2nd phase of the Technical Upgrading Programme ofCompany's "Sustainable Growth Strategy 2007-2011". The "Sustainable Growth Strategy 2007-2011" was approved in 2006. The keytargets of the strategy by 2012 are an increase of crude steel production to12.4 mln tpy (+40%), an increase of flat rolled steel production by 90%,securing 100% self-sufficiency for major raw materials, further development ofhigh value-added product portfolio and an increase of energy self-sufficiency atthe major production site in Lipetsk. In H1 2007, NLMK substantially increase the sales of high value-added products.The commissioning of the new hot dip galvanizing line enabled the Group toincrease the production of hot dip galvanized and pre-painted steel. Theconsolidation of VIZ-Stal since August 2006 contributed to the growth ofelectrical steel production in H1 2007. The production of the electrical steelat the Group level amounted to 365 thousand tonnes representing a 125 thousandtonnes increase (+52%) compared with H1 2006. The crude steel production in Q2 2007 decreased by 139 thousand tonnes due tothe temporary underperformance of blast furnace -6. The temporaryunderperformance resulted in a decrease of the production level during April -August. At present, the blast furnace is functioning at a regular capacity. The geographical sales structure at the group level has undergone substantialchanges in H1 2007 compared with H1 2006. We observed an increase of rolledsteel domestic sales. In H1 2007, the rolled products sales volume on thedomestic market was 1.33 million tonnes. This represents a 41.2 thousand tonnesincrease compared with H1 2006. The sales of higher value-added productsdemonstrated the most substantial growth. The sales of coated and electricalsteel increased by 71.9 thousand tonnes (+28%) and 24.5 thousand tonnes (+62%)compared with H1 2006 respectively. The decrease of sales in North America in H12007 was caused by the worsening of the market situation in the region comparedwith NLMK's traditional export markets such as European Union (EU), Turkey andthe Middle East. Favorable steel market conditions in H1 2007 were the main factor that resultedin a substantial growth of sales revenue and financial results as compared to H12006. Thus, sales revenue in H1 2007 amounted to USD 3,609.1 million (+42%compared to H1 2006), operating profit amounted to USD1,384.1 million (+50%)and EBITDA equaled USD1,570.6 million (+59%). The acquisition of Altai-koks in April 2006 and VIZ-Stal in August 2006 as wellas the disposal of non-core assets have also contributed to the growth ofconsolidated financial results in H1 2007. Furthermore, NLMK has changed export delivery conditions. Starting from March2006, transportation costs to customers, border terminal or sea port areincluded in the product price. Net profit in H1 2007 amounted to USD 1,065.0 million. This was 13% ahead of H12006. Net profit was impacted by the disposals of Lebedinsky GOK in H1 2006 andLipetskcombank and Prokopievskugol Group of Coal Companies in H1 2007. If weexclude the results of these one-off activities, the Company's net profit in H12007 grew by 57%. The growth of steel prices in Q2 2007 resulted in an increase of 33% of the netprofit of the Group compared with Q1 2007. The Group is generating robust operating cash flow. In H1 2007, net cash flowreceived from operating activities amounted to USD 1,366.9 million, an increaseof 160% compared to H1 2006. The Group's strong operating cash flow ensures itshigh level of financial sustainability. Steel Segment The steel segment is the key segment of the Group. In H1 2007 NLMK,DanSteel A/S and VIZ-Stal sales to external customers were the main contributorsto the financial results of this segment. The steel segment's share ofconsolidated revenue from external customers was over 90%. In H1 2007 the steel segment produced 4.5 million tonnes of crudesteel, 1.7 million tonnes of saleable slabs and 2.7 million tonnes of rolledproducts. Revenue from external customers in H1 2007 amounted to USD 3,278.4 million,which is 37% higher than in H1 2006, operating profit USD 1,131.4 million (+36%compared to H1 2006). The major reason for this improvement is the increase ofprices of main products. An additional factor is the consolidation of VIZ-Stalin August 2006. Proceeds from the disposal of a stake in Lebedinsky GOK obtained in H12006 and loss associated with the restructuring of loan to the ProkopievskugolGroup of Coal Companies in Q1 2007 resulted in a USD 122.2 million (or 13%)decrease of profit before minorities in this segment compared with H1 2006. Sales revenue from external customers in Q2 2007 accounted for USD 1,679.7million, an increase of 5% q-o-q. The main reason for the sales revenueimprovement was the growth of steel product prices and sales volumes ofVIZ-Stal. In Q1 2007 prices for coal concentrate, iron ore and electricity, which werefixed until the end of the year, contributed to production costs stabilizationand revenue growth in Q2 2007. A sharp increase of profit before minorities in Q2 2007 as compared with theprevious quarter, an increase of USD228.6 million (+82%), is mainly attributableto costs incurred from restructuring the loan granted to Prokopievskugol Groupof Companies in Q1 2007. Mining segment In H1 2007, NLMK's mining segment comprised OJSC Stoilensky GOK, OJSC Dolomiteand OJSC Stagdok. These companies mainly supply raw materials to NLMK'sproduction facilities in Lipetsk and which also sell limited volumes outside theGroup. Iron ore producer Stoilensky GOK, the principal mining company within the Group,produced 5.8 million tonnes of iron-ore concentrate and 0.8 million tonnes ofsinter ore in H1 2007. The output of Dolomite in the same period was 0.9 milliontonnes of flux dolomite. Stagdok, which supplies limestone, produced 1.6 milliontonnes of fluxing limestone in H1 2007. The mining segment's revenue from external customers remained at the level ofthe previous period and equaled USD 43.1 million. Intersegmental sales in H1 2007 rose by USD 180.6 million reaching USD 388.0million. This increase resulted from price rises and volumes of iron oreconcentrate shipped to NLMK. The segment's revenue in Q2 2007, including intersegmental sales, remained atthe level of the previous which resulted from stable volumes shipped and ironore concentrate prices. Operating profit in this segment in the second quarter of 2007 amounted toUSD130.6 million, an increase of 5% q-o-q due to decrease of energy andmaintenance costs. As 90% of the mining segment's sales in value terms are internal sales, thesegment's share of NLMK's consolidated external revenue in H1 2007 was 1%. Coke-chemical segment The coke-chemical segment comprises OJSC Altai-koks and its subsidiaries, whichwere consolidated within the Group from Q2 2006. Altai-koks is one of theleading producers of coke in Russia. In H1 2007, Altai-koks produced 1,924,000tonnes of coke of 6% moisture. The coke production volume in Q2 2007 was 1.1million tonnes, which represents a 166.2 thousand tonnes increase compared withQ1 2007. In H1 2007, the coking segment's revenue from external customers was USD 243.2million, while operating profit amounted to USD8.5 million. A 31% increase in sales revenue from external customers in Q2 2007 isattributable to the growth of sales volumes and prices both in the domestic andworld markets.The coke-chemical segment's share of H1 2007 consolidated revenue was 7%. After putting into operation new coke battery #5 in Q4 2006, total annualproduction capacity reached 5.0 million tonnes of coke of 6% moisture. Other segments Revenue from other operating segments primarily includes revenue from threeoperational units, whose results do not exceed threshold values. These segmentsinclude sea port services, financial services, banking and insurance services,as well as coal mining and refinement by the Prokopievskugol Group of CoalCompanies (in Q1 2007). In H1 2007, gross profit from other segments amounted to USD 24.4 million. Itrepresents a decrease of USD 1.5 million compared with H1 2006. Income before minority interests rose in H1 2007 amounting to USD 135.7 million,which is primarily attributable to the waiver of Prokopievskugol obligations forthe repayment of a loan within the framework of debt restructuring. Theadditional driver was the recognition of financial results on disposal ofProkopievskugol Group of Coal Companies and Lipetskcombank, recorded in "Gainfrom disposal of subsidiaries" line. In Q2 2007 gross profit from other segments was USD 10.6 million, operatingprofit USD 6.1 million compared with an operating loss in the previous quarterof USD 17.6 million. The positive result of operating profit in Q2 2007 isattributable to disposal of the Prokopievskugol Group of Coal Companies. Consolidated financial results In H1 2007, NLMK's sales revenue reached USD 3,609.1 million, an increase of42% compared with the corresponding period of the previous year. The key factorscontributing to the level of revenue and profit were: • prices increases for the products sold by the Group • consolidation of Altai-koks starting April 2006 and VIZ-Stal starting August 2006 • since March 2006 conditions for the delivery of exported products have changed. The sales price for NLMK's products now also include transportation costs to customers, border terminal or sea port. Gross profit in H1 2007 amounted to USD 1,748.2 million, an increase of 52%compared with H1 2006. Operating profit was USD 1,384.1 million, an increase of50%. H1 2007 EBITDA amounted to USD 1,570.6 million, an increase of 59% compared withthe corresponding period of the previous year. The EBITDA margin for the firsthalf 2007 was 44%, an increase of 5 percentage points compared with the firsthalf 2006. NLMK Group's net profit in H1 2007 amounted to USD 1,065.0 million, an increaseof 13% compared with the corresponding period last year. The decrease of netprofit growth rates is due to a significant non-recurring income from the saleof stake in Lebedinsky GOK in H1 2006. If the effect of the non-recurring saleof assets is eliminated, NLMK's net profit growth in H1 2007 would be 57%. In Q2 2007 revenue grew by 6% or USD 108.7 million compared with Q1 2007. In Q1 2007 NLMK settled supply prices for coking coal concentrate, iron ore rawmaterials and energy until the end of the year, which resulted in stabilizing ofcosts and increase of profit growth rates in Q2 2007. Gross profit increased by 14% or USD 113.5 million compared with Q1 2007, whileoperating profit grew by 16% or USD 103.8 million. Compared with Q1 2007, net profit for Q2 2007 grew by 33% which is attributableto recognition of financial results on disposal of Prokopievskugol Group of CoalCompanies and Lipetskcombank in Q2 2007 that totaled USD 81.5 million. The consolidated income statement for H1 2007 recognizes equity in net earningsof Steel Invest and Finance S.A. (JV with Duferco Group) with total amount ofUSD 7.7 million. According to unaudited IFRS financial statements of Steel Invest and FinanceS.A. prepared by the management, H1 2007 revenue was USD 1,878.8 million, EBITDAUSD142.6 million, and net profit USD 55.9 million The financial results of Steel Invest and Finance S.A. are recognized in NLMK'sincome statement with a reference to NLMK share in company's authorized capital(50%), as well as adjustments in accordance with US GAAP principles. Aftercompletion of a fair valuation of the fixed assets of Steel Invest and FinanceS.A and agreement of the final value of NLMK's share the amount of correctionscould be changed. Consolidated balance sheet data As of 30 June 2007, NLMK's assets reached USD 9,411.5 million, an increase of8% compared with 31 December 2006. The share of the Company's own capital in the sources used to finance NLMK'soperations is permanently high and at the end of H1 2007 was 82%. The Group's balance sheet structure reflects the financial stability of thecompany, which is confirmed by the obtaining highest credit ratings amongRussian steelmakers. NLMK's highly liquid assets substantially exceed the amount of its debt. NLMK'scash and cash equivalents position as at 30 June, 2007 amounted to USD 1.348,6million, an increase of 100% (or USD 683.3 million) compared to 31 December,2006. In the first half of 2007, the annualized return on assets (ROA) was 23% andannualized return on equity (ROE) was 29%. These ratios are lower than in H12006 due to additional non-recurring gain from the divestment of NLMK's interestin Lebedinsky GOK in Q1 2006. Cash Flow In H1 2007 net cash received from operating activities equaled USD1.366,9million, a 160% increase compared with H1 2006. Strong generation of operating cash flow allows NLMK to finance organic growthfrom its own cash funds without attracting substantial debt. In H1 2007 net cashreceived from operating activities exceeded purchases and construction ofproperty, plant and equipment by 3.5 times. Cash outflow for investment activities in H1 2007 amounted to USD573.7 million,which is USD66 million less than in H1 2006. The main cash outflow for investment activities in H1 2007 was associated withUSD395.4 million investments in fixed assets. Net cash flows associated with financial activities in H1 2007 amounted toUSD130.6 million. The main cash outflows associated with financial activitiesare the repayment of short-term credits that amounted to USD225.4 million. Themain cash flow from financing activities is associated with the proceeds fromthe disposal of stakes in energy assets that were classified by the Board ofDirectors of NLMK as non-core assets. The proceeds from the transaction wereUSD78.5 million. Cash and cash equivalents as at 30 June 2007 equaled USD1,348.6 million, whichis double or USD683.3 million higher than as at 31 December 2006. Outlook We expect to see the traditional softening of the Russian flat steel market dueto seasonal factors towards the end of 2007. The world market is expected to besaturated with flat products, also due to the traditional slowdown at the end ofthe year. This will increase the risk of price falls in both export and domesticmarkets. Despite this, in 2007 as a whole, we expect growth of sales revenue andoperating profit. We are also forecasting 2007 EBITDA growth compared with 2006numbers. 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. INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) PREPARED INACCORDANCE WITH ACCOUNTING PRINCIPLESGENERALLY ACCEPTED IN THE UNITED STATES OFAMERICA Interim condensed consolidated balance sheets as at June 30, 2007 and December31, 2006 (unaudited) (All amounts in thousands of US dollars, except for share data) As at June 30, As at December 2007 31, 2006ASSETS Current assetsCash and cash equivalents 1,348,556 665,213Short-term investments 136,710 37,261Accounts receivable, net 1,110,116 1,150,492Inventories, net 936,248 856,940Other current assets, net 96,922 331,322Restricted cash - 8,372 3,628,552 3,049,600Non-current assetsLong-term investments, net 860,958 810,350Property, plant and equipment, net 4,128,397 3,988,128Intangible assets, net 191,223 199,030Goodwill 570,866 559,703Other non-current assets 31,520 110,179 5,782,964 5,667,390Total assets 9,411,516 8,716,990 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilitiesAccounts payable and other liabilities 830,490 664,319Short-term borrowings 71,841 248,782Current income tax liability 77,566 80,350 979,897 993,451Non-current liabilitiesDeferred income tax liability 563,659 537,647Long-term borrowings 19,226 48,153Other long-term liabilities 13,648 194,872 596,533 780,672Total liabilities 1,576,430 1,774,123 Commitments and contingencies - - Minority interest 108,921 133,425 Stockholders' equityCommon stock, 1 Russian ruble par value - 5,993,227,240 221,173 221,173shares issued and outstanding at June 30, 2007 andDecember 31, 2006Statutory reserve 10,267 10,267Additional paid-in capital 52,395 1,812Accumulated other comprehensive income 738,341 589,986Retained earnings 6,703,989 5,986,204 7,726,165 6,809,442Total liabilities and stockholders' equity 9,411,516 8,716,990 Interim condensed consolidated statements of income for the six months endedJune 30, 2007 and 2006 (unaudited) (All amounts in thousands of US dollars, except for earnings per share amounts) For the six For the six months ended June months ended June 30, 2007 30, 2006 Sales revenue 3,609,079 2,541,985 Cost of salesProduction cost (1,663,079) (1,236,662)Depreciation and amortization (197,752) (158,305) (1,860,831) (1,394,967) Gross profit 1,748,248 1,147,018 General and administrative expenses (106,623) (85,987)Selling expenses (211,848) (117,642)Taxes other than income tax (39,582) (21,658)Accretion expense on asset retirement obligations (6,070) - Operating income 1,384,125 921,731 Loss on disposals of property, plant and equipment (19,791) (2,719)(Losses) / gains on investments, net (3,442) 390,463Interest income 44,778 58,672Interest expense (12,127) (10,626)Foreign currency exchange, net 15,325 (69,779)Gain from disposal of subsidiaries 81,511 -Other income / (expenses), net 1,682 (8,858) Income from continuing operations 1,492,061 1,278,884 before income tax and minority interest Income tax (423,979) (325,970) Income from continuing operations before minority interest 1,068,082 952,914 Minority interest (12,067) (11,900) Equity in net earnings of associate 7,729 492 Income from continuing operations 1,063,744 941,506 Discontinued operations Gain from operations of discontinued subsidiary 1,236 2,279Income tax - - Income from discontinued operations 1,236 2,279 Net income 1,064,980 943,785 Income from continuing operations per share (US dollars)basic and diluted 0.1775 0.1571 Income from discontinued operations per share (US dollars)basic and diluted 0.0002 0.0004 Net income per share (US dollars)basic and diluted 0.1777 0.1575 Interim condensed consolidated statements of cash flows for the six months endedJune 30, 2007 and 2006 (unaudited) (thousands of US dollars) For the six For the six months ended June months ended June 30, 2007 30, 2006CASH FLOWS FROM OPERATING ACTIVITIESNet income 1,064,980 943,785Adjustments to reconcile net income to net cash providedby operating activities:Minority interest 13,148 11,900Depreciation and amortization 197,752 158,305Loss on disposals of property, plant and equipment 19,791 2,719Losses / (gains) on investments, net 3,442 (390,463)Gain from disposal of subsidiaries (81,511) -Equity in net earnings of associate (7,729) (492)Deferred income tax expense / (benefit) 47,524 (7,343)Accretion expense on asset retirement obligations 6,070 -Other movements (1,510) 21,558Changes in operating assets and liabilitiesIncrease in accounts receivable (17,551) (137,577)Increase in inventories (80,258) (4,357)Increase in other current assets (10,286) (1,276)Increase in loans provided by the subsidiary bank (104,199) (42,000)Increase / (decrease) in accounts payable and other 338,080 (41,369)liabilities(Decrease) / increase in current income tax payable (20,826) 14,387Net cash provided by operating activities 1,366,917 527,777CASH FLOWS FROM INVESTING ACTIVITIESAcquisition of subsidiary, net of cash acquired of $1,264 - (809,655)Proceeds from adjustment of the original purchase price of 37,442 -subsidiariesProceeds from sale of property, plant and equipment 6,977 2,926Purchases and construction of property, plant and (395,420) (239,845)equipmentProceeds from sale of investments 6,449 419,647Purchases of investments (35,670) (12,416)Loan issued (133,096) -Disposal of subsidiaries, net of cash disposed of $106,800 (59,407) -Movement of restricted cash (1,000) (417)Net cash used in investing activities (573,725) (639,760)CASH FLOWS FROM FINANCING ACTIVITIESProceeds from borrowings and notes payable 30,118 8,391Repayment of borrowings and notes payable (225,372) (93,156)Capital lease payments (1,522) -Proceeds from disposal of assets to the company under 78,469 -common controlPayments to controlling shareholders for common control - (104,000)transfer of interests in subsidiaryDividends paid to minority shareholder of existing (8,070) -subsidiariesDividends to shareholders (4,258) (336,114)Net cash used in financing activities (130,635) (524,879)Net increase / (decrease) in cash and cash equivalents 662,557 (636,862)Effect of exchange rate changes on cash and cash 20,786 98,307equivalentsCash and cash equivalents at the beginning of the period 665,213 1,924,148Cash and cash equivalents at the end of the period 1,348,556 1,385,593 Interim condensed consolidated statements of stockholders' equity andcomprehensive income for the six months ended June 30, 2007 and 2006 (unaudited) (thousands of US dollars) Common Statutory Additional Accumulated Retained Total stock reserve paid-in other earnings stockholders' capital comprehensive equity income Balance at 221,173 10,267 1,812 72,129 4,809,094 5,114,475 December 31, 2005 Comprehensive income: Net income - - - - 943,785 943,785 Other comprehensiveincome: Net unrealized gain - - - (1,196) - (1,196)on a change invaluation ofinvestments Translation - - - 343,321 - 343,321adjustment Comprehensive income 1,285,910 Dividends to - - - - (448,781) (448,781)shareholders Payments to - - - - (104,000) (104,000)controllingshareholders forcommon controltransfer of interestsin subsidiary Balance at 221,173 10,267 1,812 414,254 5,200,098 5,847,604 June 30, 2006 Balance at 221,173 10,267 1,812 589,986 5,986,204 6,809,442 December 31, 2006 Comprehensive income: Net income - - - - 1,064,980 1,064,980 Other comprehensiveincome: Translation - - - 148,355 - 148,355adjustment Comprehensive income 1,213,335 Dividends to - - - - (347,195) (347,195)shareholders Earnings from - - 50,583 - - 50,583disposal of assets tothe company undercommon control Balance at 221,173 10,267 52,395 738,341 6,703,989 7,726,165 June 30, 2007 For further information: NLMKAnton Bazulev +7 495 915 1575 Financial DynamicsJon Simmons +44 207 831 3113 This information is provided by RNS The company news service from the London Stock Exchange