OREANDA-NEWS. On April 26, 2007 Evraz Group S.A. (LSE: EVR) announced its preliminary audited results for the year ended 31 December 2006 with a strong year-on-year growth in sales volumes and revenues, reported the press-centre of  Evraz.

Alexander Frolov, Evraz Group’s Chairman and CEO, commented: “Fiscal 2006 was the best year in the history of the Evraz Group. It was one of rapid growth with continuing success and we are delighted with this achievement. I am glad to present all-time record highs demonstrated by strong results in almost all spheres of our business. This achievement is completely in line with our long-term strategy and allowed us to deliver superior returns for our stockholders. Steel sales volumes have climbed significantly on the back of an upward price trend in the world steel market that started in the second quarter of 2006, and were supported by growing steel consumption worldwide. Revenues grew compared to 2005 as the Company rationalised production across all its steel plants. In particular, we realised synergies from the successful integration of our European rolling mill facilities, Palini e Bertoli and Vitkovice Steel, which produce higher value-added products.Through the year we stayed focused on our primary strategy to retain the Company’s position as one of the most cost-effective integrated steel producing and mining groups in the world. We believe that the ability to produce low-cost semi-finished and higher added-value steel products is essential to ensure long-term market competitiveness and value creation.


In 2006, we continued to expand our global presence with an agreed acquisition of the North American steel maker, Oregon Steel Mills. Closing on this transaction was made in mid-January, 2007. We also purchased Stratcor (USA and South Africa) and a share in Highveld Steel and Vanadium Corporation (South Africa). In March 2007, we reported the tragic event with a significant loss of life at the Ulyanovskaya mine, operated by our affiliate, Yuzhkuzbassugol. The Company continues to monitor Yuzhkuzbassugol’s management actions, the social assistance to the dependents of the victims as well as the government authorities investigations as to the cause of this tragedy and the lessons to be learnt. On behalf of Evraz’s board of directors and management I wish to thank all stockholders for continuing support and trust in our capabilities in managing the challenges we face on the road to success. I would also like to thank our employees and partners for their enormous contribution to the year’s outstanding overall results”.


Commenting on the outlook for 2007 and beyond Alexander Frolov said: “In 2007 we expect to produce 15,5-16,0 million tonnes of crude steel and 14,2-14,8 million tonnes of rolled products including 1,6-1,7 million tonnes in the US. Evraz's investment plans of approximately $575 million will mainly target on-going projects to increase operational efficiency. Included in these projects is the reline of the Zapsib blast furnace. This investment will decrease crude steel output for 2007 by approximately 1 million tonnes. Additionally there will be a shutdown of all open hearth furnaces located in the very centre of Novokuznetsk, a city with population of over 550,000 people. Such action will further improve the local environmental conditions and increase operational efficiency of our Siberian plants. Russian construction expansion will further stimulate domestic long products demand, which continues to outperform GDP growth. Favourable pricing environment in 1Q07 and expected strong pricing through 2Q07, together with solid growth in sales volumes are  expected to combine to increase Evraz consolidated revenues for the first six months of 2007 by 45-55% and the 1H2007 EBITDA by 50-60%”.


Summary Results:
Evraz’s consolidated revenues in 2006 amounted to US$8,292 million, a 27,4% increase compared to revenues of US$6,508 million in 2005. The steel segment sales accounted for the majority of this increase in revenues following on the growth in sales volumes combined with the upward price trends in world markets. Total volumes of steel products sold in 2006 were 16,0 million tonnes, up 24,5% from 12,9 million tonnes in 2005.


In 2006, consolidated cost of revenues amounted to US$5,159 million compared with US$4,172 million in 2005. Cost of revenues as a share of consolidated revenues improved in percentage terms from 64,1% reported in 2005 to 62,2% in 2006. This improvement was primarily attributable to the growth in steel volumes and average prices in 2006 compared to 2005, while Evraz’s own iron ore at an effective underlying primary cost of production helped shield Evraz’s consolidated gross profits from the impact of increased prices of iron ore. Gross profit was up 34,1% to US$3,133 million from US$2,336 million.


In 2006, revenues from non-Russian sales increased to US$4,075 million, or 49,1% of total sales compared with US$2,603 million, 40% of total sales in 2005. The increased share of non-Russian revenues was attributable to the growth in export sales volumes following the acquisitions of Palini e Bertoli and Vitkovice Steel. Notwithstanding the significant increase in non-Russian sales, revenues from sales in Russia improved by 8% from US$3,905 million to US$4,217 million due to higher steel volumes and higher average steel prices, however decreased as a percentage of total revenues.


Profit from operations grew by 45,3% to US$2,298 million for the year ended 31 December 2006, amounting to 27,7% of consolidated revenues, compared to US$1,582 million in 2005, or 24,3% of consolidated revenues.


Evraz share in income of joint ventures and associates decreased by 21% to US$45 million due to Yuzhkuzbassugol losses.


In 2006, the Company reports consolidated net profit attributable to equity holders of Evraz Group of US$1,385 million vs. US$918 million in 2005. Income tax expense increased by 34,3% to US$638 million in 2006 from US$475 million in 2005. Evraz’s effective consolidated tax rate, defined as income tax expense as a percentage of profit before tax, slightly decreased from 31,1% in 2005 to 30,4% in 2006.


Consolidated adjusted EBITDA increased by 42,7% to US$2,652 million in 2006 compared with US$1,859 million in 2005. The adjusted EBITDA margin advanced to 32% in 2006 from 28,6% in 2005.