OREANDA-NEWS. June 19, 2007.  ОАО Magnitogorsk Iron and Steel Works, one of the leading integrated metallurgical companies,  announces consolidated financial statements for the 1st Quarter of 2007, reported in accordance with generally accepted accounting rinciples in US ( US GAAP).

1. Financial Results
•         The OJSC MMK Group's gross revenue in the 1st Q of 2007 has grown 51.7% against the 1 st Q 2006 figures totaling USD 1.845 billion.
•         The operating income has gone up to USD 449 million, a 53.8% growth on the 1 st Q of 2006, accounting for 24.3% of the gross revenue.
•         OJSC MMK's 2007 Q1 net income has grown 41.1% on the 2006 Q1 amounting to USD 350 million, or USD 0.034 per share, with the net income accounting for 19.0% of the revenue.
•         The 2007 Q1 EBITDA has reached USD 507 million, or 27.5% of the revenue. This represents an increase of USD 171 million, or 50.9%, on the 2006 Q1.

The core company of the MMK Group is the Magnitogorsk Iron and Steel Works Open Joint Stock Company (OJSC MMK). The share of OJSC MMK's sales to third parties in the Group's total revenue is 58.1%, а nd taking into account sales to the MMK Group's subsidiary traders, 91.8% (see Table 2). The proportion of OJSC MMK's assets in the total MMK Group's assets was 87.3% as at the end of Q1 2007. It is obvious that OJSC MMK's results have a decisive effect on the results of the Group as a whole.

The income structure of the MMK Group, compared to the same period of last year, has changed   as follows: 1) proceedings from sales through the Group' s traders increased by59.2%; 2) revenues of the MMK Group' s subsidiaries grew by72.7%. This was mainly due to the growth of sales by such companies as OJSC MMK-METIZ (an increase of USD 46.5 m , or 55%, to USD 103.2 m ), ZAO Stroityelny Komplex (an increase of USD 4.3 m , or 66.5%, to USD 10.7 m ), and also to the inclusion in the revenues of the MMK Group's other companies of revenues generated by OOO Bakalskoye Rudoupravlenie (Bakal Mining Administration) (a growth of USD 6.4 m ).

In the 1st quarter of 2007 OJSC MMK produced 3,145,000 tonnes of crude steel and sold 2,930,000 tonnes of commercial products, a year-on-year increase of 8.9% and 11.7%, respectively. The growth of the production levels and sales has been possible thanks to the expansion of the Company's production capacities.

The average price of 1 ton of steel products sold by OJSC MMK in Q1 2007 was USD 536, that is, USD 106, or 24.7%, up on Q1 2006.
The income structure of the MMK Group, compared to the same period of last year, has changed   as follows: 1) proceedings from sales through the Group' s traders increased by59.2%; 2) revenues of the MMK Group' s subsidiaries grew by72.7%. This was mainly due to the growth of sales by such companies as OJSC MMK-METIZ (an increase of USD 46.5 m , or 55%, to USD 103.2 m ), ZAO Stroityelny Komplex (an increase of USD 4.3 m , or 66.5%, to USD 10.7 m ), and also to the inclusion in the revenues of the MMK Group's other companies of revenues generated by OOO Bakalskoye Rudoupravlenie (Bakal Mining Administration) (a growth of USD 6.4 m ).

In the 1st quarter of 2007 OJSC MMK produced 3,145,000 tonnes of crude steel and sold 2,930,000 tonnes of commercial products, a year-on-year increase of 8.9% and 11.7%, respectively. The growth of the production levels and sales has been possible thanks to the expansion of the Company's production capacities.

The average price of 1 ton of steel products sold by OJSC MMK in Q1 2007 was USD 536, that is, USD 106, or 24.7%, up on Q1 2006.
Changes in costs were mainly attributable to increased levels of production and growth of average purchasing prices for main raw materials.

The Q1 2007 selling and distribution expenses have grown faster (by USD 50 m , or 61.7%) that other items mainly because of the increased costs of transporting greater quantities of products shipped to the MMK Group's captive traders (an increase of USD 39.3 m , or 66.8%).

Administrative expenses have grown within the inflation rate.

Social costs have gone up because of increased welfare costs, plus costs of USD 7 m allocated for the construction of the Metallurg Ice Arena.

The Q1 2007 operating income has grown 53.8% year-on-year, with the operating margin standing at 24.3% (24.0% in Q1 2006).

The Q1 2007 earnings before tax and minority interest and net income has grown faster than the operating income because of reduced financial income. The exchange gain has been recorded at USD 21 m against USD 47 m in Q1 2006.

EBITDA has grown 50.9% to USD 507 m . The EBITDA /tonne of steel was USD 161, which is USD 45, or 38.8%, higher than the USD 116 level for Q1 2006. EBITDA margin amounted to 27.5% remaining at a high level.
The operating cash flow generated by the Group (which in Q1 2007 amounted to USD 436 m – see Table 5) is sufficient to ensure stable operations of all of the Group's companies and implement a large-scale investment program.

The cash flow from the change in working capital amounted USD 14 m .

The Q1 2007 expenditure on fixed and intangible assets amounted USD 179 m .

In Q1 2007 OJSC MMK paid dividends in the amount of USD 330 m ( exclusive of dividends on treasury stock). More detailed information you will find on the official web-site - http://www.mmk.ru/eng/press/news/article.wbp?article-id=42C4160A-AC10-1016-0145-20EBC33CA34A