OREANDA-NEWS. OJSC Novolipetsk Steel (NLMK) (LSE: NLMK) today announces Q2 2007 Russian Accounting Standards (RAS) financial results for its major companies. Click go to http://www.nlmksteel.com/upload/RAS%20financials/RAS%20Q2%202007%20%20_ENG_.pdfto to see the full text of the press-release.

Q2 2007 RAS Financial Results for NLMK Group’s major companies
OJSC Novolipetsk Steel (NLMK) (LSE: NLMK) today announces Q2 2007 Russian Accounting Standards (RAS) financial results for its major companies. The filing of RAS accounting results is a Russian regulatory requirement. In addition, NLMK has been preparing financial reports in accordance with the US GAAP accounting standards since 1998. RAS accounting results differ materially from US GAAP accounting results and are not comparable to financial statements prepared in accordance with US GAAP. The RAS accounting results of NLMK Group’s major companies are not indicative of the financial condition or results of these entities under US GAAP. Reference should be made only to consolidated financial statements prepared in accordance with US GAAP for information with respect to NLMK Group’s financial condition and results of operations.

NLMK’s financial results improved in Q2 2007 compared to Q1 2007 due to strong pricing environment
Average steel prices in Q2 2007 were higher than the level of Q1 2007 and Q2 2006. This was the primary factor contributing to the increase of sales revenue during the reporting period. The profit increase in Q2 2007 compared to the previous quarter is also attributable to price increases for iron ore raw materials, coking coal concentrate and energy, which were fixed until the end of the year, as well as the strong pricing environment. The gross profit and net income in Q2 2007 increased by 15.7% and 11.8% respectively in comparison with Q1 2007.

The substantial price increase of basic raw materials in Q2 2007 compared to Q2 2006 resulted in growing costs of goods sold at the main production site in Lipetsk and corresponding slight lowering of financial results compared to Q2 2006. The growth of cost of goods sold was primarily caused by the price increase of iron ore raw materials which are mostly supplied by Stoilensky GOK.


Sustainable growth of financial results at VIZ-Stal
VIZ-Stal sales revenue in Q2 2007 compared to Q1 2007 went up by RUR 614.2 mln (+14.7%) due to growing sales volume as well as price increase on grain- and non-grain-oriented steel in May. The sales revenue growth in Q2 2007 of RUR 1.1 bln (+29.2%) compared to Q2 2006 is primarily attributable to the strong pricing environment and increased sales volumes.

Stoilensky GOK demonstrates growth of financial results compared to Q2 2006
The sales revenue at Stoilensky GOK in Q2 2007 compared to Q2 2006 increased by RUR 2.1 bln (+65.1%) due to a strong pricing environment and growth of sales volumes.
The price increase of iron ore raw materials resulted in gross profit and operating profit growth in Q2 2007 compared to Q2 2006 by 105.8% and 115.3% respectively.
The financial results slightly deteriorated compared to the previous quarter due to the reduction of iron ore raw materials supply from Stoilensky GOK to the main production site in Lipetsk at the stable price level. The reduction was caused by temporary underperformance of the blast furnace №6.

Substantial increase of financial results at Altai-koks
The financial results increase in Q2 2007 compared to the previous quarter is primarily attributable to favorable market conditions and the growth of coke sales volumes. The growth of Altai-koks financial results in Q2 2007 compared to Q2 2006 primarily resulted from putting into operation new coke battery №5 at the end of last year.

Slight decrease of financial results at OJSC “TMTP”
The financial results at OJSC “TMTP” decreased in Q2 2007 compared to Q1 2007 and Q2 2006. The decrease of financial results is primarily attributable towards the drop in USD/RUB exchange rate. The USD/RUR exchange rate fluctuations have a substantial impact on sea port financial results because freight turnover tariffs are regulated by the Russian governmental agencies and  fixed in US dollars. The additional factor contributing to the decrease of financial results is a declining dry freight turnover due to labor disputes between employees and sea port administration.

Financial results increase at OJSC “NTK”
The growing volume of logistics and transportation services in Q2 2007 compared to Q2 2006 resulted in improved financial results. The additional factor contributing to favorable financial performance is the utilization of company owned railcars since September 2006. This approach enabled OJSC “NTK” to cut railcars usage fees paid to “Russian Railways” and thus decrease transportation costs. The stable financial results in Q2 2007 compared to the previous quarter are primarily attributable towards additional costs caused by scheduled maintenance of company owned railcars during the reporting period.