MMK Announces Operational Trading Update Q1 2008 Results under Russian Accounting Standards

· Revenue increased by 21% to RUR 52,3 bln (RUR 43,1 bln in 1Q2007)
· Operating income on the level of RUR  11,6 bln (RUR 11,7 bln in 1Q2007)
· Net income (net of the effect of financial investments revaluation) grew by 2% to RUR 8,5 bln (RUR 8,4 bln in 1Q2007)

· Crude steel production up 14% to 3.6m tons compared to 1Q07
· Commercial steel products output increased 12% to 3.3 m tons (1Q2008 to 1Q2007)
· A rise in product prices across the board compared to the end of 2007, including 22% for flat rolled products and 23% for long products
· Domestic demand and global industry dynamics to drive further price increases in Q2

Commenting on the first quarter results, Victor Rashnikov, Chairman of MMK’s Board of Directors said:
“In the first quarter of 2008 we have shown strong positive financial and operational results. These achievements were a result of the company’s focus on high value added products, our strong position in the growing domestic market and continuing significant investments in advanced technology and equipment.
Already this year we have made further significant steps toward resource self-sufficiency through our strategic partnership with coal producer Belon and the development of Prioskolsky iron ore deposit. Against a background of record steel prices and with a strong outlook for the demand for our products in domestic and export markets, we look forward with confidence to the year ahead."

 

1. Production
Major products output

 

 

 

 

 

  In 1Q2008 MMK produced 3,598 thousand tons of steel and 3,287 thousand tons of commercial steel products. Company continued increasing production volumes, having grown 8,1% in steel and 5,8% in commercial products compared to 4Q2007.
  Enhanced output of billets by 42 thousand tons is due to increases steel making capacities. Long products output also grew by 81 thousand tons on the background of increased demand in 1Q2008 compared to the end of the previous year. Scheduled revamping of production facilities in the end of 2007 boosted hot-rolling and cold-rolling capacities. Production of tin plate and galvanized steel followed the demand curve for these product types.

  2. Average prices (FCA)

  The prices are indicative and do not consider either steel grade and quality characteristics or sales markets. Average prices calculation is based on division of revenue by volume.

Steel markets entered new growth phase in 2008. Increase of average prices in the beginning of 2008 is conditioned mostly be strengthening selling prices in all the markets of MMK. It is also because of geographical sales shift with bias towards domestic market which historically enjoys higher prices.
Slight decrease of galvanized steel average price in 1Q2008 compared to 4Q2007 is due to seasonal slow down in construction during this period.