MMK: Results of consolidated financial statements for 9M of 2007

Open Joint Stock Company Magnitogorsk Iron and Steel Works, one of the leading Russian integrated steel making companies, announces the results of its consolidated financial statements for the nine months of 2007 according to US GAAP.  

·         The revenue of MMK Group in the nine months of 2007 increased by 32.31% compared to the nine months of 2006 and amounted to USD   6 150 million.

·          The operating income reached 1 626 million or 26.44% of the revenue.  The growth compared to the nine months of 2006 amounted to 24.88%.

·         The 2007 9 months' consolidated net income of the Company increased by 30.31% against the same period of last year and amounted to USD 1 393 million, i.e. USD 0.13 per share.   The net income accounted for 22.65 % of the revenue. 

·         EBITDA for the nine months of 2007 reached USD 1 821 million or 29.61% of the  revenue. Compared with the nine months of 2006 EBIDTA of the Company grew by USD 374 million or 25.85%.  

* Earnings Before Interests, Tax, Depreciation and Amortization = Income from operating activities + Depreciation and Amortization + Loss on disposal of property, plant and equipment

The main company of the Group is OJSC Magnitogorsk Iron and Steel Works. The share of  OJSC MMK’s sales to third parties accounts for  57.89% of the gross revenue of the Group and together with the sales of MMK Group steel traders, for 90.08% (see table 2). It is obvious that the operating results of OJSC MMK have a determining influence on the financial results of the Group. 

 

The following changes occurred in the revenue structure of MMK Group compared with the similar period of the last year: 1) the revenue of OJSC MMK,  the parent company of the Group, in the consolidated sales  increased by  33.4% due to the growth of  steel prices and steel shipments to the domestic and CIS markets; 2) the  growth of the revenue from the increased export  sales of steel products through the Group steel traders stood at 22.4%; 3) the revenue of MMK Group subsidiaries increased by 68.5%. In particular, the revenue of MMK-Metiz grew by USD 157 million, the revenue of  ZAO Stroitelny Complex, by USD 23 million,  and the revenue of MMK-Profil-Moscow, by USD 25 million. The revenue of Bakalskoye Rudoupravlenie in the amount of USD 23 million is included in the Group revenue.

In the nine months of 2007 OJSC Magnitogorsk Iron and Steel Works produced 9 934 thousand tons and sold 9 071 thousand  tons of commercial steel products, which is respectively 8.1% and 8.6 % more than in the same period of 2006. Increase in production and sales volumes is accounted for by the expansion of the company’s production facilities.

The average price of 1 ton of steel products sold by OJSC MMK during the nine months of 2007 amounted to USD  586, which is USD 101 or 20.7% higher than in the same period of 2006.

 

The growth of the consolidated revenue compared with last year was prompted by increased production and sales of all types of steel products, in particular:

·         Increase in sales of slabs and billets. This increase was due to the expansion of the Company's steel making facilities and the resulting increased production of commercial slabs and billets.

·         Increase in sales of long products and their share in the total revenue thanks to the start-up of new state-of-the-art section mills.  

·         Growth of the revenue from sales of flat and downstream products;

·         Increase in the sales of other products and services by the companies of the Group.