OREANDA-NEWS. November 24, 2010. METALLOINVEST, one of Russia’s leading steel and mining holding companies (“Holding”), announced its audited consolidated IFRS financial results for the first six months ended June 30, 2010.

First Half 2010 Financial Highlights

- Consolidated revenues up 43% year on year to RUB 99.9 billion

- EBITDA up 292% year on year to RUB 36.5 billion

- EBITDA margin up 173% year on year to 37%

- Net income up 47% year on year to RUB 15.6 billion

Eduard Potapov, Chief Executive Officer of METALLOINVEST, commented: “All our divisions have demonstrated positive financial performance due to efficient and timely anti-crisis measures implemented at the end of 2008 and in 2009. These measures allowed us to significantly reduce our production costs through optimization of production processes, cost-cutting and introduction of energy saving technologies.”

First Half 2010 Operating Highlights 

- Iron ore production up 141% year on year to 17.1 million tonnes

- Pellet production up 33% year on year to 8.9 million tonnes

- Hot-briquetted iron (HBI) production  totalled 1.2 million tonnes – in line with the same period of 2009

- Steel production largely unchanged at the level of 3.1 million tonnes

Eduard Potapov noted: “This year we have been focusing on two key objectives – increasing production volumes to the pre-crisis levels and establishing stable basis for further development. We are well on track to reach these goals thanks to our active sales policy and favorable market conditions.

We are purchasing new mining and processing equipment for our plants and upgrading our steel production facilities to increase output at the fastest pace and ensure full utilization of our capacities. We are looking to expand our investment activities to enable further development of our companies and ensure increased production of high added-value products. We are planning to double output of HBI in the next five years. We also intend to expand pellet production capacities at our Mikhailovsky Mining and Processing Plant (Mikhailovsky GOK).

According to our forecasts, full year 2010 will see a 20% year on year growth in iron ore concentrate production volumes, while pellet production volumes are expected to increase by 14% year on year.”

Debt Portfolio Optimization

Net debt down 29% (compared to January 1, 2010 levels) to RUB 137.9 million (according to the Russia’s Central Bank exchange rate as at November 1, 2010)

Weighted average interest rate down 1.3% (compared to the beginning of 2009) to 6.5%

Pavel Mitrofanov, Deputy Chief Executive Officer and Chief Financial Officer of METALLOINVEST, noted: “Significant improvements in our operating and financial performance, along with measures aimed at optimizing our debt portfolio, allowed us to noticeably reduce the Holding’s borrowing levels. As at October 1, 2010, over 73% of our debt is not due for repayment in the next twelve months. We would like to note that METALLOINVEST was one of the first Russian companies to return state guarantees provided to support the VTB Bank’s credit line. The state guarantees were returned to Russia’s Ministry of Finance on October 12, 2010 following the repayment of over 99% of the line which amounted to a maximum limit of RUB 61 billion.”

Social Responsibilities

METALLOINVEST is committed to fulfilling social responsibilities with regards to its employees. During the economic downturn, METALLOINVEST managed to avoid significant headcount cuts and retain basic social guarantees, including social support of motherhood, pensioners, as well as children’s recreation programmes. Following an increase in average salary levels in the summer of 2010, METALLOINVEST employees’ wages went up by 12% compared to the pre-crises levels of 2008.

Major Recent Developments

- Hamriyah Steel Plant was put into operation in the United Arab Emirates in the second quarter of 2010. The plant is involved in production of reinforcement and is sourced with billets supplied from Russia (Oskol Elektrometallurgical Plant, Urals Steel plant). Total investments in the project amounted to approximately USD 150 million

- In August 2010, Moody’s Investors Service rating agency assigned the Holding a Ba3 corporate family rating and a Ba3 Probability of Default Rating, as well as an Aa3.ru national scale rating with a stable outlook

- In September 2010, International Mining Consultants (IMC) agency confirmed an increase in the METALLOINVEST’s iron ore reserves from 13.8 billion tonnes to14.9 billion tonnes ( plus7.5%), according to JORC classification. METALLOINVEST is self-sufficient in iron ore for 160 years of continuous activities at current production levels

- Finalizing line of the rolling mill 350 at the Oskol Elektrometallurgical Plant has been prepared for launch. The line is expected to produce 300 thousand tonnes of high quality steel products per year. The product offering will enable OEMK to compete with its international peers in the European markets and become an exclusive supplier of a number of high quality steel grades to customers in Russia and the CIS.