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OAO Severstal (SVST)

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Monday 02 July, 2007

OAO Severstal

1st Quarter Results

OAO Severstal
02 July 2007


For Immediate Release

2 July 2007

                  Strong first quarter results from Severstal

Financial Results for the three months ended 31 March, 2007

($ million unless otherwise stated)

                                Q1 2006      Q1 2007            Change Q1y-o-Q1y

Revenue                          2,725        3,677                       34.9%
Profit from operations             415          635                       53.0%
EBITDA1                            644          921                       43.0%
Net profit2                        217          396                       82.5%
EPS, $                            0.24         0.39                       62.5%


1 EBITDA represents profit from operations plus depreciation and amortisation,
  and gain (loss) on disposals of property plant and equipment

2 Net profit attributable to shareholders

OAO Severstal (LSE: SVST; RTS: CHMF), today reports first quarter results
reflecting a significant improvement compared with the same period last year and
a continuation of positive Q4 trends.

Q1 2007 Highlights:

   •Strong year-on-year growth

       •Favourable prices across all geographies and markets

       •Increases in raw materials, energy and labour costs passed on to

       •2006 investment programme yielding good returns

   •A record $3,677 million in revenues, up 34.9% compared with Q1 2006

   •Strong EBITDA growth at $921 million in Q1 2007, up 43% from $644 million
    in Q1 2006

       •Improved efficiency, better product mix and cost control added around
        $100m to EBITDA compared to Q1 2006
   •Net profit up 82.5% to $396 million for Q1 2007 from $217 million in Q1
       •Strong Russian domestic market for steel and iron ore products

       •Steel prices in Russia and Europe demonstrating sustainable growth

       •Strong performance in the mining business: EBITDA up 50.0%

       •Significant improvement in Lucchini

   •Q1 investment programme of $267 million in line with budget and forecast

   •Continuation of the positive trends seen in Q4 2006

Alexei Mordashov, CEO of OAO Severstal, said, 'I am pleased to report that
Severstal has made a positive start to the new financial year with continued
growth. We are building successfully on the changes we made last year to provide
us with a strong platform for the future.'

Chief Executive's Review

Compared with the same period last year, this quarter demonstrates improved
trends in the key areas of our business.

Russian Steel continued the good performance of Q4 2006 with an excellent first
quarter showing a 52.7% increase in EBITDA compared with the same period last
year. Prices continue to be strong in both Russian and export markets and there
has also been a significant improvement in volumes compared to Q1 2006.

Severstal's Mining business has also had an exceptional first quarter both
compared to Q1 2006 and Q4 2006: EBITDA was up by some 50.0% compared with the
same period last year and by 42.7% compared with Q4 2006. Prices are up on
average by 14% with a similar growth in volumes.

Severstal's overseas business each produced improving EBITDA margins for Q1 2007
over Q4 2006.

Severstal North America reported a nearly 6.3% improvement in EBITDA compared
with Q4 2006. Lucchini's EBITDA for the first quarter is up nearly 39.8%
compared with the same period last year as a result of higher prices and
volumes, and favourable raw materials prices.

                            Q1 2007 Financial Summary

Severstal's consolidated revenues increased by 34.9% to $3,677 million in Q1
2007 from $2,725 million in Q1 2006, attributable to a stable price environment
in all geographies and product mix improvements.

Consolidated cost of sales were $2,611 million in Q1 2007, compared with
$1,977 million in Q1 2006. Cost of revenues as a percentage of consolidated
revenues decreased to 71.0% (Q1 2007), from 72.6% in Q1 2006. The primary
drivers behind this change were higher growing raw material, energy and labour

Gross profit has grown by 42.6% from $748 million in Q1 2006 to $1,067 million
in Q1 2007.

In the first quarter of 2007, revenues from non-Russian sales amounted to $2,253
million, or 61.3% of total sales. The comparable figure for the first quarter of
2006 was $1,842 million, or 67.6% of total sales.

Profit from operations increased by 53.0% to $635 million in Q1 2007 from $415
million in Q1 2006. This increase was largely due to buoyant steel prices trend.
Group operating margin went up to 17.3% in Q1 2007 from 15.2% in Q1 2006.

Consolidated EBITDA increased by 43.0% from $644 million in Q1 2006 to $921
million in Q1 2007. This growth is mainly attributable to the strong financial
performance of Russian Steel, and our Mining and Lucchini businesses, and the
continuing stabilisation of steel prices in all markets.

Primary drivers of this increase were sales volumes of hot-rolled strip and
plate, long products and metalware products, which rose by 28.0%, 70.9% and
90.4% respectively. Average sales prices for coal and coking coal concentrates
went up by 17.4%, by 39.7% for long products, and by 24.6% for metalware

Income tax charges for Q1 2007 were $168 million compared with $123 million in
Q1 2006.

In Q1 2007, Severstal reported consolidated net profit attributable to
shareholders of
$396 million compared with $217 million in Q1 2006.

EPS for the first quarter of 2007 amounted to $0.39, $0.15 higher than for the
first quarter of 2006.

Net debt, calculated as the difference between financial debt and cash and cash
equivalents plus short-term bank deposits, decreased for the three months ended
March 31, 2007 from $155 million to a cash surplus of $174 million. Increase in
total indebtedness from $3,002 million to $3,008 million was offset by an
increase in cash, cash equivalents and short-term bank deposits from $2,847
million to $3,182 million. This increase is mainly attributable to the results
of operating activities.

A dividend for Q1 2007 of 2.6 Rubles ($0.10) per share (one GDR represents one
underlying ordinary share) has been approved by the EGM held in Cherepovets on
June 29 .

For further information:


Dmitry Druzhinin, Investor Relations
Olga Antonova, Public Relations
+7 495 540 7766

Tulchan Communications
Dominic Fry/Tom Murray
+44 207 353 4200

Severstal will be holding a conference call for analysts and investors at 5 pm
Moscow Time on Monday 2 July 2007. Dial-in details are:

Time: 5pm (Moscow Time) , 2pm (London Time), 9am (East Coast Time)

Russia dial-in: 8108 0021 651 012

UK dial-in:      0800 953 1444

US dial-in:      1866 220 1452

International dial-in for other countries: +44 (0) 1452 542 300

Participant code: 6053996

You can find 1Q 2007 financial statements and presentation on the website:

                      This information is provided by RNS
            The company news service from the London Stock Exchange