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Evraz Group reports ZSMK full year 2004 results

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Evraz Group reports ZSMK full year 2004 results

Moscow, July 19, 2005 – Evraz Group S.A. (LSE: EVR), one of the leading vertically integrated steel production and mining businesses with operations mainly in Russia, today announces audited financial results for West Siberian Iron and Steel Plant (“ZapSib”, RTS: ZSMK) for the year ended 31 December 2004. The results were prepared in accordance with International Financial Reporting Standards (IFRS).

FY2004

FY2003

Change,
Y-on-Y, %

Revenues, US$ thousand
1,942,484

1,023,230

89.8

Operating profit, US$ thousand
588,784

143,471

310.4

Operating margin, %
30.3

14.0

Adjusted EBITDA , US$ thousand
657,158

221,469

196.7

EBITDA margin, %
33.8

21.6

Net income, US$ thousand
381,972

100,742

279.2

Net income margin, %
19.7

9.8


Commenting on the results, Alexander Frolov, Managing Director Corporate of Evraz Group, said:

“Zapsib achieved rapid growth in revenues and profitability in 2004. As a result of tight control over costs of production ZapSib’s operating profit quadrupled and operating margin reached 30.3%. In 2004, we started a major upgrade of Zapsib’s production facilities and, looking forward, we see 2005 as a year of continued intensive investment into efficiency-driven modernisation”.


Results of operations

Net revenue rose 89.8% to US$1,942 million in 2004 from US$1,023 million in 2003. This revenue growth was driven by improved prices for Zapsib’s steel products in its key markets, despite a slight production output decrease resulting from the planned reconstruction of a blast furnace.

Product
2004
(‘000 tonnes)
2003
(‘000 tonnes)
Change, Y-o-Y, %
Coke
3,383
3,410
-0.8
Pig iron
4,558
4,897
-6.9
Steel
5,603
5,931
-5.5
Rolled products
4,903
5,317
-6.2


ZapSib generated operating profit of US$588.8 million, a 310.4% increase over the 2003 figure of US$143.5 million. This translates into an increase in the operating profit margin to 30.3% from 14.0% in 2003. The main drivers of this increase in profitability were higher revenues and continued focus on cost reduction. In May 2004, ZapSib re-commissioned a blast furnace, reducing the risk of production interruptions and enabling better utilization of existing oxygen converter facilities.

In 2004, Adjusted EBITDA was US$657.2 million, 196.7% higher than the 2003 figure of US$221.5 million. This translates into an increase in the EBITDA margin to 33.8% from 21.6% in 2003.

Net income reached US$382.0 million, compared to US$100.7 million in 2003.

Financial position

Last year, as part of Evraz’s strategy of further vertical intergration and expansion of its mining segment Zapsib spent US$74.0 million to acquire 33.40% of Kachkanarsky Ore Mining and Processing Enterprise “Vanadiy” (“KGOK”). Subsequently ZapSib acquired an additional 6.55% ownership interest for US$14.9 million. ZapSib’s share in profits of KGOK amounting to US$18.0 million was included into its consolidated income statement.

In 2004, payments for property, plant and equipment amounted to US$120.1 million.

During the year, Zapsib repaid its liabilities under the Settlement Agreement ahead of schedule, except for the amounts of US$90.1 million payable to NKMK. Payments under the Settlement Agreement amounted to US$59.4 million.

As of December 31, 2004 total debt (short-term and long-term loans and borrowings) was US$140.4 million. Cash and cash equivalents amounted to US$21.9 million.

As of December 31, 2004 total assets amounted to US$1.118 billion compared to US$625 million as of December 31, 2003.


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For further information:

Evraz Group
Corporate Affairs and Communications
Irina Kibina
Alexander Karlashov
Tel: +7 095 234 4629
IR@eam.ru

Merlin
Michael Rummel
Lachlan Johnston
Peter Otero
Maria Suleymanova
Tel: +44 207 653 6620
msuleymanova@merlinpr.com