LSR Group (“LSR” or the “Group”) one of the leading real estate developers and building materials producers in St. Petersburg and the Leningrad region (LSE: LSRG, MICEX, RTS: LSRG), announced today that as part of Group’s strategy and investment programme, it approved a contract for the construction of a new brick factory in the Kirovsky District, Leningrad Region. The total cost of the project is expected to be around Euro 95 million, to be financed through loans as well as proceeds from the recent IPO of the Group.

Following a tender, ZAO Kompakt was chosen as general contractor on this project and will undertake the full design and construction of the plant. OJSC Pobeda LSR, a fully owned subsidiary of LSR Group and a leading brick manufacturer in Russia will lead the project.

The construction work will be undertaken in three stages over a total of 34.5 months to ensure a gradual launch of the production facilities. The first production line is expected to be completed by 2010 with a capacity of 120 million of building bricks a year, followed by the launch of the facing brick line with a capacity of 75 million bricks, with further lines to be launched to reach a total plant capacity of 220 million units a year.

Commenting on the announcement, Mr. Levit, CEO and member of the Board of Directors of LSR Group, said:

“We are witnessing an increasing demand for building materials, particularly bricks, driven by the growing construction volumes in the region and a rapid development of the regional property segment. The new plant will help to meet the demand for this building material, further strengthening the Group’s revenue streams.”

It may be noted that early this year LSR Group has also entered into a contract for the supply of equipment with CERIC international industrial group (contract amount of around ?71 million). The 220 million unit plant is to be started up by LSR Group in 2010. The total project investment volume is $280 million.

According to the Russian research and consulting company Resheniye, the size of the ceramic brick market in St. Petersburg and the Leningrad Region increased from  356 million units in 2006 to over 390 million units in 2007.

Notes to Editors:

OJSC LSR Group is a diversified construction company founded in 1993 and operating in a number of complementary market segments. Its core business areas are building materials, construction and real estate development. The Group includes enterprises for extraction and processing of aggregates,  production and transportation of building materials, and housing construction – from mass market large-panel housing to elite property built after designs made by leading domestic and foreign architects. 

LSR Group has operations and offices in a number of cities in the Leningrad Oblast, in St. Petersburg, Moscow, Yekaterinburg, Lithuania, Latvia, Estonia, Ukraine and Germany.

LSR Group employs over 15,000 people. In 2005 and 2006 the revenues of LSR Group (according to IFRS statements) were RUB 13,085.5 million and RUB 21,110.8 million respectively. For the six months of 2007 the Group’s revenues amounted to RUB 16,062.0 million compared to RUB 9,336.4 million for the same period last year.

In July 2007, Moody’s Investors Service assigned a B1 rating to LSR Group; outlook – stable. In November 2007, OJSC LSR Group implemented an IPO. In December 2007, LSR Group was bestowed a National Award in the field of business as ‘The Company of the Year’ in the ‘Construction’ category.

OJSC Pobeda LSR (a fully owned subsidiary of LSR Group) is the major ceramic brick manufacturer in Russia with a total production capacity of 290 million standard units a year. It comprises three brick factories in St. Petersburg and the Leningrad Region – Keramika, Lenstroikeramika and Pobeda. It produces all types of building and facing ceramic bricks as well as RAUF large-format porous bricks. The company has been expanding its own retail chain known as the Brick Centre since 2005. It has its own raw materials resources of Cambrian blue clay quarries at Krasny Bor and Lenstroikeramika-Kariyer. The company has a regional representative office in Moscow. 

ZAO Kompakt is a well established contractor and offers a broad  range of services such as turnkey construction projects, main repairs and renovations, engineering services, design work and building materials production.  Since its foundation in 1992, the company has taken part in the construction of a number of large-scale industrial and civil engineering projects including, in particular, the St. Petersburg Flood Protection Barrier (the Dam), Baltiysky Zavod, Sufflet-St.Petersburg and Avangard-Solod (Moscow Region) malting plants, AssiDoman Packaging AB  packaging materials factory in Vsevolozhsk, Ford car factory, Gillette production and warehouse facilities,  Pulkovo-2 international airport complex and Pulkovo Cargo Terminal, a number of facilities for the RF Central Bank in St. Petersburg etc.