??? Magnitogorsk Iron and Steel Works, one of the leading integrated metallurgical companies,  announces consolidated financial statements for the 1st Quarter of 2007, reported in accordance with generally accepted accounting rinciples in US (US GAAP).

1.Financial Results

·  The OJSC MMK Group's gross revenue in the 1^st Q of 2007 has grown 51.7% against the 1 ^st Q 2006 figures totaling USD 1.845 billion.

·  The operating income has gone up to USD 449 million, a 53.8% growth on the 1 ^st Q of 2006, accounting for 24.3% of the gross revenue.

·  OJSC MMK's 2007 Q1 net income has grown 41.1% on the 2006 Q1 amounting to USD 350 million, or USD 0.034 per share, with the net income accounting for 19.0% of the revenue.

·  The 2007 Q1 EBITDA has reached USD 507 million, or 27.5% of the revenue. This represents an increase of USD 171 million, or 50.9%, on the 2006 Q1.

MMK Group's Income Statement                                                                                 (Table 1)

		Q1,USD million		Change Y-O-Y
		2007	2006	USD m	%
Gross revenue		1,845	1,216	629	51 .7%
Income from operating activities		449	292	157	53 .8%
% of revenue		24 .3%	24 .0%
Income before tax and minority interest		471	341	130	38 .1%
% of revenue		25 .5%	28 .0%
Net income		350	248	102	41 .1%
% of revenue		19 .0%	20 .4%
Comprehensiveincome		406	248	158	63 .7%
% of revenue		22 .0%	20 .4%
EBITDA*		507	336	171	50 .9%
% of revenue		27 .5%	27 .6%
Basic and fully diluted earnings per common share (USD)		0,034	0,024	0,01	41,7%

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

The core company of the MMK Group is the Magnitogorsk Iron and Steel Works Open Joint Stock Company (OJSC MMK). The share of OJSC MMK's sales to third parties in the Group's total revenue is 58.1%,?nd taking into account sales to the MMK Group's subsidiary traders, 91.8% (see Table 2). The proportion of OJSC MMK's assets in the total MMK Group's assets was 87.3% as at the end of Q1 2007. It is obvious that OJSC MMK's results have a decisive effect on the results of the Group as a whole.

  MMK Group Sales to Third Parties                                                                                       (Table 2)

		Q1,USD m		Change Y-O-Y
		2007	2006	YSD m	%
Revenue of OJSC «???»		1,072	738	334	45.3%
% of the Group's revenue		58 . 1%	60 . 7%
Revenue of the MMK Group's traders		621	390	231	59.2%
% of the Group's revenue		33 . 7%	32 . 1%
Revenue of the Group's other companies		152	88	64	72.7%
% of the Group's revenue		8 . 2%	7 . 2%
Group's gross revenue		1 ,845	1 ,216	629	51 .7%

The income structure of the MMK Group, compared to the same period of last year, has changed  as follows: 1) proceedings from sales through the Group's traders increased by 59.2%; 2) revenues of the MMK Group's subsidiaries grew by 72.7%. This was mainly due to the growth of sales by such companies as OJSC MMK-METIZ (an increase of USD 46.5 m, or 55%, to USD 103.2 m), ZAO Stroityelny Komplex (an increase of USD 4.3 m, or 66.5%, to USD 10.7 m), and also to the inclusion in the revenues of the MMK Group's other companies of revenues generated by OOO Bakalskoye Rudoupravlenie (Bakal Mining Administration) (a growth of USD 6.4 m).

In the 1^st quarter of 2007 OJSC MMK produced 3,145,000 tonnes of crude steel and sold 2,930,000 tonnes of commercial products, a year-on-year increase of 8.9% and 11.7%, respectively. The growth of the production levels and sales has been possible thanks to the expansion of the Company's production capacities.

The average price of 1 ton of steel products sold by OJSC MMK in Q1 2007 was USD 536, that is, USD 106, or 24.7%, up on Q1 2006.

MMK Group Sales By Product                                                                                      (Table 3)

		Q1, USD m		Change Y-O-Y
		2007	2006	USD m	%
Billets and Slabs		67	1	66	?67
% of revenue		3 . 6%	0 . 1%
Flat-rolled products		1,047	676	371	54.9%
% of revenue		56 . 7%	55 . 6%
Long products		191	110	81	73.6%
% of revenue		10 . 4%	9 . 0%
Downstream products		417	337	80	23.7%
% of revenue		22 . 6%	27 . 7%
Other products and services		123	92	31	33.7%
% of revenue		6 . 7%	7 . 6%
Total revenue		1 ,845	1 ,216	629	51 .7%

The growth of consolidated revenues compared to last year's results has been driven by the growth of production levels and sales and changes in the sales structure, such as:

·  increased sales of slabs and billets due to the expansion of MMK's steel smelting capacity which has grown faster than the downstream processing capacity;

·  increased sales of long products and their greater share in the total revenues;

·  increased revenues from sales of flat and downstream products; and

·  increased sales of other products and services by the Group's companies.

MMK Group's Operating Expenses                                                                                    (Table 4)

		Q1, USD m		Change Y-O-Y
		2007	2006	USD m,	%
Cost of products sold (exclusive of amortization and depreciation)		1,110	723	387	53.5%
Amortization and depreciation		49	42	7	16.7%
Selling and distribution expenses		131	81	50	61.7%
Administrative expenses		64	59	5	8.5%
Social costs		19	13	6	46.2%
Taxes other than income taxes		19	8	11	137.5%
Other operating losses and incomes *		4	(2)	2

* Other operating income and losses include Loss on disposal of property, plant and equipment + Other operating incomes and losses

Changes in costs were mainly attributable to increased levels of production and growth of average purchasing prices for main raw materials.

The Q1 2007 selling and distribution expenses have grown faster (by USD50 m, or 61.7%) that other items mainly because of the increased costs of transporting greater quantities of products shipped to the MMK Group's captive traders (an increase of USD39.3 m, or 66.8%).

Administrative expenses have grown within the inflation rate.

Social costs have gone up because of increased welfare costs, plus costs of USD7 mallocated for the construction of the Metallurg Ice Arena.

The Q1 2007 operating income has grown 53.8% year-on-year, with the operating margin standing at 24.3% (24.0% in Q1 2006).

The Q1 2007 earnings before tax and minority interest and net income has grown faster than the operating income because of reduced financial income. The exchange gain has been recorded at USD21 magainst USD47 min Q1 2006.

EBITDA has grown 50.9% to USD507 m. The EBITDA /tonne of steel was USD 161, which is USD 45, or 38.8%, higher than the USD 116 level for Q1 2006. EBITDA margin amounted to 27.5% remaining at a high level.

MMK Group's Free Cash Flow                                                                          (Table 5)

		Q1, USD m		Change Y-O-Y USD m,
					%
		2007	2006
Fundsfromoperations*		422	303	119
Changeinworkingcapital		14	-119	105
Net cash provided by operating activities		436	184	252
CAPEX		-179	-152	-27
Free cash flow		257	32	225

*Funds from operations =Cash provided by operating activitiesbeforeChange in working capital

The operating cash flow generated by the Group (which in Q1 2007 amounted to USD436 m– see Table 5) is sufficient to ensure stable operations of all of the Group's companies and implement a large-scale investment program.

The cash flow from the change in working capital amounted USD14 m.

The Q1 2007 expenditure on fixed and intangible assets amounted USD179 m.

In Q1 2007 OJSC MMK paid dividends in the amount of USD330 m( exclusive of dividends on treasury stock).

2. Financial Position

MMK Group's Balance Sheet, USD m               (Table  6)

	31.03.2007	31.12.2006
Total current assets, including	2,389	2,480
Cash and cash equivalents	270	338
Short-term bank deposits	192	228
Short-term investments	315	325
Trade accounts receivable	463	422
Allowance for doubtful accounts receivable	-11	-12
Inventories	700	688
Other receivables and current assets	460	491
Non-current assets, including	3 ,415	3,209
Property, plant and equipment	2 ,886	2 ,764
Other non-current assets	529	445
Total Assets	5 ,804	5 ,689
Non-current liabilities, including	703	686
Long Term Debt and capital lease obligations	590	606
Other long-term liabilities	113	80
Current liabilities, including	996	964
Short Term Debt	393	400
Trade accounts payable	187	225
Other payables and current liabilities	416	339
Minority Interests	20	12
Equity	4,085	4,027
Total liabilities and stockholders’ equity	5 ,804	5 ,689

The MMK Group's financial position is characterized by the following:

High liquidity level:The amount of current assets has decreased by 3.7% (mainly due to lower cash and short-term deposits), while current liabilities have grown by 3.3% (due to increased other short-term debt). Current liquidity ratio has lowered from 2.6 as at the end of 2006 to 2.4 as at the end of Q1 2007. The Group's cash and cash equivalents as at the end of Q1 2007 was USD270 m. MMK's free cash funds are invested in highly liquid financial instruments, such as bank deposits or securities for resale and receiving additional income.

Low degree of dependence on external borrowing:   Financial leverage calculated as the ratio of total debt to equity was 0.42 as at the end of Q1 2007.The ratios of debt under credits and loans to equity and to EBITDA for the entire year were 0.24 and 0.48, respectively. The Group's net debt was USD521 m.

Analytic indicators                                (Table7)

Ratios	Q12007
EBITDAmargin	27.5%
ReturnofEquity(ROE) = Net Income / Total Equity (average for the period)	34.7%
Net cash provided by operating activities / EBITDA	86.0%
Current ratio = Current Assets / Current Liabilities	? 2.40
Leverage = Total Liabilities / Total Equity	? 0.42
Debt / Equity	? 0.24
Debt / EBITDA *	? 0.48
Interest EBITDA Coverage = EBITDA/  Interest Expense	? 33.8
Debt	983
Net Debt = Debt – Cash and equivalents – Short-term deposits	521

* EBITDA was multiplied by 4 for conversion to the annual value.

The results of consolidated financial report for Q1 2007 prepared according to US GAAP can be found here: https://www.mmk.ru/eng/financial/2007/index.wbp