On February 13, 2008 the first meeting of the LSR Group’s Board of Directors elected at the company’s extraordinary Shareholders Meeting on February 7 took place.
1. Board Appointments
Dmitry Goncharov, Managing Director of LSR Europe GmbH (a company of LSR Group) who has been chairing the company’s Board since April 2007 was re-elected as Chairman of the Board of Directors.
The Board of Directors also elected the members of the Audit Committee and the Human Resources and Compensation Committee and set up a new Strategy and Investments Committee. All three committees are chaired by independent directors.
Audit Committee:
- Seppo Juha Remes, Member of the Board of Directors of OJSC LSR Group, Independent Director – Chairman of the Committee.
- Elena Tumanova, Member of the Board of Directors, CFO of OJSC LSR Group.
- Sergey Skaterschikov, Member of the Board of Directors of OJSC LSR Group, Independent Director.
Human Resources and Compensation Committee:
- Sergey Skaterschikov, Member of the Board of Directors of OJSC LSR Group, Independent Director – Chairman of the Committee.
- Lauri Ratia, Member of the Board of Directors of OJSC LSR Group, Independent Director.
- Dmitry Goncharov, Managing Director of LSR Europe GmbH (a company of LSR Group).
Strategy and Investments Committee:
- Lauri Ratia, Member of the Board of Directors of OJSC LSR Group, Independent Director – Chairman of the Committee.
- Igor Levit, Member of the Board of Directors, CEO of OJSC LSR Group.
- Sergey Skaterschikov, Member of the Board of Directors of OJSC LSR Group, Independent Director.
Commenting on today’s announcement Igor Levit, CEO of LSR Group, said: “The strategic development plans of LSR Group provide for a major investment programme including the construction and commissioning of new plants to produce building materials (such as cement, bricks and aerated concrete), growth of the company’s real estate development portfolio and the implementation of new residential and commercial property projects.
“We also intend to continue our expansion into fast developing regions through acquiring local businesses holding a substantial market share. Our new Strategy and Investments Committee will ensure a more detailed review of transactions and balanced risk assessment, which, in turn, will increase the efficiency of the company’s development for the benefit of its shareholders.”
2. Approval of consolidated non-audited RAS statements for 2007
(consolidated balance sheet and income statement of OJSC LSR Group for 12 months of 2007 prepared in conformity with the Russian Accounting Standards (RAS) as per the Rules approved by Order of the RF Ministry of Finance of 30 December 2006 No.112).
According to the RAS statements,* the revenues of LSR Group in 2007 were RUB 35,801 million showing annual growth at the rate of 78% (in 2006, the revenues were RUB 20,078 million). EBITDA more than doubled and in 2007 was RUB 9,584 million (compared to RUB 4,463 million in 2006). The net profit according to the results of 2007 compared to 2006 grew by more than 2.5 times and totaled RUB 4,862 million (compared to RUB 1,894 million in 2006).
Such a dynamic growth of the company’s financial performance is due to the growth of operational performance of all of LSR’s business divisions including increased sales of building materials and completion of a number of property development projects as well as rising prices for key products, high market demand and a favourable macroeconomic situation.
*The RAS statements preparation principles differ from the IFRS principles. The consolidated audited IFRS statements are to be published in May, 2008.
3. Approval of two transactions
3.1. Acquisition by a subsidiary of OJSG Rudas (a company of LSR Group) of a 100% stake in OOO Kaskad owning two quarry sand pits, Novo-Toksovo and Kingiseppsky GOK, their aggregated reserves exceeding 14.5 million cub.m according to the license. The amount of transaction was RUB 308 million (approx. USD 12.5 million).
Alexey Yushkov, Head of the Aggregates Division of LSR Group has commented as follows:
“The new acquisition will increase the raw materials stock of the company providing OJSC Rudas with additional materials for almost 10 years and will expand the coverage of the company’s operations to reach the Kingiseppsky, Slantsevsky and Volosovsky districts of the Leningrad Oblast.
“Moreover, the new pits will broaden the product-mix of OJSC Rudas through the new quartz sand product used for the production of aerated concrete, bricks and dry concrete mixes. All of the above, combined with the existing competitive advantages, will reinforce the company’s strong market positions through retaining a sizable market share and will contribute to its enhanced financial performance.”
3.2. Acquisition by OJSG LSR Group of a 100% stake in OOO Promrezerv, a Yekaterinburg company holding a long-term lease of a 9.8 hectare plot of land in the eastern part of Yekaterinburg bordering on the downtown area (the Analytical Centre of the Urals Real Estate Chamber assigns the plot location area to Price Belt 1).
The amount of transaction was EUR 7.065 million. According to an independent assessment by DTZ, the investment value of the plot is USD 22.1 million (over EUR 15 million).
LSR Group proposes to use the land for neighbourhood real estate developments to include an economy class residential compound with a garage complex and a Class B office building, as well as service outlets and various local shops. According to the development concept, the total building area is estimated at 147,000 sq.m.
Even today the district features a developed social infrastructure with Schools, kindergartens, supermarkets and other facilities in close vicinity to the future development.
The area also boasts easy transportation access. In the long-term, the City Development Plan up to 2025 includes a proposal to build a metro line.
By its strategic importance Yekaterinburg is the third geographical market of LSR Group after St. Petersburg (and the Leningrad Oblast) and Moscow (and the Moscow Oblast). The new acquisition along with the land plots acquired by the company in Yekaterinburg at the end of 2007, will enable LSR to expand its development projects portfolio in the Urals region and go on establishing an integrated real estate development and construction division in Yekaterinburg.
Today the population of Yekaterinburg is approx. 1.3 million people. By its volume of construction the region is fourth behind only Moscow (including the Moscow Oblast), St. Petersburg and Kazan. Over recent years, the construction market of Yekaterinburg has been growing rapidly: e.g. the total volume of housing delivered in 2007 was 900,000 sq.m, almost 170,000 sq.m (22.8%) more than in 2006 (732,700 sq.m). In 2006, the growth rate of housing delivery was 14% compared to 2005 (approx. 640,000 sq.m).
According to the reports of DTZ, as of late 2007 the cost per sq.m of economy and business class residential property in the primary market was USD 2,150-2,500 while the average wages were 16,000 roubles (by this indicator Yekaterinburg holds third place in Russia). In 2007, Standard & Poors assigned a BB rating to Yekaterinburg, with a stable outlook.
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