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LSR Group enters into a design and construction contract for the new cement project

03 April 2008

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), today announces that as part of an investment project for construction of a cement plant in Slantsy in the Leningrad region, OOO Cement (a subsidiary of LSR Group) has entered into a construction contract with OOO Cement Northwest, 100 percent owned by Hefei Cement Research and Design Institute, China. The contract is worth approx. €163 million and is funded from LSR’s IPO proceeds and borrowings. The agreement was approved by the Board of LSR Group in March 2008.

Under the contract, OOO Cement Northwest will act as the general contractor of the whole range of design and construction work planned to be completed in June 2010.

OOO Cement Northwest was established by the state-owned Chinese company, Hefei Cement Research and Design Institute, specifically to construct the cement plant for LSR Group in the Russian Federation. The company was awarded the contract by LSR Group following bids from many leading players in industrial design and construction because it offered the best combination of cost, quality and time. It should also be noted that Hefei Cement Research and Design Institute has extensive experience in the construction of cement plants in particular and in the last three years has built and designed more than ten such plants across the world.

Phase 1 of the project with a capacity of 1.85 million tons of cement is planned to be operational in 2010. The Group will invest approx. US$600 million in the project by 2010. Subsequently, the plant capacity will be increased up to 3.7 million tons through the construction of a second production line. Currently, in addition to the design and construction work contract, another contract is being implemented providing for the supply of equipment worth €126 million by FLSmidth & Co A/S of Denmark.

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

“We are pleased to say that LSR Group is on schedule with implementing this strategic project in Northwest Russia in line with the business plan. The Group itself is one of the major cement consumers in Russia and needs up to 1 million tons per year. Once operational, the new plant will enable LSR Group not only to satisfy its own demand for cement, but also take a leading position in the cement market of the Northwest Federal District of Russia, which experiences serious shortages of this building material.”

According to the Resheniye consulting and research company, the shortage of cement in the RF Northwest Federal District in 2006 was 1.05 million tons while the market size was 4.70 million tons. In 2008, the market size is expected to reach 5.65 million tons, and the cement shortfall will grow up to at least 1.34 million tons, according to Resheniye’s forecasts.

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.

OOO Cement was established by LSR Group in 2006 to implement a cement project in the Slantsy district, Leningrad region. The new plant will meet the demand of the cement market in St. Petersburg and the Leningrad region. The plant will use raw materials supplied from lime and clay quarries and waste resulting from oil shale extraction and processing.

For more details please contact:

Press Service, LSR Group
Tel.: +7(812) 314-1044

«LSR Group» discloses information on the page on the Internet of LLC Interfax-TsRKI — the news agency accredited by the Central Bank of the Russian Federation to disclosure of information.
Information is available here.

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