LSR Group proceeds with the acquisition of a major aerated concrete producer in Ukraine

LSR Group proceeds with the acquisition of OJSC Obukhiv Porous Concrete Plant in Ukraine as part of geographical diversification strategy. 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 the Ukrainian Antimonopoly Committee has granted permission to Aeroc International AS, a subsidiary of LSR Group, for the acquisition of a 97% stake in OJSC Obukhiv Porous Concrete Plant, a major aerated concrete producer in Ukraine. The €30 million acquisition was approved by LSR’s Board in February 2008 and is expected to be completed in the summer 2008.

OJSC Obukhiv Porous Concrete Plant (OPCP) is a leader in the Ukrainian autoclaved aerated concrete (AAC) market and the key AAC supplier in the Kiev region today. According to the All-Ukrainian Union of Building Materials and Products Manufacturers, OPCP has an 18% share of the Ukrainian AAC market and over 50% of the market in the Kiev region. OPCP is located in the city of Obukhiv, 40 km from Kiev, the capital of Ukraine. In 2007, the company reported output and sales of 150,000 cub.m. As part of an existing contract with Wehrhahn, the world leader in the production of aerated concrete equipment, OPCP is completing a project aimed at increasing its annual capacity to 350,000 cub.m.

OPCP is LSR Group’s second aerated concrete project in Ukraine. The first project – a new AAC plant with the capacity of 400,000 cub.m a year – is under construction in Berezan, 70 km from Kiev, and is due to be completed in the summer of 2008.  The equipment is supplied by HESS AAC-Systems, a well-known German-Dutch manufacturer of AAC equipment. 

Commenting on the development, Igor Levit, CEO of LSR Group, has said:

“We consider the Ukrainian market to be very attractive due to the steady growth in the volumes of construction and building materials consumption as well as the dynamics of housing price growth. The acquisition of OJSC Obukhiv Porous Concrete Plant by LSR Group, combined with the plant’s upgrading up to the capacity of  350,000 cub.m per annum, as well as the completion of a new 400,000 cub.m plant that we are planning to make operational in the summer of 2008, will enable our company to occupy the dominating position in the Kiev region and become a leader in  the Ukrainian aerated concrete market as a whole.” 

Consequently, the aggregated production capacity of Aeroc International in Ukraine is expected to exceed 700,000 cub.m a year. The company is planning to make full use of the synergy of the two plants through promoting and distributing AAC products under a single brand - AEROC. In addition, the new acquisition will enable the two Ukrainian plants to be specialized in particular products to more flexibly respond to different customers’ needs. 

Notes to Editors:

AAC market in Ukraine.  According to the All-Ukrainian Union of Building Materials and Products Manufacturers, the total aerated concrete output in Ukraine was 730,000 cub.m in 2007. Another 110,000 cub.m were imported from abroad. Thus the volume of sales in the Ukrainian AAC market in 2007 totalled 840,000 cub.m with the prospect to reach 2,100,000 cub.m by 2011. The market has been experiencing shortages due to limited supply of the product.

Construction volume dynamics in Ukraine. According to the State Statistics Committee of Ukraine and the Analytics and Statistics Committee of the Ukrainian Realtors Association, the total housing area completed in 2005 was 7.5 million sq.m, in 2006 it was approx. 9 million sq.m, and in 2007 - over 10 million sq.m. The average residential property price in 2007 grew by 19.05%, and as of January 1, 2008 was $3,173.35 per sq.m of total apartment area.

Aeroc International AS is an aerated concrete subholding company of LSR Group and the leading AAC producer in Northeast Europe. The company uses a single AEROC trademark in all of its markets – light as air, hard as rock.

Today Aeroc International AS is the 100% owner of its subsidiaries in five countries:

OOO Aeroc SPb in Russia
Aeroc AS in Estonia
Aeroc SIA in Latvia
UAB Aeroc in Lithuania
TOV Aerok in Ukraine

Three modern plants operate in St. Petersburg (Russia), Estonia and Latvia. In Ukraine, in addition to the acquisition of Obukhiv Plant, another advanced plant is under construction with the annual capacity of 400,000 cub.m. The companies of Aeroc International employ approx. 400 people.

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.

For more details please contact:

Press Service, LSR Group
+7 (812) 314-1044
press@lsrgroup.ru
www.lsrgroup.ru