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LSR Group Strengthens Its Position in the Ural Region

30 June 2008

30 June 2008, St. Petersburg, LSR Group, a leading real estate developer and building materials producer in Russia (LSE: LSRG; MICEX, RTS: LSRG) announces that the Board of Directors of the Group has approved two transactions. The value of transactions is not disclosed.

As part of the strategy to geographically diversify and strengthen the Company's positions in the construction and building materials markets of Yekaterinburg (Urals Region), the Board of Directors of LSR Group approved two transactions:

1. Transaction to acquire a 100% stake in OOO Uralscheben.

OOO Uralscheben is one of the key players in the crushed stone market of Yekaterinburg: according to the estimates by the specialists of OOO Uralscheben, the market share of the company in Yekaterinburg in 2007 was 5%.  OOO Uralscheben holds 100% shares in both OOO Rezhevsky DSZ and OOO Gagarinsky Granitny Kariyer, both companies having all necessary licenses to use the subsoil from the two quarries with a total volume of proven reserves around 160 million cub.m.

2. Transaction to acquire a 75% stake in OOO PKU Nova-StroyProekt.

The core business of OOO PKU Nova-StroyProekt is designing houses from detached houses to neighbourhoods and compounds, designing panel and frame buildings, parking lots, garages and motor roads. The company has a license to develop buildings and structures of levels 1 and 2. The company's track record includes 400 implemented projects.

Igor Levit, CEO and member of the Board of Directors of OJSC LSR Group, commented as follows:

"The acquisition of companies such as Uralscheben and PKU Nova-StroyProekt provides a consistent follow-up to LSR's plans to set up a regional division in the Urals repeating the unique vertically integrated business model of our company in the market of Yekaterinburg and the Sverdlovsk region, which is strategically important for us. The new acquisitions - a crushed stone business and a design office - will enable us to provide our operations in Yekaterinburg with necessary raw materials because crushed stone is an aggregate necessary for producing both prefabricated housing panels and reinforced concrete and ready-mix concrete, as well as to provide for professional designing of both detached houses manufactured by our prefab construction company and whole neighbourhoods."

In April this year LSR Group acquired an 87% stake in OJSC Betfor Reinforced Concrete Factory, the largest prefab construction manufacturer and producer of reinforced concrete, ready-mix concrete and aerated concrete in Yekaterinburg, where the Group already owns approx. 60 hectares of land plots and planning to implement economy class neighbourhood projects.

Notes to Editors:

Yekaterinburg is the main city of the RF Urals Federal District. It is a major administrative, industrial, transport, trade, research and cultural centre. Yekaterinburg is the centre of the Sverdlovsk Oblast. The population of Yekaterinburg is around 1.3 million people. By its volume of construction the region ranks fourth after Moscow (including the Moscow region), St. Petersburg and Kazan. The construction market in Yekaterinburg has been rapidly growing over recent years: e.g. a total of 900,000 sq.m of housing were completed in 2007, nearly 170,000 sq.m (23% growth rate) more than in 2006 (732,700 sq.m). In 2006, the growth of housing construction compared to the 2005 volume (approx. 640,000 sq.m) was 14%. According to the reports of DTZ, as at end of 2007 the cost per sq.m of economy and business class residential property in the primary market was US$ 2,150 - U$ 2,500 while the average monthly 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.

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 US$ 463 million and US$ 777 million respectively. In 2007, the revenues amounted to US$ 1,403 million.

LSR Group has a B1 rating from Moody's Investors Service (outlook - Stable) assigned in July 2007 and confirmed on 30 May 2008 and a B+ rating by Fitch Ratings (outlook - Stable) assigned on 30 May 2008. The Group's shares are listed on MICEX and RTS and on the London Stock Exchange in a form of GDRs since November 2007. 

In 2007, LSR Group was awarded 'The Company of the Year' National Award in the 'Construction' category.

For more details please contact:

Press Service, LSR Group
+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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