LSR Group sales rise but profits hit by revaluation

02 October 2008

LSR Group, Russia

Russia’s LSR Group posted first half (H108) revenues of US$ 940 million, up +53% on the US$ 616 million reported for H107. Despite strong revenues, net profit fell -99% to US$ 3 million following a revaluation of investment property that saw a US$ 159 million write-down.

The LSR Group, based in St. Petersburg, Russia, operates in the construction, building materials, aggregates and construction services market, as well as in commercial real estate.

While revaluation hit group net profit, performance across the construction divisions saw revenues and operating profit up in all sectors except aerated concrete, which saw revenues increase but profits drop.

The group’s building materials division increased revenues by +57% from US$ 260 million in 1H07 to US$ 409 million in 1H08 and operating profits rose +31% from US$ 44 million to US$ 57 million.

In the reinforced concrete operation, revenues were up +51% to US$ 130 million, with operating profit up by +47% from US$ 17 million in 1H07 to US$ 25 million in 1H08.

Ready-mix concrete revenues jumped +65% from US$ 72 million in 1H07 to US$ 119 million in 1H08, while operating profit increased by +20% to US$ 5.4 million.

Brick operations recorded 1H08 revenues of US$ 61 million, up +50% from the US$ 41 million posted in 1H07, while operating profit jumped +94% to US$ 19 million from US$ 10 million in 1H07.

Revenues from aggregates extraction increased +63% from US$ 86 million in 1H07 to US$ 140 million in 1H08, while operating profit rose +81% to US$ 41 million from US$ 23 million in 1H07. Likewise, revenues from sand extraction increased +63% to US$ 69 million with an operating profit of US$ 25 million, up +36% on 1H07 figures.

Crushed granite operations increased sales by +74% from US$ 41 million in 1H07 to US$ 71 million in 1H08 and operating profit rose +123% from US$ 7.4 million in 1H07 to US$ 17 million in 1H08.

Aerated concrete operations increased revenues by +77% to US$ 53 million, but operating profit fell -18% from US$ 7 million in 1H07 to US$ 6 million in 1H08. A company statement said this drop in profits was attributable to increased transportation costs following a market shift from the Baltic States to St. Petersburg and an increasingly competitive market overall.

The Group’s construction services division increased revenues by +61% from US$ 36 million in 1H07 to US$ 58 million in 1H08 and operating profits jumped +103% from US$ 4.8 million in 1H07 to US$ 10 million in 1H08.

“We are pleased with the operational results for the first half of 2008,” said CEO Igor Levit. “We have continued to strengthen our home market of St. Petersburg while expanding our presence in other regions such as Yekaterinburg and the Urals, Ukraine and Moscow.

“Most of the write-down on our real estate development segment is due to the US$ 145 million revaluation that was necessary following the re-phasing of the construction schedule for the electric city office project. Originally to be completed in four phases, the finalised plan rescheduled this to just one and the revised cash flow schedule negatively affected the valuation,” confirmed Mr Levit.