S&P affirms Novolipetsk Steel

Standard & Poor's said it affirmed its BB+ long-term corporate credit rating and ruAA+ national scale rating on Russian steelmaker OJSC Novolipetsk Steel (NLMK) following a review of the company's 2006 and first-quarter 2007 performance.

The outlook is stable.

S&P said the ratings remain constrained by the fact that NLMK is essentially a land-locked single-site producer exposed to commodity cycles, and by the risks associated with operating in Russia. The recent acquisition of DanSteel and the joint venture with Duferco have somewhat improved NLMK's geographic diversification and product mix, but the company's production is still highly concentrated in its Lipetsk site, and semifinished products (slabs and pig iron) constitute more than 40% of its output.

The ratings are supported, however, by the company's financial profile, which is characterized by strong cash flow generation, large cash balances, and virtually no net debt, the agency said.

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