Fitch affirms Novolipetsk

Fitch Ratings said it affirmed OJSC Novolipetsk Steel's BB+ long-term issuer default rating, B short-term issuer default rating and AA(rus) national long-term rating.

The outlook is stable.

The agency said the ratings reflect Novolipetsk's strong financial profile, sound credit metrics and geographical diversification of revenues. Despite some decline relative to 2005, profitability remained among the highest in the steel industry, both in Russia and worldwide. In addition, the company has notably low gross leverage of 0.1x and a net cash position of $368 million.

In addition, the agency acknowledged the benefits of Novolipetsk's recent acquisitions, such as LLC VIZ Stal, DanSteel A/S and the joint venture with Duferco Group, which will enable the company to move to more value-added products and to gain a footprint in the European markets.

Less positively, Novolipetsk has reduced to nil self-sufficiency in coking coal, limited diversification of product portfolio and a relatively low share of high value-added products, Fitch said.

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