Surprise 1H05 Results For Severny GOK

The company reported a net income of USD 175 mln for the first half of the year, or 460 times higher than posted for the first half of the previous year, and 71% more than the whole of 2004. Severny GOK?s production reached USD 384 mln.Concorde Capital: SCM (a major shareholder of SGOK) is under strong pressure from the new government, which is campaigning to eliminate the shadow economy from Ukraine. It seems SCM?s Rinat Akhmetov has chosen to accept the rules of the game. However, be cautions when measuring SGOK?s profitability (please refer to our Iron Ore report of May 27). During 1H05, in addition to iron ore, Severny exported slabs produced by Azovstal for USD 201 mln. Therefore, the company?s real net margin for 1H05 is about 30%, or 8% higher than its 2004 full year margin.