Azovstal Posts Weak 1H Results.

The company (AZST: Susp) reported 1H06 sales of $1,035.4m (down 19% yoy) and net income of $72.5m (down 48% yoy). Rolled steel output was down 8.5% yoy in 1H06, to 2.426m mt. Andriy Gostik: The company’s profitability improved almost six-fold in 2Q06 versus 1Q06, when AZST’s sales were down 17% yoy and net income down 81% yoy. AZST’s sales decline is consistent with the general market trend, as prices for steel exported from the CIS were down 10-20% yoy in 1H06, depending on the product. We expect AZST’s sales and margins to improve in 3Q06 thanks to growing steel prices and then to shrink in 4Q06 as price growth slows. We project AZST’s 2006 sales at $2,2505m (down 7% yoy) and net income of $183m (down 19% yoy, net margin of 8.2%).