Dnipropetrovsk Pipe's AGM Annouces Company's Development Plan.

The company (DTRZ: BUY) has successfully undergone a financial recovery procedure which started in April 2003. On Sep 21, 2005, an amicable agreement was signed between DTRZ’s core shareholder, Industrial Union of Donbass (IUD) which owns over 70% of the company’s shares and its creditors who had previously filed for the company’s bankruptcy. According to the agreement, DTRZ has written off a major portion of its accounts payable to the creditors (~USD 21.5 mln) and the remaining amount (USD 9.9 mln) will be paid off by the end of 2006. The write-off boosted the company’s reported income which in 2005 comprised USD 21.7 mln. The company’s adjusted net income-2005 is USD 0.16 mln. DTRZ’s sales in 2005 totaled USD 143.9 mln, up 69.5% yoy . The company expects a substantial improvement in its bottom line in 2006 with net income projected at USD 12.9 mln and an estimated net margin of ~7-9%. DTRZ has developed a detailed modernization program for the next four years with a total estimated cost of USD 41.1 mln which will allow the company to increase production from current 228 ths mt to 300 ths mt in 2008-2009.

The company exports 74% of its pipe production and its export structure is well diversified and not pegged to the Russian market. Specifically, in 2005 DTRZ sold only 15% of its pipes to Russia. The EU import duty on DTRZ’s pipes is just 12.6%, the lowest among Ukrainian pipe makers, as DTRZ was granted market economy company status. This status opens significant doors in the EU market for its pipe exports in the near future. The company’s other key markets are the Middle East, Africa, Eastern Europe and Asia.

The AGM replaced DTRZ’s Supervisory Board with the IUD’s top management. We expect DTRZ to enjoy IUD’s financial strength, management abilities and distribution channels which should result in significant financial and operating performance improvements in the mid term.