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Abramov to Resign as Evraz Feels Pinch

Steelmaker Evraz Group warned on Friday that worsening market conditions would hit its second-half profits, and announced a major reshuffle of the company's top management just months after listing its shares in London.

It also announced a first-half dividend of $1.65 per common share, or 55 cents per Global Depository Receipt. Analysts estimated the total payout at about $200 million.

Evraz said in a statement that Alexander Abramov would step down as chief executive on Jan. 1, adding that its board had proposed Valery Khoroshkovsky, managing director of operations, as his replacement.

Evraz -- which had solid first-half results with net profit jumping 10 percent to $729 million year on year -- said in a separate statement that the second half might not be as rosy.

"Changing market conditions affect [the] company's operations and may have an adverse impact on Evraz's results for the second half of 2005, as compared to the first half of 2005," said Evraz, whose revenues rose 27 percent to $3.6 billion in the first half.

Abramov, who is estimated to be worth $2.9 billion by Forbes magazine, owns a controlling stake in Evraz, Russia's biggest steelmaker, and will remain a board member with no executive responsibilities.

Analysts said Evraz's warning reflected what industry watchers already knew: that most Russian steel companies were likely to suffer a 20 to 30 percent squeeze in second-half profits due to tough international market conditions.

"We are not expecting a major fall for the whole of 2005 [for Evraz]," said UralSib analyst Kirill Chuiko.

Evraz's GDRs fell 2 percent in London to $17, compared with its June initial public offering price of $14.50.

Evraz -- which plans to keep its 2005 production at around last year's level of 13.7 million tons -- also said the board had proposed that Alexander Frolov take over as chairman from Abramov as of next May 1.

Analysts said the split in the chairman and CEO roles gives two ambitious executives the chance to assume more responsibility, although Khoroshkovsky -- likely to have greater hands-on control -- only has a modest stake in Evraz.

He owns 1.9 percent, compared with Frolov's 28.2 percent, while Abramov holds 59.1 percent.

"Now that it has become a public company, the separation of the roles of chief executive officer and of chairman should enhance corporate governance," Abramov said in a statement.

Evraz raised over $400 million in its initial public offering.

Its announcement came just a day after key domestic rival Novolipetsk announced plans to float shares in London following months of hesitation after Evraz's lackluster debut.

Evraz's key assets include the Nizhny Tagil plant in the Sverdlovsk region, as well as the West Siberian and Novokuznetsk plants in Siberia. It also controls Palini & Bertoli in Italy and Vitkovice Steel in the Czech Republic.


(The Moscow Times 28.xi.05)

 
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