11

Six months 2003 US GAAP interim financial results

November, 2003Moscow

22

Income Statement HighlightsIncome Statement Highlights

$mlnSix months

2003Six months

2002%

Sales 215.7 202.9 106%

Gross margin 61.2 54.6 112%

EBITDA 24.5 35.4 69%

EBIT 10.4 24.8 42%

EBT 14.8 16.1 92%

Net Income 14.1 4.6 307%

33

Analysis of changes in Income statementAnalysis of changes in Income statement

$mlnSix months

2003

including

Six months 2002

(excluding effect of

provisions)

Changes (organic

component-

Six months 2002)

Organic component

(excluding effect of provisions)

Acquisition component

Sales 215.7 182.1 33.6 202.9 (20.8)

Gross margin

61.2 54.6 6.6 54.6 -

EBITDA 24.5 23.7 (0.2) 27.5 (3.8)

EBIT 10.4 12.9 (3.5) 16.8 (3.9)

44

Analysis of changes in EBITDAAnalysis of changes in EBITDA

$mlnSix

months 2003

including

Six months 2002

Changes (organic

component -

Six months 2002)

Organic component

Acquisition component

EBITDA 24.5 24.7 (0.2) 35.4 (10.7)

Gross margin 61.2 54.6 6.6 54.6 -

G&A and S&D (51.2) (41.7) (9.5) (37.7) (4.0)

Depreciation and amortization

14.0 10.8 3.2 10.6 0.2

Provisions 0.5 1 (0.5) 7.9 (6.9)

55

Segmentation – key resultsSegmentation – key results

$mln

OILE

Q

MIN

EQ

ST

EE

L

NP

PE

Q

SH

IP

MM

S

Other

Intersegment

sales

To

tal

Sales, six months 2003

37.8 23.9 50.2 37.0 44.7 62.1 23.9 (63.9) 215.7

Gross

Margin, six months 2003

31% 21% 22% 34% 16% 15% 19% 28%

Sales, six months 2002

39.1 18.1 61.5 37.1 24.0 105.6 26.0 (108.5) 202.9

Gross

Margin, six months 2002

25% 19% 15% 38% 13% 11% 13% 27%

66

Change in sales by segmentChange in sales by segment$mln Six

months 2003

Six months

2002Change

Change, %

Change structure

O&G equipment

37.8 39.1 (1.3) (3.3%) (10.2%)

NPP equipment

37.0 37.1 (0.1) 0% (0.8%)

%Shipbuilding 44.7 24.0 20.7 86.3% 161.7%Mining equipment

23.9 18.1 5.8 32.0% 45.3%

Special Steel 50.2 61.5 (11.3) (18.4%) (88.3%)Machinery manufacturing services

62.1 105.6 (43.5) (41.2%) (339.8%)

Other 23.9 26.0 (2.1) (8.1%) (16.4%)

Intersegment sales

(63.9) (108.5) 44.6 41.1% 348.4%

Total 215.7 202.9 12.8 6.3% 100.0%

77

Change in gross margin by segmentChange in gross margin by segment

$mln.

Six months

2003

Six months

2002Change

Change,%

Change structure

O&G equipment

11.9 9.7 2.2 22.7% 33.3%

NPP equipment

12.7 14.1 (1.4) (9.9%) (21.2%)

Shipbuilding 7.2 3.0 4.2 140.0% 63.6%

Mining equipment

4.9 3.4 1.5 44.1% 22.7%

Special Steel 10.9 9.0 1.9 21.1% 28.8%

Machinery manufacturing services

9.0 11.9 (2.9) (24.4%) (43.9%)

Other 4.6 3.5 1.1 (31.4%) 16.7%

Total 61.2 54.6 6.6 12.1% 100.0%

88

Change in EBITDA by segmentChange in EBITDA by segment$mln. Six

months 2003

Six months

2002Change Change, %

Change structure

O&G equipment

3.2 7.1 (3.9) (54.9%) 35.8%

NPP equipment

7.1 7.3 (0.2) (2.7%) 1.8%

Shipbuilding 4.0 1.2 2.8 233.3% (25.7%)Mining equipment

0.7 0.5 0.2 40.0% (1.8%)

Special Steel 9.0 7.4 1.6 21.6% (14.7%)Machinery manufacturing services

5.1 14.1 (9) (63.8%) 82.6%

Other (4.6) (2.2) (2.4) (109.1%) 22.0%

Total 24.5 35.4 (10.9) (30.8)% 100.0%

99

ProfitabilityProfitabilitySix months

2003Six months

2002

Sales, $ mln 215.7 202.9

Gross margin 28.4% 26.9%

EBITDA 11.4% 17.4%

EBIT 4.8% 12.2%

Net Income 6.5% 2.3%

1010

Balance Sheet HighlightsBalance Sheet Highlights

$mln Six months 2003

Six months 2002

Change %

Current Assets 477.3 346.0 131.3 38%

Total Assets 784.0 592.5 191.5 32%

Current Liabilities

381.6 283.7 97.9 35%

Total Liabilities 573.1 394.0 179.1 45%

NWC 95.7 62.3 33.4 54%

1111

Key RatiosKey RatiosSix months

2003Six months

2002

Current ratio 1.25 1.07Quick ratio 0.17 0.26NWC to Total Assets 12% 4%Total Liabilities to Total Assets

73% 73%

Turnover (days)Assets 582 472Inventories 215 200Trade accounts receivable 37 40NWC 67 15

1212

Income statement net of non-cash effectIncome statement net of non-cash effect$th

Six months 2003

Six months 2002

Income after taxes and minority interest 14 148 4 590

Minority interest (2 518) 2 586

Deferred tax 1 599 5 379

Operating provisions (475) (6 442)

Non-operating provisions (556) -

Deferred payment* 3 066 3 206

Minority interest on deferred payment (752) (786)

Total adjusted net income 14 472 8 533

Depreciation 13 001 11 305

Net income + Depreciation 27 473 19 838* represented payment for NPPE that is due upon the commissioning of the respective power plants

1313

SG&ASG&A

$th6 months

20036 months

2002Change

Selling 5 623 5 486 137 2.5%

G&A 45 625 32 233 13 392 41.5%

Total 51 248 37 719 13 529 36%

1414

G&A expenses ($th)G&A expenses ($th)Total 6 months 2003 G&A

expensesOrganic

componentAcquisition component

45 625 37 537 8 088

Organic component items

Six months

2003

Six months

2002Change

Change structure

Payroll 13 416 9 762 3 654 37% 69%Unified Social Tax 4 270 3 222 1 048 33% 20%Road User’s Tax - 2 096 (2 096) (100%) (40%)Rent of land (or land tax) 1 758 1 269 489 39% 9%Depreciation 829 577 252 44% 5%Property insurance 2 206 1 839 367 20% 7%Repairs & maintenance 2 543 2 159 384 18% 7%Utilities 9 348 8 350 998 12% 19%Other 3 164 2 958 206 7% 4%

Total organic component

37 537 32 233 5 303 16% 100%

1515

Selling expenses ($th)Selling expenses ($th)Total 6 months 2003 Selling

expensesOrganic

componentAcquisition component

5 623 4 243 1 380

Organic component items

Six months

2003

Six months

2002Change

Change structure

Transport / customs / packaging / commission

3 135 4 123 (988) (24%) 79%

Advertising 35 27 8 30% (1%)

Other 1 073 1 336 (263) (27%) 21%

Total organic component

4 243 5 486 (1 243) (23%) 100%

1616

Debt dynamicsDebt dynamics

$mlnSix months

2003Year-end

2002Six months

2002

Long-term debt(incl. non-convertible bonds)

88.4** 61.1* 32.2

Short-term debt 54.1 53.3 48.4

Current portion of long-term debt 4.1 3.7 5.2

Total debt 146.6 118.1 85.8

Interest expense 8.5 6.0

Capitalized interest 0.9 0.5

Interest coverageEBITDA / (Interest expense+Capitalized interest)

2.6 5.4

* Increase in long term debt due to CLN issuance** Increase in long term debt due to issuance of non-convertible bonds

1717

Effective interest rateEffective interest rate

$mln Six months 2003 Six months 2002

Average debt 131.1 74.8

Interest expense 8.5 6.0

Capitalized interest 0.9 0.5

Effective interest rate 14% 17%

1818

Trade a/c receivable, payable & advancesTrade a/c receivable, payable & advances

* Increase is due to advances for a diesel submarine for The Chinese Navy **Increase is due to advances received from Atomstroyexport* Increase is due to advances for a diesel submarine for The Chinese Navy **Increase is due to advances received from Atomstroyexport

$mlnYear 2002

ASE

adj

Year 2002

Adjusted

Six months

2003

Change

%

Short-term trade a/c

receivable54.6 (9.4) 45.2 34 (25%)

Due from related parties 2.9 9.4 12.3 19.5 59%

Long-term trade a/c

receivable13.5 (13.5) - 3.9 100%

Due from related parties, long-term

2.4 13.5 15.9 15.3 (4%)

Short-term trade a/c payable

32.3 (3.2) 29.1 33.4 15%

Advances received * 91.1 (40.6) 50.5 105.5 109%

Due to related parties** 5.1 43.8 48.9 78.5 61%

1919

InventoryInventory

$mlnSix

months 2003

Six months

2002Change

Change,

%Change

structure

Materials and spare parts

75.2 61.5 13.7 22% 35%

Work-in-progress 99 83.6 15.4 18% 39%

Finished goods 50.7 41.2 9.5 23% 24%

Total inventories, at cost

224.9 186.3 38.6 21% 97%

Provision for obsolete inventories

(23.5) (24.4) 0.9 (4%) 2%

Total inventories, net 201.4 161.7 39.7 25% 100%

2020

Other current assetsOther current assets

($mln) Six months 2003

Taxes receivable 54.7

Other current assets 29.3

Total 84.0

2121

Plant and equipmentPlant and equipment

($mln)

PPE as of December 31, 2002 201.4

Cumulative translation adjustment 9.1

PP&E of new subs (excl. effect of allocation of negative goodwill)

1.4

Additions 16.8

Disposals (8.3)

Depreciation for the year (13.0)

Other 0.5

PPE as of June 30, 2003 207.9

2222

Subsequent events - acquisitionsSubsequent events - acquisitions

CompanyAcquisition date, 2003

Consideration($th)

Ownership

Volgograd Shipbuilding

Plant

July and October

4 842

Increased from

18.96% to 69.23%

OAO CKB Korall

October 2 501

Increased from

30.40% to 92.91%