Kazakhstan Kagazy PLC: Financial Results for the Third Quarter and Nine Months Ended September 30, 2007

Kazakhstan Kagazy PLC (the "Company” or "Kagazy”) (LSE:KAG), owner of Central Asia’s largest producer of paper, corrugated board and packaging products and one of the leading industrial real estate development companies in the country, today announced its financial results for the third quarter and nine months ended September 30, 2007. These results have been extracted from interim condensed consolidated financial statements, which have been prepared according to IAS 34 ("Interim financial reporting”). HIGHLIGHTS FOR THE THIRD QUARTER Consolidated revenues up 85% year on year to US$ 23.6 million EBITDA increased more than four fold year on year to US$ 6.7 million with an EBITDA margin of 28.3% Operating profit increased more than four fold year on year to US$ 5.0 million with an Operating margin of 21.2% Net profit of US$ 8.5 million with a Net profit margin of 35.8% HIGHLIGHTS FOR THE NINE MONTHS Consolidated revenues up 65% year on year to US$ 58.9 million EBITDA tripled year on year to US$ 16.3 million with an EBITDA margin of 27.6% Operating profit more than tripled year on year to US$ 12.5 million with an Operating margin of 21.2% Net profit up nearly seven times year on year to US$ 11.2 million with a Net profit margin of 19.0% Total assets up 153% year on year to US$ 647.5 million Maksat Arip, Chief Executive Office of Kazakhstan Kagazy PLC, commented: "Our paper business has experienced unprecedented growth in the first nine months of 2007 and we do, therefore, expect that the rate of growth will be lower in 2008. However, we will continue to drive volume increases and efficiency improvements in our business, in order to yield higher operating margins. As a result, we expect the level of capital expenditure in 2008 to be lower than previously anticipated. As stated in October, we are reviewing our strategy in the real estate segment and expect to provide you with an update in April 2008. At the moment, we do not plan any further land acquisitions in Astana and are focused on the Almaty area. In the existing environment, we continue to review investment opportunities that arise in the prevailing market conditions in the industrial real estate and paper sectors, and do expect to capitalize on such opportunities over the coming year.” FINANCIAL SUMMARY (US$ ‘000)   Q3 2007   Q3 2006   Year on Year Growth   9m 2007   9m 2006   Year on Year Growth Revenues 23,629 12,780 85% 58,902 35,741 65% EBITDA 6,695 1,518 341% 16,270 5,380 202% Operating Profit 5,021 1,170 329% 12,507 4,125 203% Net Profit 8,451 (641) - 11,190 1,470 661% OPERATING REVIEW Group Kazakhstan Kagazy’s consolidated revenues increased by 85% year on year in the third quarter, and by 65% year on year for the nine month period as a result of the strong growth generated by the paper business. The construction of the first stage of the logistics project was completed in July 2007 and full occupancy is anticipated in the first quarter of next year. The Company’s EBITDA tripled year on year for the nine month period and increased more than four fold year on year for the third quarter. EBITDA margin expanded from 15.1% to 27.6% year on year for the nine months period. This has largely reflected the robust development of the paper business during the first nine months of 2007. Consolidated depreciation and amortisation expense nearly tripled year on year from US$ 1.3 million to US$ 3.6 million in the first nine months of 2007 and increased from US$ 0.4 million to US$ 1.5 million year on year for the third quarter, following the 95.8% increase year on year of the Company’s net asset base in its paper and property businesses. Selling and administrative expenses in the first nine months of 2007 increased by 63% year on year from US$ 5.0 million to US$ 8.1 million and were up 79.2% year on year from US$ 1.8 million to US$ 3.3 million for the third quarter. This increase was below the corresponding sales growth and reflects the rise in compliance costs. Kagazy’s operating profit more than tripled year on year over the first nine months and increased by more than four fold in the third quarter, with operating margin expanding to 21.2% for both periods compared to 11.5% for the nine months and 9.2% for the third quarter of 2006. Net finance costs, representing interest expense after deduction of interest income, amounted to US$ 6.7 million in the nine month period compared to US$ 1.3 million in the corresponding period of 2006. Net profit increased by nearly seven times year on year for the first nine months of 2007 and included foreign exchange gains of US$ 5.6 million compared to US$ 0.9 million for the corresponding period of 2006. The number of shares outstanding after the initial public offering in July 2007 was 104.7 million. Proforma earnings per share based on the post-IPO number of shares were US$ 0.107 in the first nine months of 2007 compared to US$ 0.014 for the corresponding period of 2006. Paper Kagazy owns the largest producer of paper, corrugated board and packaging products in Central Asia. Production Volume   Q3 2007   Q3 2006   Growth Year on Year   9m 2007   9m 2006   Growth Year on Year Corrugated packaging (square meters) (‘000) 16,852 11,162 51% 57,816 40,875 41% Container board (ton) 16,631 9,224 80% 40,492 27,158 49% Cut fine paper (ton) 317 - - 778 - - The production volume of two main product lines, corrugated packaging and container board, increased by 41% and 49% year on year, respectively, for the nine month period. The growth in revenue of Kagazy’s paper segment has further accelerated in the third quarter compared to the first half of the year and reflected the positive seasonal impact on business. Following the acquisition of Kazupack in August 2007, Kagazy has completed the integration of the company’s production facilities into its operations during the quarter. Kazupack contributed US$ 0.9 million of revenue and US$ 0.1 million of EBITDA for the third quarter. During the quarter Kazupack’s own corrugating machine has been decommissioned and the plant has been refitted to convert corrugating sheets to boxes. Kagazy’s paper mill and corrugating plant are currently operating at 85% and 62% capacity, respectively. Property Kazakhstan Kagazy owns one of the largest commercial real estate developers in Kazakhstan, PEAK. Since the successful completion of the first stage of the logistics and warehouse facility in July 2007, 74% is now occupied, which includes 35% by Kagazy’s companies. Currently Kagazy is completing the client requested modifications and expects the remaining space to be occupied in the first quarter of 2008. The property business has contributed US$ 1.7 million of revenue and US$ 1.5 million of EBITDA to the Group’s results for the nine month period and US$ 0.73 million of revenue and US$ 0.71 million of EBITDA in the third quarter. The Company has acquired a new land plot of approximately 7 hectares which adjoins the existing Northern plot in Boraldai, Almaty. The total size of Kagazy’s land bank currently amounts to 545 hectares. FINANCIAL REVIEW Net cash outflow from operating activities totalled US$ 19.1 million during the nine month period, compared to US$ 47.7 million for the corresponding period of 2006. The reduction in net cash used by operating activities was largely as a result of the improved efficiency levels. Net cash used in investing activities totalled US$ 75.1 million in the nine month period, and included US$ 73.8 million of capital expenditure, compared to US$ 20.9 million for the corresponding period of 2006. Cash flows from financing activities amounted to US$ 249.0 million in the nine month period, compared to US$ 69.9 million for the corresponding period of 2006. Major sources of financing in the nine months of 2007 included the initial public offering of shares on the London Stock Exchange in July 2007, which generated US$ 253.7 million of net proceeds for the Company. The Group‘s cash balances totalled US$ 218.7 million as at September 30th 2007, as compared to US$ 16.9 million a year ago. Net debt amounted to US$ 13.2 million as at September 30, 2007, compared to US$ 105.3 million as at September 30, 2006. OTHER INFORMATION Kazakhstan Kagazy management will host a conference call today at 9 am (New York time) / 2 pm (London time) / 5 pm (Moscow time)/ 8 pm (Almaty time) to discuss its financial results. The dial-in numbers for the conference call are: UK/International:   +44(0)20 7138 0840 US: +1 718 354 1362 A replay will then be available for 7 days after the conference call. To access the replay, please dial: UK/International:   +44(0)20 7806 1970 US: +1 718 354 1112 PIN number: 4746710# For further information, please visit www.kazakhstankagazy.com Kazakhstan Kagazy PLC runs Central Asia’s largest producer of paper, corrugated board and packaging products. It also operates one of the leading industrial real estate development companies in the country through Prime Estate Activities Kazakhstan LLP (Peak), which owns approximately 545 hectares of prime land, strategically located in a newly created industrial zone near Almaty, for construction of commercial warehousing and logistics infrastructure facilities. The Group reported total assets of approximately US$ 647.5 million as at September 30, 2007 and consolidated revenues of approximately US$ 58.9 million for the first nine months ended September 30, 2007, according to unaudited IFRS financial results. Kazakhstan Kagazy’s securities are listed under the symbol "KAG” on the London Stock Exchange. This interim statement contains certain forward-looking statements with respect to the financial condition, results, operations and businesses of Kazakhstan Kagazy plc. These statements and forecasts involve risk and uncertainty because they relate to events and depend upon circumstances that will occur in the future. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements and forecasts. Nothing in this interim statement should be construed as a profit forecast. KAZAKHSTAN KAGAZY PLC INTERIM CONSOLIDATED BALANCE SHEETS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2007 AND DECEMBER 31, 2006 (UNAUDITED) (Amounts in thousands of U.S. dollars) ASSETS   30 September 2007   31 December 2006 Unaudited Proforma unaudited as restated $’000 $’000 Non-current assets Property, plant and equipment 268,365 179,021 Intangible assets 3,804 40 Prepayments in respect of construction contracts 52,568 22,735 VAT recoverable 11,450 8,666 Cash and cash equivalents on interest-bearing deposits - 2,717 336,187 213,179 Current assets Inventories 53,726 47,986 Prepayments in respect of goods and construction contracts 16,021 59,766 Other current assets 60,704 6,226 Trade and other receivables 22,322 4,937 Cash and cash equivalents 158,561 634 311,334 119,549 Total assets 647,521 332,728   EQUITY AND LIABILITIES Equity Share capital 5,470 - Share premium 248,174 - Revaluation reserve 33,310 14,808 Other reserves 81,181 81,181 Translation reserve 6,139 (869) Retained earnings 20,366 8,921 394,640 104,041 Non-current liabilities Interest bearing loans and borrowings 184,474 134,620 Deferred tax liabilities 17,195 7,864 201,669 142,484 Current liabilities Interest bearing loans and borrowings 6,256 48,534 Corporate income tax payable 159 75 Other tax liabilities 676 514 Trade and other payables 44,121 37,080 51,212 86,203 Total equity and liabilities 647,521 332,728 KAZAKHSTAN KAGAZY PLC INTERIM CONSOLIDATED INCOME STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006 (UNAUDITED) (Amounts in thousands of U.S. dollars)   Nine months ended 30 September 2007   Nine months ended 30 September 2006 Unaudited Proforma unaudited as restated $’000 $’000 Revenue 58,902 35,741 Cost of sales (38,123) (26,674) Gross profit 20,779 9,067 Selling expenses (2,651) (2,085) Administrative expenses (5,470) (2,899) Finance costs (9,076) (3,458) Finance income 8,046 1,219 Other expenses (153) 42 Profit before tax 11,475 1,886 Income tax expense (285) (416) Profit for the period 11,190 1,470 KAZAKHSTAN KAGAZY PLC INTERIM CONSOLIDATED CASH FLOW STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006 (UNAUDITED) (Amounts in thousands of U.S. dollars)   Nine months ended 30 Sept 2007   Nine months ended 30 Sept 2006 Unaudited Proforma unaudited $’000 $’000 CASH FLOWS FROM OPERATING ACTIVITIES Profit before tax 11,475 1,886 Adjustments for: Depreciation of property, plant and equipment 3,604 1,293 Amortisation of intangible assets 7 4 Amortisation of bond discount 327 316 Loss on disposal of property, plant and equipment 95 42 Net foreign exchange profit/(loss) (2,109) (1,127) Interest receivable (2,407) (284) Interest expense 9,749 3,003 20,742 5,133 (Increase) in trade and other receivables (24,232) (21,162) Decrease/(Increase) in current tax assets 7 (5,058) (Increase) in inventories (2,371) (3,212) (Increase) in other current assets (52,576) (16,116) Decrease/(increase) in advances made in respect of goods and services 44,240 (24,704) (Decrease)/Increase in other tax liabilities (65) 4,064 Increase in short-term payables 3,544 20,152 Foreign exchange movement from translation of subsidiary investments 820 (86) Interest paid (9,112) (6,495) Income tax paid (84) (201) Net cash from operating activities (19,087) (47,685) CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property, plant and equipment (9,390) (2,424) Purchase of intangible assets (102) (13) Proceeds from sale of property, plant and equipment and construction in progress 282 2,460 Expenditure on construction in progress including advance payments in respect of construction contracts (56,869) (14,941) Capitalised borrowing costs on construction in progress (7,554) (3,534) Deferred tax assets (1,491) - Interest received 2,139 284 Decrease in other long term assets 2,189 1,973 Acquisition of subsidiary (4,310) - Net cash used in investing activities (75,106) (16,195) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue of bonds 2,892 47,432 Capital introduced by investors - 9,810 Receipt of bank loans 74,541 16,741 Settlement of bank loans (82,098) (4,104) Proceeds from issue of shares 273,500 - Payment of share issue costs (19,856) - Net cash used in financing activities 248,979 69,879 NET INCREASE IN CASH AND CASH EQUIVALENTS 154,786 5,999 Effects of exchange rate changes on the balance of cash held in foreign currencies 3,141 - CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 634 347 CASH AND CASH EQUIVALENTS AT PERIOD END 158,561 6,346