Annual_report_2006

REPORT BY THE BOARD OF DIRECTORS Ž E L E Z I A R N E P O D B R E Z O V Á 2 0 0 6 A N N U A L R E P O R T 17 Purchase of strategic raw materials and energy Compliance with ISO standards in business relationships with suppliers of raw materials as well as due payment behaviour have enabled us further improvements in supply activities, especially in terms of quality and delivery terms. In 2006, we purchased raw materials totalling SKK 4 156 million; thereof 18.6% were imported goods. As usual, scrap steel, ferro-alloys and raw iron were our priorities in purchasing raw materials, as well as heat-resistant materials and thick tin-sheets and steel tapes. In 2006, we bought a total of 309 900 tonnes of scrap steel for SKK 2 269.5 million, thereof 5.2% was import- ed supply mainly from Hungary. In 2006, we purchased a total of 231 521 MWh of electricity. Our own hydro power plants and the co-generation unit produced 59 709 MWh of power, 21.2% of our total yearly consumption. Last year, we bought 45 634 thousand m 3 of natural gas from Slovenský plynárenský priemysel, a. s. In comparison to 2005, the real growth of prices of purchased electricity represented 3.2%, and the purchase prices of natural gas increased by 23%. Non-current assets and technology management In 2006, the Company invested a total of SKK 342.2 million in the innovation of non-current assets. The most important investments in technology included: •reconstruction of annealing furnace No. 4 in the tube mill. The modernized furnace enables the hot treatment of the most sophisticated materials, mainly boiler tubes. Unique technical equipment is able to warm tubes with its radiating burners to a temperature of 1 080 centigrade and subsequently cool in a cooling tunnel at a speed of 300 centigrade per minute, •Adige splitting line in the section of finishing treatment, which enables splitting from the minimum length of 20 mm, and brushing and washing of split tubes, •reconstruction of Ohler tube cut-off saw in seamless tube mill. In 2006, the most significant investments in construction included: •construction of forwarding stock in seam- less tube mill, which enlarged its capacity and significantly accelerated the loading of finished products, •roofing of scrap blending panel, which significantly reduced the risk of explosions during the production of steel over the winter period. Further increase in non-current assets by SKK 41.2 million resulted from the transfer of inventories as part of a methodological change, which represented the transfer of strategic spare parts for specific assets with useful life exceeding one year. Overall operating expenses incurred for repairs to technological equipment, build- ings, and structures amounted to SKK 783.4 million in 2006. The investment of greatest significance for us represented the replacement of the rack of transfer bench (SKK 23.3 million) and repair of a punch press in the seamless tube mill (SKK 11.2 mil- lion). Further important investments include repairs of annealing furnaces in the tube mill. Major construction work was conducted on the ŽP Informatika, s.r.o., (information centre) and at the reconstruction of the drinkable water supply in the municipality of Podbrezová. A key change in the area of non-current intangible assets represents the disposal of software application to subsidiary GAMO a.s., which–-based on an exclusive outsourc- ing contract–-delivered comprehensive services in respect of IT and IS operation and development. Currently, this software and the entire hardware except for technology systems is the ownership of subsidiary ŽP Informatika s.r.o., which provides compre- hensive services to Železiarne Podbrezová a.s. ; since 1 March 2007, ŽP Informatika s.r.o. has also been providing services to other entities within the Group.