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 25 Due to the signing of the loan contract at the end of 2005 with the so-called “Bank Club” comprising four banking houses for a five year period, there was a stabilisation of the Company’s current and non-current financ- ing which was duly used by the Company throughout the year. The decrease in the number of financing banks has proven a cor- rect decision. Throughout the year, Citibank (Slovakia) a.s., HSBC Bank plc, pobočka zahraničnej banky, CALYON BANK SLOVA- KIA a.s., and Tatrabanka a.s. provided Železiarne Podbrezová a.s. with sufficient funds at unified terms. Our reputation and long-term economic stability were the only guarantees for the provision of these finan- cial sources. The Company’s foreign exchange financing in 2006 focused on Euro represented more than 85%, i.e. the rate of the Company’s exports. Throughout the year, the average interest rate amounted to 3.7%. In 2006, for the purposes of foreign exchange risk hedging the Company realised financial derivatives at face value of EUR 51 million, with the aim of reaching the exchange rate equal to SKK/EUR 38 as set by the 2006 financial plan at the maturity of export receivables. In 2006, profit from these option and forward contracts in financial terms represented SKK 51.5 million. For the purposes of foreign exchange risk hedging in 2007 and in the upcoming years, in 2006 the Company concluded financial derivative contracts worth EUR 56 million, which reflects 45% of planned sales denominated in Euro. Our financial strategy focuses on maturities and the expiration of derivative products has been arranged throughout the year proportionally to the planned cash flows. Financial Management It was representing the difference between total income of SKK 8 767 196 thousand and total expenses of SKK 7 921 146 thousand. The structure of income has not substantially changed when compared to the previous year. Income from operations represented 97.1% of the total, and was mostly derived from the revenues from sales of own prod- ucts and services sold (92.0%) and from own work capitalized (3.2%). Income from financial activities represented 2.9%. The structure of expenses in 2006 was simi- lar to the previous year: • Consumed material . . . . . . . . . . . . . . . . 54.5% • Consumed energy. . . . . . . . . . . . . . . . . . 11.8% • Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.4% • Personnel expenses . . . . . . . . . . . . . . . 19.7% • Non-current assets depreciation . . . . . 3.2% • Other operating expenses . . . . . . . . . . . 0.7% • Financial expenses . . . . . . . . . . . . . . . . . . 0.8% • Taxes and fees . . . . . . . . . . . . . . . . . . . . . . 2.0% In 206, added value per employee amounted to SKK 705 500. Steady labour productivity resulted from the overall boom in the indus- try in 2006. The 2006 profit of SKK 846 050 thousand significantly exceeded the objective set in the business plan. Financial data as presented in the Annual Report corresponds with data disclosed in the separate IFRS financial state- ments of Železiarne Podbrezová a.s. Expenses, income and profit for 2006 Last year, the Company’s financial position was well balanced and stable. The joint stock company timely and duly fulfilled its obligations to all suppliers and constitutional, statutory, and public institutions. In 2006, Železiarne Podbrezová a.s. reported profits of SKK 846 050 thou- sand.