Annual Report 2009

A N N U A L R E P O R T 2 0 0 9 16 REPORT BY THE BOARD OF DIRECTORS Purchase of Strategic Raw Materials and Energy Being in compliance with ISO standards in business relationships with suppliers of raw materials and having a stringent payment discipline have enabled us to further improve supply activities, especially in terms of quality and delivery terms. The demand crisis, however, enables more favourable prices and payment conditions to be negotiated. In 2009, we purchased raw materials totalling EUR 59 319 thousand, of which 17.7% were imported goods. As usual, with regard to our purchase of raw materials, scrap steel, ferro additives and raw iron were priorities; heat-resistant materials, thick tin-sheets and steel tapes also represent priority purchases. In 2009, we purchased a total of 172 595 tonnes of scrap steel, of which 98% represents supply from our subsidiaries ŽP EKO QELET a.s. and KBZ s.r.o. In 2009, we purchased a total of 116 033 MWh of electricity. Our water power plants and co-generation unit produced 61 870 MWh of electricity, which represents as much as a 36.6% share of internal generation in our total annual consumption. In 2009, we purchased 35 579 thousand m 3 of natural gas from Slovenský plynárenský priemysel, a.s. for our consumption. The actual growth of electricity prices represented 11.7% year-on-year and the average prices of natural gas were 19.9% lower when compared to prices in 2008. Capital Investments and Technology Management In 2009, we acquired non-current assets in the total amount of EUR 5 765 thousand. Capital expenditures were reduced in a similar way as in other areas and formed only 48% of the capital expenditures made in 2008. In 2009, we spent a total of EUR 4 557 thousand on new machinery and technology and refurbishing our original technological equipment, which represents 79% of the total capital expenditures. The biggest technological investment was the installation of a special continuous bifilar line for galvanising precision steel tubes for hydraulic and pneumatic lines (HPL tubes). The installed line is one of a kind in the CEE region. The line enables galvanising a tube with an outer diameter between 8 to 42 mm and a length between 4 to 6 m. The thickness of the zinc coat can be regulated. This brand new technology required the technological process to be optimised extensively and a complex launch into operation. Other significant investments in technology include the cogeneration unit turbine and a push bench toothed rack. After production in subsidiary ŽP Tažírny trub Svinov, spol. s r.o. was terminated, the non-destructive tube testing line was delivered, modernised and placed into service in Železiarne Podbrezová a.s., which enables testing the tubes with outer diameter between 12 and 60 mm using the whirling current method and ultrasound. In the elbow production unit we installed an automatic parting-off machine. The construction investments formed 21% of the total investments (EUR 1 202 thousand). Completion of the reconstruction of the steel mill social building represented a key construction investment. In 2009, as a part of our environmental policy we completed the construction work on the oil warehouse and built a new station for disposing of wastewater and a warehouse for chemicals that relate to galvanising the HPL tubes. In order to ensure the reliable operation of technological equipment and the maintenance of the buildings and structures, repairs in the total amount of EUR 15 227 thousand were performed in 2009, of which repairs amounting to EUR 808 thousand were provided by external suppliers. The costs of repairs fell by 44.3% on year-to-year basis.