Annual report 2012

ŽELEZIARNE PODBREZOVÁ A.S. 30 The addition to financial investments during 2012 amounted to EUR 173 thousand and it is detailed in the notes to the separate and consolidated financial statements. During 2012, Železiarne Podbrezová a.s. provided a long-term financial borrowing amounting to EUR 1 million to its subsidiary, Transformaciones Metalurgicas S.A., which is reported as a part of financial assets according to IFRS given its nature. In December 2012, ŽP a.s. created a new subsidiary, PIPEX Deutschland GmbH, with its registered seat in Munich, Germany. The contribution of ŽP a.s. as a partner was paid in January 2013. The value of this acquired investment as at 31 December 2012 amounting to EUR 81 thousand is also a part of the financial assets according to International Accounting Standards. TRANSMESAa nd TAP With their product portfolio, TRANSMESA and TAP (Spanish companies) strengthen the international position of the ŽP GROUP in the production and sales of precision cold-drawn steel tubes. After 2011, inwhich the companies reported the best financial results in their history, the same trend also continued in the first half of 2012. Given the developments on both global and European markets, the companies experienced reduced demand and a decline in winning new contracts in 3Q. As a result, in September 2012, TRANSMESA had to switch to a limited operational mode reduced by 20%. Despite the aforementioned decline, thanks to amore-favourable product range, the production plan was met with the total amount of 8679 tonnes. In 2012, both companies supplied their customers with tubes in the total amount of 10 358 tonnes, of which 8 092 tonnes were of their own production. Revenues from the sale of merchandise, products and services totalled EUR 30 545 thousand (i.e. a year-to-year decline of 4%), of which EUR 3 691 thousand represented the sale of products from Železiarne Podbrezová a.s. In terms of the sale of merchandise, the companies experienced a significant decline due to customer pressure on price reduction. Under the aforementioned conditions, the consolidated profit after tax amounted to EUR 1 661 thousand (separately, TRANSMESA: EUR 1 077 thousand and TAP: EUR 584 thousand). As at 31 December 2012, the consolidated assets totalled EUR 31 154 thousand, of which current assets amounted toEUR17629 thousand. Among the 33 countries to which TRANSMESA ships its products, the domestic Spanish market covers 18.5% of the realised revenues. EU Member States, North America and Australia continue tohold their dominantmarket shares. In terms of production and the achieved results of operations, 2012 could be evaluated positively. In addition to the aforementioned results, significant investment projects were completed, such as the construction of the third production hall, the reconstruction of a Meer three-tow bench performed internally and the preparation of the finishing line with a Bültmann five-roll straightening machine in TAP. In TRANSMESA, in August 2012, a new Linde generator for the protection atmosphere of an annealing furnace was installed and a system for an automated warehouse of finished goods was upgraded. All of these investments into increasing quality, production flexibility and customer services will ensure increased profitability in the future assuming market stabilisation. For 2013, due to the continuing global economic crisis, the companies prepared a conservative plan with an equal volume of sales as in the previous year, as part of which limited operational production in the first months, coupled with only a gradual increaseof performedoutputs, is expected. ŽĎAS, a.s. a nd TSPlzeň a.s. In the long term, ŽĎAS, a.s. and TS Plzeň a.s. are leading producers in Czech heavy engineering; in 2012, they continued to strengthen their positions compared to their European and global competitors. The global recession in traditional sales territories continued in 2012 and negatively impacted both companies' operations. Especially in signingnewcontracts, the competition triggered inadequate pressure on the reduction of selling prices. Czech producers are also constantly exposed to foreignexchange risk despite financial hedgingoperations. The production programme of ŽĎAS, a.s. comprised supplies of inspection and parting lines, forming machines for smith and drop forging, flat and volume moulding, scrap metal processing equipment, cast iron and ductile cast iron, ingots and free forged products, pressing tools for hot and cold flat and volume moulding. Renovations and modernisations, from complete production sets to single machines rank the company among leading Czech and European producers in this production range. All deliveries are provided to customers by the company's own external assembly and high-quality servicing departments. Export is an important economic indicator and accounted for 52.7%of the 2012 sales. The list of foreign customers includes major companies from Germany, China, Slovakia, Russia, Italy, Sweden, Spain, Austria, Norway, theNetherlands etc. In 2012, ŽĎAS, a.s., reported total revenues from the sale of merchandise, products and services in the amount of EUR 120 902 thousand (CZK 3 040.8million), of whichmetallurgical production amounted to EUR 68 620 thousand (57%), forming machines – EUR 24 630 thousand (20%), rolling mills – EUR 4 778 thousand (4%) and other – EUR 22 873 thousand (19%). The business activities were aimed at markets of former Soviet Union states and at the development of business relations withChina, India andSouthAmerica. In terms of capital expenditure, ŽĎAS a.s. performed the modernisation of technology equipment in the total amount of EUR8960 thousand (CZK225.3million). ANNUAL REPORT 2 012 REPORT BY THE BOARD OF DIRECTORS ON THE BUSINESS ACTIVITIES, ASSETS, AND FINANCIAL PERFORMANCE IN 2012 AND INFORMATION ON THE BUSINESS PLAN