Annual Report 2003

REPORT BY THE BOARD OF DIRECTORS ANNUAL REPORT Ž E L E Z I A R N E P O D B R E Z O V Á 2 0 0 3 13 This is the seventh consecutive year, that Železiarne Podbrezová has ended with profits for the financial year. Although the company did not meet the achievements of the two preceding extraordinary profitable years, 2003 was a success since the economic conditions that existed in 2003 were much more difficult. Illegitimate act of determined prices of energy passed by Úrad pre reguláciu sieťových odvetví (Office for regulation of network industries) as law no. 276/2001 Z. z., brought about price rise in electricity and natural gas, increasing thus considerably cost of energy with practically unchanged volume of production and sales, if compared with previous year. Such negative impact has partly been eliminated by cost reducing policy applied in different areas of company's activity. A prime accomplishment of 2003 has been the revitalisation of the daughter company ŽĎAS, a. s., in the Czech Republic, and the completion of an assembly for the new line producing welded tubes with small diameters and therefore extending the range of products that can be produced in the in the future, especially with respect to supplies produced for the automotive industry. Steady financial balance became a sound stimulus showing stabilising effect in sales and substantiating trust of our bank partners. Important here was the fact that bonds issued by the company were accepted at the quoted market of the Bratislava Stock Exchange in February 2003. BUSINESS ACTIVITIES Production and Sales Sales policies regulated centrally by Železiarne Podbrezová and managed on a territory basis by individual sales companies: PIPEX International AG, PIPEX ITALIA S. p. A., ŽP Trade Bohemia, a. s., and SLOVRUR Sp. z o. o., provided sufficient orders and thereby allowed for optimal exploitation of the production equipment. Compared with the previous year, a slight drop was recorded in the weight volumes of precision tubes, tube elbows and of welded tubes with large diameters. On the other hand, 2003 saw the highest historical production volume of steel and of hot rolled tubes. In 2003 we produced a total of 295 007 tonnes of continuous cast steel billets of this 77 309 tonnes were produced for sale. Two new products have extended production range: quadrate 150 mm and 280 mm. We produced 172 305 tonnes of seamless hot rolled tubes, of this 110 982 tonnes for sales, the remaining quantity was further processed in our tube mills. Our customers were supplied with 48 303 tonnes of precision cold drawn tubes, and with 2 530 tonnes of welded tube elbows. We have produced and sold 3 433 tonnes of welded tubes with large diameters. From the tubular products section’, doing the finishing treatment of precision tubes, we have supplied our customers with products worth the total price 213 671 thousand SKK. Although compared with 2002 this is a considerable rise by 34 % due mainly to the new cutting section SINICO II, still, the planned volumes were not fully met. Reviewing production performance in general, 2003 saw significant upgrade in the quality of products, resulting from the implementation of several technological innovations in steel production, as foreseen by Technical Progress Plan developed in co-operation with Ústav materiálového výskumu (Institute of Materials’ Research) at Slovak Academy of Science in Košice. In 2003 we supplied our customers with products worth 4 981 227 thousand SKK, comparable with the level of 2002. A major portion, 86,57 % was placed on foreign markets for customers from 45 countries on all continents. on business activities, state of assets and capital of the company, financial management in 2003, and information about the future business strategy