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 26 EVENTS OF SPECIAL SIGNIFICANCE OCCURRING AFTER CLOSED ACCOUNTING PERIOD The most significant event impacting the cost structure of the company as well as metallurgy in the whole of Europe at the end of 2003 and beginning of 2004, was rapid price increase of steel scrap (by 40% – 50 %), resulting from a re-direction of deliveries of this raw material from Europe and from USA to China the latter is experiencing a construction boom. Shortages in scrap was felt by mills, but also from the descense of pig iron resulting from reduced coke export from China. This brought about a further impact on price of ferro-alloys, important additives in steel production, the price of which jumped up by 50 to 100 %. Surging prices of raw materials starting in early 2004 has however, been not reflected in proportionately higher prices of steel tubes. Consequently, in January, February and March the company produced a loss of 31,8 million SKK. Increasing costs of raw materials was in the first quarter of 2004 incorporated into contracts signed for the second quarter, and due to sufficient volume of orders, we expect that as of June 30, 2004, the preceding loss shall be annulled and the company will again show profit. A second important event that is expected to have an impact on the results of the company is the purchase of 100 % shares in the company ŠKODA TS, a. s., Plzeň. Železiarne Podbrezová has acquired this share from the Appian Group, through its daughter company ŽĎAS and through its sales subsidiary ŽP Trade Bohemia. The production programme of ŠKODA TS a.s. is aimed at supplying products for sugar refineries, vulcanizing press for production of tyres, machinery for rolling mills and the hydraulic forging press. Železiarne Podbrezová idea is to build a strong basis for machine engineering production and to apply a synergy effect in the areas of sales, production, design and construction, and in the financial policy. The third important event was Železiarne Podbrezová being accredited a certificate on the labour safety system as control compliant with the standards OHSAS 18 001 in February 2004. This was granted after an audit conducted by the consulting company SGS Slovakia. Owing to the rising accident rate through the past years, the company decided to make the labour protection system more effective. Železiarne Podbrezová has now been classed among the top companies applying this effective system of labour protection, while becoming the first metallurgical company holding this certificate among the former east block countries. Pursuing our Concept and Strategy of Quality Control, the re-certification audit was completed in 2004 in order to assess our compliance with the requirements of quality management set up by the standards of ISO 9001:2000 and VDA 6.1. The audit has confirmed that our system is effective capable of improving and of meeting the demands of the customers.