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 32 BUSINESS STRATEGY The strategy to be pursued by Železiarne Podbrezová a.s. in 2004 is similar to the one of 2003, it is aimed at diversifying business activities. Apart from the core production of seamless steel tubes by the mother company, extended recently by production of precision welded tubes, the second main activity is production in the area of heavy mechanical engineering and metallurgy by the daughter company ŽĎAS, a. s., Czech Republic, supported now by the newly acquired daughter company ŠKODA TS, a. s., Plzeň. The third pillar is represented by the sports and leisure Tále resort operated by Tále a. s. in the Low Tatras region. Our marketing strategy shall be focused on the following: To satisfy our traditional customers with steel seamless tubes, increasing at the same time the volume of more sophisticated tubes (boiler tubes, heat exchanger tubes, bearings etc.) with higher market prices, distributing on the most lucrative territories; To increase volume of products with higher added value; To win new customers for new products – welded precision tubes with small diameter (20 mm to 90 mm) and profiles, opening thus a new field of co-operation in the automotive industry in the period when foreign capital establishes this production within Central Europe. Our financial strategy pursues further the philosophy of balancing the level of loans with that of our own resources. Steady trend of stabilising the SKK/EUR rate shall be eliminated with export prices by means of derivate bank transactions. For the whole of 2004, we have available derivate positions in the value of 34,750 million EURO, their expiry being distributed evenly throughout the year in line with monthly schedules. As for technological upgrade and investments, after adopting restriction measures for 2004, investment of 184,8 million SKK shall be placed in technological improvements. Information technology will be widely improved in 2004 in line with the project "Unification of info systems of Železiarne Podbrezová and ŽĎAS", introducing a unified processes and thereby also upgrade of applications in both companies. Applications for economic functions are being supplied to ŽĎAS on the basis of the Outsourcing Contract since January 2004 and the plan is to develop more fully this process in 2004. The core project of 2004 is the network transition to the "Gigabyte Ethernet". In terms of product quality, we shall pursue consequentially the control system under standards ISO 9001:2000, VDA 6.1 and API Q1 and the environmental management system under the standards ISO 14 001. The employees' programme of personnel, compensation and social policy shall be met at least on the 2002 level. We will observe the system of labour safety and health protection as certified under the standards OHSAS 18 001. The private apprentice secondary school shall systematically be used to educate qualified labour for the company.