Annual Report 2004

Ž E L E Z I A R N E P O D B R E Z O V Á ANNUAL REPORT 2004 32 REPORT BY THE BOARD OF DIRECTORS BUSINESS STRATEGY The strategy to be pursued by Železiarne Podbrezova a.s. in 2005 is similar to the one of the previous year and it is aimed at diversifying business activities. We will, in the parent company, develop the core metallurgical production in the area of steel production, seamless steel tubes and extend the second main activity to the production of precision welded tubes. We are preparing an investment plan focused on improving the effectiveness of the production of steel surfaced bends. Our strategic target is the financial entrance into existing companies with activities in the purchase and manufacturing of the scrap steel. We consider this initiative to be the most important step to enhance the Company's stability. The second main activity is production of heavy mechanical engineering and metallurgy by the subsidiary's company ŽĎAS, a.s., the Czech Republic, supported currently by the newly acquired subsidiary ŠKODA TS, a.s., Plzeň. The third activity, sport and leisure, is facilitated by the Tále resort operated by Tále a.s. in the Low Tatras region. Our marketing strategy shall be focused on three main lines: 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, bearing tubes, construction tubes, alloyed tubes) with higher market prices, distributing to the most lucrative territories; To increase volume of products with higher added value; To win new customers for new products including welded precision tubes with small diameters (19 mm to 90 mm), opening thus a new field of co-operation in the automotive industry in the period when foreign capital is establishing production in Central Europe, mainly in Slovakia. Our financial strategy also pursues the philosophy of balancing the level of loans with own sources. A continuous appreciating trend of the SKK/EUR exchange rate shall be hedged by derivate transactions. For 2005, we have opened derivative positions in the value of EUR 34,750 million, their expiry being distributed evenly throughout the year in line with monthly budgets. In technological investments for 2005, after adopting restrictivemeasures, investment of SKK 193 million shall be placed in technological improvements. Information technology will be widely improved in 2005 in line with the project "Unification of information systems of Železiarne Podbrezová and ŽĎAS". We plan to introduce unified processes and upgrade of application support in both companies. Applications for economic functions are being supplied by ŽĎAS on the basis of the Outsourcing Contract since January 2004 and the plan is to develop them fully in the next years. In terms of product quality, we shall consequently pursue 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 employee's programme of personnel, compensation and social policy shall meet the level established in the previous year. We will observe the system of labour safety and health protection as certified under the standards OHSAS 18 001. The private apprentice secondary school in Lopej shall systematically be used to educate qualified labour for the Company.