Annual Report 2005

Purchase of strategic raw materials and energy Reliable financing and compliance with ISO standards in business relationships with the suppliers of raw materials and other materials resulted in the further enhancement of supply activities, particularly with regards to quality and delivery terms. In 2005, we purchased raw materials totalling SKK 3 760 million; of this 19% were imported goods. As usual, scrap steel, ferro-alloys and raw iron were our priorities in purchasing raw materials, as well as heat-resistant materials and tin-sheets. In 2005, we bought a total of 289 thousand tonnes of scrap steel for SKK 1 880.4 million. Of this 7% was imported scrap mainly from Hungary. In 2005, we purchased a total of 225 586 MWh of electricity. Our own hydro power plants and the co-generation unit produced 60 078 MWh of power, 21% of our total yearly consumption. In 2005, we bought from Slovenský plynárenský priemysel, a. s., 45 251 thousand m3 of natural gas in total for our own consumption. In comparison to 2004, the real growth of the prices of the purchased electricity represented 9.37% and the purchase prices of natural gas increased by 22.23%. Fixed asset and technology management In 2005, the Company invested a total of SKK 279.8 million in the innovation of tangible and intangible fixed assets. Thereof SKK 162.6 million was spent on the purchase of new machines and the reconstruction of existing technological facilities. A total of SKK 35.5 million went on information technologies and automation of production processes. Investments in intangible assets, mainly the development of own application software, represented SKK 11.4 million. Other capital expenditures were incurred in construction activities. The most significant investment in the development of new products represents the reconstruction of the production line for boiler tubes. It is designed for the final check of produced tubes with lengths up to 22 m and contains non-destructive test of tubes by whirling currents with demagnetisation and ultrasound, as well as other technological procedures, mainly the straightening of tubes, cleaning, designation, and ultrasound cutting of non-tested tube ends. Other major investments in technology realised in 2005 include: ° Splitting centre Adige CM 502 in the section of finishing treatment that is used for the cutting of short tubes; ° Production line in the tube mill (non-destructive tests, tube cut in short fixed lengths, brushing of ends); ° Reconstruction of a tube cut-off saw in seamless tube mill; ° Marking of steel billets in the steel mill. The overall expenses incurred for the repairs of technological equipment, buildings and structures amounted to SKK 757 million in 2005. The investment of greatest significance for us represents the major repair of a turbine in the co-generation unit and major repairs of draw benches and annealing furnaces in the tube mill. Major structural repairs included the information centre, energy buildings, and the Cultural Centre. ENVIRONMENTAL POLICY The Certified System of Environmental Management under European standard ISO 14 001:1996, applied in 2000, is one of the tools used in Železiarne Podbrezová a.s. for environmental protection and the promotion of a positive environmental profile. Efficient maintenance and improvement of the system was confirmed by two supervisory audits carried out REPORT BY THE BOARD OF DIRECTORS Report by the Board of Directors Annual Report 2005 Železiarne Podbrezová 16