Annual Report 2005

BUSINESS PLAN The long-term business strategy pursued by Železiarne Podbrezová is based on diversification. Therefore, the business plan for future periods is based on three main planks. The parent company intends to develop core metallurgical production in the area of steel production and seamless steel tubes, and to extend secondary metallurgical production and the production of precision welded tubes. We intend to further develop the technical background of controlled companies processing steel scrap. Our marketing strategy will be further focused on three key objectives: ° To satisfy our traditional customers of steel seamless tubes, increase the proportion of more sophisticated tubes (boiler tubes, heat exchanger tubes, bearing tubes, construction and alloyed tubes) with higher market prices distributed to the most profitable territories; ° To increase the proportion of products with higher added value; ° To win new customers for new products, including welded precision tubes of small diameters (19 mm through to 90 mm) and opportunities to open new co-operation facilities, mainly in the car industry at a time when foreign capital is promoting the strong development of the auto industry in the Central European region and mainly Slovakia. Our long-term financial strategy is focused on the improvement of the ratio of owned to borrowed funds. We intend to hedge our export prices against the persistent rising trend in SKK/EUR conversion rate by derivative bank transactions. In future years we intend to use a new credit line provided by the Institute of Bankers Club at the end of 2005. As for technological development and capital investments, in 2006 we plan to make a total investment of SKK 319.4 million in the improvement of Company’s fixed assets. Undoubtedly, the most important project will be the construction of a pipe mill shipping hall with automated stock control. Another significant event will be the modernization of an annealing furnace in a pipe mill, which will enable the heat treatment of sophisticated alloy boiler tubes of all brands. In fixed assets maintenance, we intend to make repairs totalling SKK 718 million. Major general repairs include the exacting repair of the pushing toothed rack of the transfer moulding mill, general repair of the punching press, and repairs to other annealing furnaces at the drawing plant. In 2006 we intend to operate and develop the information system, both at the parent company and at subsidiaries, through outsourced services provides by GAMO a.s. subsidiary. In order to guarantee the high quality of our products, we intend to pursue the control system under ISO 9001:2000, VDA 6.1., API Q1 standards, and the environmental management system under ISO 14 001:2004 standard. In 2006, our quality control system will be subject to a certification audit under ISO/TS 16949:2002 standard, which will afford us further opportunities to sell our products to the car industry. We intend to maintain our programmes of staffing, wages and social policies for our employees to meet the level established in the previous year. In 2006, we will apply a wage differential to regulate wage growth separately for workers and clerical staff. We will continue developing the occupational health and safety control system certified under OHSAS 18001 standards. During the following years, we will use the private apprentice secondary school of metallurgy in Lopej to prepare skilled labour for the Company. On 1 September 2006, based on the decision by the Slovak Ministry of Education, we will start a new school year at the sports-oriented Private Secondary Grammar School. REPORT BY THE BOARD OF DIRECTORS Report by the Board of Directors Annual Report 2005 Železiarne Podbrezová 33