Annual_report_2006

REPORT BY THE BOARD OF DIRECTORS Ž E L E Z I A R N E P O D B R E Z O V Á 2 0 0 6 A N N U A L R E P O R T 13 on business activities, assets, and financial performance in 2006 and information on business strategy 2006 was the twelfth consecutive year when Železiarne Podbrezová operated with posi- tive results. The generated net profit of SKK 846 050 thousand was reported in accor- dance with International Financial Reporting Standards. For the first time, the Company applied IFRS, as adopted by the EU, in its separate financial statements for 2006 based on the Slovak Accountancy Act. The impact of the new standards and interpreta- tions on the valuation of assets and liabilities was immaterial. However, this methodologi- cal change distorts the attitude to the dynamics of some return ratios. The Board of Directors assesses the previous year very positively notably due to the fact that com- pared to the prior year, financial results were generated under economically more severe conditions. Critical to our success was our long-term and effective business policy. We have utilised the favourable period of the global metallurgy trade boom for a gradual and permanent price hike of our products. The 2006 volume of exports was more than 86% of our sup- plies to customers. Therefore we find the increase in prices to be an important factor which significantly eliminated negative impacts resulting from the Slovak crown’s strengthening against other global currencies. Železiarne Podbrezová a.s. has improved its significant market position within the EU as a precision steel tube producer; the Company’s market share in this area reached 9%. Favourable selling opportunities enabled the optimum utilisation of our tech- nology, owing to which we retained a sound level of operating costs. The financial strategy focused on the increase of own capital ratio was fulfilled, and equity to cover the Company’s assets reached 63%. As of 31 December 2006, equi- ty per share represented SKK 1 946. The 2006 net profit represented SKK 355 per share, where return reached 10%. The Company’s funding was balanced through- out the year. The strong 2006 profits opened up the possibility of the application of a divi- dend policy with regard to our shareholders while retaining a high level of technological equipment maintenance, including further modernisation. Sales were directed on a central level from Železiarne Podbrezová a.s. managed territo- rially by the commercial companies of PIPEX International AG, PIPEX ITALIA S.p.A., ŽP Trade Bohemia, a.s., and SLOVRUR Sp. z o. o., all of which ensured the optimum scope of construction contracts. This in turn enabled the utilisation of technological equip- ment to the full extent. The production volume expressed in units of material was higher compared to the prior year only due to extraordinary measures. The average selling price per kilogram of our products (SKK 25 806 per tonne) was only 0.5% higher mainly due to the fact that the increase in prices in export markets was significantly limited by the strengthening of the Slovak crown. In 2006, the production of steel was at its highest in the history of the Company. We produced a total of 364 399 tonnes of steel, which is 13 922 tonnes more than the prior year. This record production was only reached due to high steel casting sequence, as well as the time required for repairs being reduced to a minimum. We plan to achieve BUSINESS ACTIVITIES Production and sale Once again the Company assessed its last financial year to have been exceptionally successful. Critical to the exceptionally positive 2006 results was our successful business policy.