Annual Report 2007

37 Ž E L E Z I A R N E P O D B R E Z O V Á 2 0 0 7 REPORT BY THE BOARD OF DIRECTORS The long-term business strategy pursued by Železiarne Podbrezová a.s. is based on diversification. Therefore, the business plan for future periods is based on three main pillars. Within the parent company, we intend to develop core metallurgical production in steel production and seamless steel tubes, and to extend secondary metallurgical production and the production of precision welded tubes. 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 welded precision tubes of small diameters and opportunities to open new co-operation facilities, mainly in the car industry. Our long-term financial strategy is focused on the improvement of the ratio between owned and borrowed funds. We intend to hedge our export prices against the persistent rising trend in the SKK/EUR conversion rate by derivative bank transactions. With reference to the purchase of raw material, other materials, and services, we will also increase the proportion of contracts entered into in EUR in Slovakia. In the forthcoming periods, we intend to use a new credit line provided by the Institute of Bankers Club at the end of 2005 for a 5-year period. As for technological development and capital investments, in 2008 we plan to make a total investment of SKK 354 million. Priority will be given to investments in finishing technology, the improvement of storage, and the acceleration of the handling at loading goods on trucks. The biggest investment for 2008 will be the development of a treatment line for exchanger tubes which will cover 12 techno- logical operations. Another major investment In technology will be the automated expedition warehouse of precision tubes which will increase pipe storage capacity and facilitate access to individual tube banks. The second stage of tube elbow production modernisation will continue, with induction heating being installed on Line 1 with the subsequent finalisation of 90-degree elbows to their final dimensions. In 2008, we will complete the modernisation of heat manage- ment in the old plant. Central steam heating will be replaced by local gas boiler rooms, and gas radiators will be installed in the halls. With respect to the con- struction investments, we will initiate the refurbishment of the steel plant’s social facilities combined with the general repairs of interior engineering networks. The reconstruction of the former dormitory building in Piesok into residential premises will also be completed. In tangible assets maintenance, we intend to make repairs at total costs of SKK 859 million. Major general repairs include the repair of the electric arc furnace and its supporting facilities. Significant repairs of cooling ducts at annealing furnaces and of an 800 KN drawing bench will be performed in the tube drawing plant. To support core metallurgical production, we will develop technical background to the controlled entities ŽP EKO QELET a.s. and KBZ s.r.o., engaged in the processing of waste metal. After the completion of a new plant for car wreck processing and steel scrap treatment in an industrial zone of Hliník nad Hronom with annual production capacity of 92 thousand tons, a test run commenced in 2008 which confirmed the designed parameters of the installed technology. The ecological importance of this project is extremely significant for Slovakia. BUSINESS PLAN The long-term business strategy pursued by Železiarne Podbrezová a.s. is based on diversification. Therefore, the business plan for future periods is based on three main pillars.