Annual Report 2008

ADDRESS FROM THE CHAIRMAN OF THE BOARD OF DIRECTORS ŽELEZIARNE PODBREZOVÁ Dear Shareholders. The results we achieved in 2008 are very good despite the emerging financial and economic crisis. We achieved profit at one-third of last year's level. lt is necessary to consider, however, that we began to experience a shortage of contracts for the entire product range as early as the third quarter of 2008. In that period,a positive decision was made by the European Central Bank on the transition trom the Slovak crown to the euro in the Slovak Republic. Nevertheless, the official conversion rate put all Slovak exporters at considerable disadvantage. As early as September 2008, the Company's Board of Directors began to thoroughly analyse the future outlook in terms of the emerging economic crisis. As we were expecting the blow of the spreading financial and economic crisis, crisis management was set up for the parent company as well as its subsidiaries. Therefore, we made considerable cost reductions, which resulted in the profit generated in 2008. The synergie effects from the acquisition of the Spanish company Transformaciones Metalurgicas S.A. (TRANSMESA) influenced the positive results of operations in late 2008 as well. We continued to implement measures in 2009 and after having assessed the results of our operations for the previous year, we adopted a decision to discontinue the production in ŽP PRAKO and ŽP Tažírny trub Svinov. In the first quarter of 2009, we were utilising our production capacities at 50%, with the headcount reduced by 23%and dramatic cost cutting implemented in all areas. The Company's Board of Directors gained experience from revitalising in the previous year, perfectly understanding not only the companies and their production programmes but also the situation on the European and global markets. As a result, the Board of Directors was able to make preparations so that positive results of operations can also be expected in 2009 despite the negative developments on the market. 1believe that all measures adopted to mitigate the impacts of the financial and economic crisis were correct. Another important fact is that the measures adopted by the parent company were also implemented in the subsidiaries and 1firmly believe that they will also achieve positive results of operations once the financial and economic crisis is over. Dear Shareholders. lt has been said in the past that good years are always followed by hard limes and we have to be prepared for when they come. 1would like to take this opportunity to thank all of you who acknowledge and understand that there will be limes when we do not achieve positive results. In January 2009, the Slovak Republic adopted the euro, which substantially facilitated planning. lt is also a guarantee that we will not be sensitive to fluctuations of exchange rates,which we experienced in the past. 1am grateful to all the banking institutions, thanks to which we did not experience any financial difficulties in the monitored period, and 1believe that we will keep on this track in the future. We are prepared to take advantage of our experience to ensure that Železiarne Podbrezová continues to be a flagship among the seamless steel tubes manufacturers, not only in the Slovak Republic, but also across Europe. 1would like to express my gratitude to all company employees, including our management and partners. 1hope that the impacts of this unprecedented economic crisis, which is principally attributable to a severe decline in financial market morale as supported by rating agencies and financial speculators, will be minimal for all of us. 1am convinced that the hard times will be a test for all companies and that those who took sound care of their companies will eventually be strengthened by the crisis. U k "' Ing. Vladimír Soták Chairman of the Board of Directors and General Director