Annual Report 2009

A N N U A L R E P O R T 2 0 0 9 14 REPORT BY THE BOARD OF DIRECTORS end. We have noticed, however, our customers have new requirements and in order to meet them we had to hire new employees. This is possible thanks to high flexibility of Železiarne Podbrezová a.s. This competition advantage as well as new experience represents reliable guarantees that we will be successful in 2010 onwards. BUSINESS ACTIVITIES Production and Sale Also in 2009 the business policy was centrally controlled by Železiarne Podbrezová a.s. and managed on a regional basis by the trading companies: PIPEX ITALIA S.p.A., PIPEX International AG, ŽP Trade Bohemia, a.s., and SLOVRUR Sp. z o.o. Decline in market demand concerning the entire production range in practically all downstream markets caused a material change in conditions. It was necessary to immediately modify the working regimes in all production operations and to adjust working hours to the actual needs of production. The deep drop in production in 2009 required measures to be implemented immediately, in particular changes in work management and limiting the rise of overhead costs. The measures were adopted without undue delay and were highly efficient; therefore, they considerably eliminated operating losses. A logical consequence of the changes was a reduction in headcount, including service and administrative activities in line with the Company’s HR management policy. In the steel mill, 191 166 tonnes of continuously cast steel billets were produced, which represents a year-on-year drop of 47.9 %. Out of the above quantity 41 521 tonnes were sold to external customers and other billets were used for producing steel tubes. The sale of steel fell by 69.1% when compared to 2008. In the seamless hot-rolled steel tube mill, 123 481 tonnes of steel tubes were produced, which represents a year-on-year drop of 34%. Out of the total produced quantity we sold 86 397 tonnes to our customers; the remaining part was processed in the production of precision tubes and welded elbows. In the facility for cold drawn tubes we produced only 25 642 tonnes of precision cold drawn tubes in 2009, which is a drop of 48.4% on a year-on-year basis. In 2009, a similar situation also occurred in other production facilities supplementing the core product range and representing approximately 8% of the total outputs. In total we produced 1 566 tonnes of welded tubes with large diameters (drop of 44.7%), 1 067 tonnes of seamless divided tubes (drop of 58.1%) and 2 318 tonnes of welded calibrated tubes (drop of 37.3 %). We also produced 2 363 tonnes of butt-welded elbows, which represents a year-on-year drop of 35%. Disruptions to continuous production, in practically all technological facilities, caused impaired quality, which was reflected by increased disposal of tubes during non-destructive inspections. Lower attention of employees operating the production lines played a significant role. The operation-related problems were resolved immediately when they occurred. We also introduced other technological innovations, in particular in the production of boiler tubes. The quality management system is certified according to ISO/TS 16949:2009, API Q1 and VDA 6.1 standards. In 2009 the system follow-up audit was performed, which verified that the production processes are in line with the ISO requirements. In 2009, we sold the finished goods, merchandise and services to our customers in the total volume of EUR 135 239 thousand, which represents a significant drop of 55.7% year-to-year. The supplies of metallurgical products in tangible units fell by 48.2%. Further reduction results from a decline of selling prices. In 2009, the products of Železiarne Podbrezová were purchased by customers in 38 countries from all continents. The geographic structure of the sale was not significantly changed in 2009. The dominant market segment continued to be the EU countries in the following sequence: Italy, Germany, Czech Republic, Poland and Hungary. The largest drop in sales to the Czech Republic (7.5%) was caused by discontinued supplies of steel sows to VÁLCOVNA TRUB TŽ, a.s. in Ostrava, which preferred another supplier in the crisis period. We recorded a slight increase in sales to European countries.