Annual Report 2009

Ž E L E Z I A R N E P O D B R E Z O V Á REPORT BY THE BOARD OF DIRECTORS BUSINESS PLAN The long-term business strategy pursued by Železiarne Podbrezová a.s. is based on diversification spread out to three main pillars: metallurgy, heavy engineering, and tourism, with substantial support by own services. During 2009 the global economic crisis affected all aspects of the Company's business operations. As a result, we had to objectively assess our reduced sales opportunities and capabilities and adjust the business plans for 2010 to this situation throughout Železiarne Podbrezová Group. Our objective for 2010 is to report positive operating results in all subsidiaries and affiliated companies and to ensure sufficient utilisation of technological equipment in order to prevent any additional layoffs. Within the parent company (the first pillar), we intend to continue developing metallurgical production, focusing on steel production and seamless steel tubes, secondary metallurgical production. The operations of technological equipment, however, will need to be adjusted to the reduced market demand for each individual product. The 2010 business plan sets out the goal to utilise the production capacities at the minimum level of 70% of the volume achieved in 2008. In 2010, through our trading companies we will ensure the sale of merchandise, products and services totalling to, at least, EUR 164.2 million, of which more than 93% will be exported to foreign markets. We are fully aware that the global economic crisis is still present; however, given the gradually increasing demand from our customers compared to 2009, we consider sales growth of 21.4% to be feasible. The cost-cutting measures adopted in 2008 and 2009 will remain effective and will be focused on operating activities. We will spend up to EUR 17.3 million on repairing technological equipment. Even the amount of planned investments is affected by the crisis. We plan to invest EUR 6 million in 2010, of which EUR 2.3 million will be allocated to the first phase of the environmental programme “Modernisation of Dust Removal from the Electric Arc Furnace”. Other significant investments will include the steam turbine in the heat station of the new plant, which will enable utilising redundant waste heat to produce electricity, modernising the equipment for continuous steel casting and expanding the production range by a new format (125 mm quadrate), modernising the anti-corrosive protection of tubes with UV varnish. In quality assurance, we will continue to pursue the management system under ISO 9001:2008 - VDA 6.1, ISO/TS 16949:2009, and the Environmental Management System under the ISO 14001:2004 standard. Through our subsidiary ŽP VVC s.r.o. we will finance specific projects in applied R&D by allotting EUR 500 thousand. The personnel, payroll and social policy programme for the Company’s employees will be affected in 2010 by the developments in 2009 and, therefore, the corporate strategy will also include an efficient re-assessment of the headcounts in line with the number of contracts and volume of auxiliary jobs and services. When hiring employees we will prefer former company employees who were dismissed owing to redundancy in the past and whose work had been positively evaluated. We will continue developing the occupational health and safety management system certified under OHS 18001 Standards. We must also keep in mind the high-quality preparation of the future workforce. Therefore, we will support educating a qualified workforce for the Company’s needs at the Private Secondary Apprentice School of Metallurgy of Železiarne Podbrezová and the Private Secondary Grammar School of Železiarne Podbrezová in the future. The operation and development of the information system in the parent company will be outsourced to our subsidiary ŽP Informatika s.r.o. also in 2010. Curtailing the costs for such services by Železiarne Podbrezová a.s. will be compensated by ŽP Informatika s.r.o. by extending the services to external entities. With regard to the development of the application software for Železiarne Podbrezová a.s. emphasis will be put on supporting the business activities in 2010. In recent years, the Company’s financial situation has been balanced and stable also thanks to credit facility provided by the bank club, the terms and conditions of which are valid until 30 September 2010. In order to maintain the Company’s financial stability we will efficiently restructure the existing credit facility well in advance for the purpose of gradually reducing exposure in the years to follow. 35