Annual Report 2010

2010 ANNUAL REPORT r REPORT BY THE BOARD OF DIRECTORS BUSINESSACTIVITIES Production and Sale Also in 201 Othe 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 (lnternational) AG, ŽP Trade Bohemia, a.s., and SLOVRUR Sp. z o.o. Following the critical year 2009,the market with steel products has gradually recovered. Thanks to our targeted business policy we gained a sufficient amount of work contracts, which helped us to better use the production capacity of our technology equipment. Greater requirements of our customers were ultimately refiected in amodification of the working regimes in individual production operations. First, we experienced greater demand far seamless rolled tubes, the production of which has been adjusted to the continuous operation since March. A similar approach was taken to address a higher demand far welded precision tubes - by adding employees to afive-day three-shift working regime. We have also seen aconsistent recovery of demand in the sale of continuously cast steel billets and the steel mill started continuous operations in May. In 2010,323,832 ton nes of continuously cast steel billets were produced,which compared to the previous year represents year-on– year growth of 69.4%; however, compared to 2008 it was adrop of 11 .7%. Out of the quantity above, 101 ,327 tonnes were sold to external customers and other billets were used far producing steel tubes. The sold quantity represents an increase of 144% compared to 2009. In the seamless hot-rolled steel tube mill, 169,941 tonnes of steel tubes were produced far 2010, which represents year-on-year growth of 37.6% compared to 2009. Out of thetotal produced quantitywe sold 113,008 tonnes to our customers; the remaining part was processed in the production of precision tubes and welded elbows. The sold quantity represents an increase of 30.8% compared to 2009. We experienced amajor increase in the production of seamless cold drawn tubes. In 201O, 43,373 ton nes were produced, which compared to the previous year is an increase of 69.1%. Nevertheless,we did not reach the 2008 level. This intense growth in sales and, accordingly, also in production required a very quick resolution to the existing situation and the adoption of a series of necessary measures to manage the increased demand. Monthly fiuctuations were balanced by using production capacities on weekends. In 201 O,steel billets and seamless hot-rolled and cold-rolled steel tubes accounted far98.4% ofthe company'stotal production. Other products represent asupplementary range of goods. In 201 Owe produced in total 2,872 tonnes of steel welded elbows and reductions with year-on-year growth of21.6% and 59 tonnes of welded reductions. We also produced 2,620 tonnes of welded tubes with large diameters, which represents a 67.3% increase compared to the previous year. We were unable to reach the required profitability of the production of welded tubes with small diameters. In 201 Oa decision was made to stop the production and the production line was offered far sale. In the area of operation tasks,our activities were facused on solving issues related to increased disposal of tubes at the ultrasound testing, mainly tubes far consumption in the car industry. The other extensive area of development was to increase plastic characteristics of material,especially of seamless rolled tubes allocated farfurther processing bydrawing. In the quality management system far serial production of spare parts used in the car industry, the main facus was on meeting the requirements of the ISO/TS 16949 standard and the application thereof to the company'sconditions. Supervisory audits according to ISO 9001 :2008,VDA6.1and ISO/TS 16949:2009 standards were successful; we have defended the certificates confirming that the production processes are audited and in line with the requirements of the relevant standards. In 201 Owe sold the products, merchandise and services to our customers in the total amount of EUR 216,280 thousand, which represents asignificant increase of 59.9% year-on-year. The supplies of metallurgical products in weight units (tonnes) increased by 63.6%, and a further increase results from higher selling prices. Nevertheless, the 2008 sales levels were not met (drop of 29.2%).Out of the sold products,supplies far export accounted far 89.6% and 10.4%was allocated to the customers in Slovakia. The geographical structure of sales was not significantly changed in 2010. The dominant market segment continued to be EU countries in the fallowing sequence: Germany, Czech Republic, Poland, ltaly, and Hungary. The largest drop in sales was to the customers in ltaly (drop of 14%); sales increased to customers in Germany (increase by more than 150%) and to the Czech Republic (increase of 120%) thanks to the renewal of steel billets supplies to TRINECKÉ ŽELEZÁRNY,a.s. 1