Annual Report 2010

2010 ANNUAL REPORT r 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 its own services. In 201 O, sales opportunities far all companies in the group objectively increased to such levels that enable us to approve the business pian for2011, which expects production and sales technological capacities to be fully utilised. Our objective far 2011 isto report positive operating results in all subsidiaries and affiliated companies al such levels that would ensure appropriate development forthe companies and also payment of dividendsfar shareholders. In the parent company,we intend to continue developing metallurgical production, focusing on steel production and seamless steel tubes,and secondary metallurgical production. The 2011 business pian sets out the goal to utilise the production capacities al least al the 2007 levels, which will be also reflected in the way the technological facilities are operated. In 2011 , through our trading companies we will ensure the sale of merchandise, products and services totalling EUR 265.6 million, ofwhich more than 93% will be exported to foreign markets. We are aware that the impacts of the global economic and financial crisis are still influencing global !rade in all industries including metallurgy and heavy engineering, but we consider a 23.7% year-on-year increase in sales to be feasible. We will spend EUR 26.1 million on repairing technological equipment and structures, which equals the pre-crisis levels. Overhaul repairs of technological facilities are pianned in the amountof EUR 3.3 million. Moreover, the amount of investments far 2011 is planned at pre-crisis levels. In 2011, we pian to invest the amount of EUR 11.6 million. The most significant investment in 2011 will be the construction of a new hall far semi-finished goods with an automated warehouse far tubes. The warehouse will significantly speed up truck loading and enable storing up to 3,150 tonnes of tubes. Speeding up materials handling will ultimately enable increasing the production capacity in the seamless tubes rolling mill. Other significant investments in 2011 will include modernising production facilities far the continuous casting of steel by expanding the production range by anew dimension - 240 mm circle, prolonging the testing line No. 17 to 17 mtube length, and modernising the walking-beam furnace lining far mandrel bars. In 2011 , as regards research and development we pian to carry out 16 individual projects with acost of EUR 306.5thousand,with the main focus on improving our equipmenťs energy efficiency,improving production quality,and optimising production processes. We will also perform an R&D project: "Research of properties of new generation fire proof steels to be applied in superheating systems with ultra supercritical parameters", which is co-funded using EU funds far regional development and the state budget of Slovakia within the "Research and Development"operating programme ofthe Ministry of Education, Science,Research and Sport of the Slovak Republic, through the subsidiary ŽP VVC s.r.o. We will finance other specific tasks in the amount of EUR 176 thousand. In quality assurance,we will continue to pursue the management system under ISO 9001 :2008- VDA6.1„ ISO/TS 16949:2009 and the Environmental Management System underthe ISO 14001 :2004 standard. The personnel, payroll and social policy programme far the company's employees will be affected in 2011 by the employment development from prior years and the corporate strategy will continue to include an efficient re-assessment of the headcounts in line with the number of work 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 pas! and whose work was evaluated positively. Efficient spending far the employee social programme will be revised in line with the reforms of the new Slovak government and developments in legislation in the relevant field. We will continue developing the occupational health and safety management system certified under OHS 18001 Standards. We must also pay close attention to ensuring the future workforce is of high quality; therefore, we will support education of a qualified workforce far the company's needs at Železiarne Podbrezová's Private Secondary Apprentice School of Metallurgy and Železiarne Podbrezová'sPrivate Secondary Grammar School in the future. The operation and development of the information system in the parent company will continue to be outsourced to our subsidiary ŽP Informatika s.r.o. in 2011. This company will also provide its services in the largest extent possible to the subsidiaries and will continue expanding its activities to external entities. With regard to the development of the application software far Železiarne Podbrezová a.s. ,emphasis will be put on supporting the business activities in 2011 and unifying them far all trading subsidiaries. In recent years, the Company'sfinancial situation has been balanced and stable mainly thanks to asingle credit facility provided by the bank club. Extending the maturity date of this credit facility until 2013 is a sufficient guarantee far stabilising the company's financing in the future forthe purpose of gradually reducing exposure in the years to follow. 1