Annual Report 2011

13 The total revenues from the sales of our products, merchandise and services in 2011 amounted to EUR 275,524 thousand, which is a 27.4% increase in comparison with the previous year. However, the sales only amounted to 90% of the sales in the most successful year, 2008, especially due to lower sellingprices.Outofthetotalsales,wesuppliedover90%ofourproductstoexportmarkets.The2011netprofitamountedtoEUR14,409thousandwith a return on sales revenues of 5.23%. We acquired new customers thanks to our high-quality services and short delivery times. We maintained our significantpositionontheEuropeanandglobalmarkets. After previous years of savings, we ensured extensive reproduction in the area of investment development, investing a total of EUR 10,956 thousand, with more than 69% in the modernisation and replacement of the technological equipment. At the end of the year, we managed to ensure the high quality of a very difficult overhaul of the technological equipment of the steel mill and the seamless tubes rolling mill. The general overhaul of the mechanicalandelectricalpartsofthepushbenchwasperhapsthemostsignificantinitshistory,i.e.from1979,intermsofitsextent. The Company's financing was balanced and stable throughout the year. The equity to assets ratio amounted to 69.5% at the end of the year. The club financing by four bank institutions is secured by a joint credit line until July 2013 that serves to finance the general needs of the Company. As at 31December2011,theratioofloansandborrowingstothetotalfundingoftheCompanywasbelow16%. The streamlining measures in the period of crisis were implemented throughout the group of subsidiaries and they remain in effect. The measures contributedtothepositiveresultsoftheoperationsofsubsidiariesin2011. In order to increase the transparency of costs, we, as a sole partner, established a separate subsidiary, ŽP Bezpečnostné služby, s.r.o. in 2011. The company took over the Company's police and security service activities. The subsidiary, ŽP Tažírny trub Svinov, spol., s r.o., was dissolved through liquidationwithaprofitintheamountofEUR894thousandanddeletedfromthecommercialregisterintheCzechRepublic. Today,wearewitnessingunclearandverycautiousforecastsregardingmarketdevelopment.TheunstablesituationofpublicfinanceofmanyEuropean Unionmemberstatesforeshadowscutsinexpendituresandinvestmentdevelopmentsupport.Beingatypicalpro-exportcompany,wefullyrealisethe threat of future economic and financial crises. However, our new experience has made us ready to respond with knowledge and prudence. Our competitiveadvantageliesinourhighflexibilityandourrecentexperienceguaranteesthatwewillcontinuetobesuccessfulinfuture. The business strategy is centrally controlled by Železiarne Podbrezová a.s. and managed on a geographical basis via trading companies PIPEX ITALIA S.p.A., Pipex (International) AG, ŽP Trade Bohemia, a.s., SLOVRUR Sp. z o.o. and PIPEX SK s.r.o. The systematic work of our sales force in the continued recovery of themarket in 2011 ensured enough contracts tomake better use of the production capacities of the technological equipment.The demand forsteelproductsproducedinPodbrezováalmostreachedthepre-crisislevel. In 2011, we produced 367,816 tonnes of continuously-cast steel blooms, which is an increase of 13.6% compared to the previous year. Out of the quantity above, we sold 132,815 tonnes to external customers, especially in the Czech Republic and Germany.The rest of the steel was used to produce steeltubes.Inthepreviousyear,westartedtoproduceanewcaststeelprofile–the240mmcircle.Itisour13thprofileanditexpandsourrangeofsteel bloomsforexternalcustomers. We produced 183,100 tonnes of seamless hot-rolled steel tubes in 2011, which is an increase of 7.7% compared to the previous year. Out of the total produced quantity we sold 118,714 tonnes to our customers; the remaining part was processed in the production of precision tubes and butt welding elbows. The quantity sold represents an increase of 5.1% compared to 2010. The results of the rolling mill may have been even better, but they were negatively influenced by an emergency event. In March, there was a fire in the cable ducts under the technological equipment that destroyed the electrical installations and regulation and control units of the main part of the rollingmill.The qualified intervention by our own fire-fighting unit and its prompt elimination of the seat of fire prevented further damage. Thanks to the perfect cooperation of all company units and the assistance of external suppliers, the production process was resumed after only 18 days. The confirmed purchase contracts were fulfilled with a month's delay followingnegotiationsandagreementwithallcustomers. There was also a significant increase in the production of precision drawn seamless tubes. In 2011, 50,907 tonnes were produced, which, compared to the previous year, is an increase of 17.4%.The gradual increase in sales and thus production necessitatedmeasures to increase production in the range ofprecisiontubeswithdiametersfrom20to60mm,whichcurrentlyrepresentsasmuchas65%oftheproductionquantity.Anon-stopoperationmode had to be introduced for a portion of the technological equipment. In 2011, we gradually performed the production quality review at the galvanising line.Wesuppliedourcustomerswith523tonnesofzinc-coatedprecisiontubes. The fire in the seamless tube rolling mill negatively influenced the production of precision drawn tubes in April. Due to a lack of input materials, we suppliedaround50%oftheprecisiontubestoourcustomerswithamonth'sdelay. BUSINESS ACTIVITY ProductionandSales REPORT BY THE BOARD OF DIRECTORS ON THE BUSINESS ACTIVITIES, ASSETS, AND FINANCIAL PERFORMANCE IN 2011 AND INFORMATION ON THE BUSINESS PLAN Ž E L E Z I A R N E P O D B R E Z O V Á A . S .