Annual Report 2011

15 Purchase of Strategic RawMaterials and Energy Capital Investments andCare forTechnology Equipment Compliance with ISO standards in business relationships with suppliers of rawmaterials and a stringent payment discipline has enabled us to improve still further our supply activities, especially in terms of quality and delivery times.The purchase price level was volatile in 2011, but it was much more stablecomparedtothepreviousyear.Theatmospherewithapossiblereturnoftheeconomiccrisishadapositiveimpactonpurchasepricesunderlong- term supplier-customer relationships. On the other hand, SLOVAKIA STEEL MILLS, a.s. launching steel production in Eastern Slovakia interfered with the balanced demand for and supply of scrap steel in the Central Europe, and it had a negative impact on purchase prices, especially the price of scrap steel. This phenomenon will continue to have a negative impact on the economic efficiency of metallurgical production of steel in Železiarne Podbrezováa.s.inthefuture. In 2011, we purchased rawmaterials in the total amount of EUR 161,735 thousand, of which 12.5%were imports. As usual, our priorities included the purchaseofscrapsteel,ferro-additives,andrawiron,aswellasheat-resistantmaterialsandspareparts. In2011,wepurchasedatotalof321,037tonnesofscrapsteel,ofwhich89%weresuppliesbyoursubsidiariesŽPEKOQELETa.s.andKBZs.r.o. In2011,wepurchasedatotalof210,870MWhofelectricity.Oursmallhydroelectricpowerplantsandtheco-generationunitproduced62,019MWhof electricity,whichrepresentsa22.7%shareofinternalgenerationinourtotalannualconsumption. In 2011, we purchased 43,457 thousand m3 of natural gas from Slovenský plynárenský priemysel, a. s. for our consumption. Average purchase prices grewby10.1%fornaturalgasandfellby4.2%forelectricitycomparedtothepreviousyear. In 2011, we acquired non-current assets in the total amount of EUR 10,956 thousand, with 69% of investment in the technology base development. Afterthecrisis,theamountofdevelopmentfundsapproximatedthepre-crisislevel. The amount of EUR 3,357 thousandwas used for construction-related investments.The greatest andmost significant construction-related investment was the construction of a hall for semi-finished goods including a fully-automated warehouse with the capacity of 3,150 tonnes of hot-rolled tubes. Theconstructionofthewarehouseconsiderablyreducedthetruckloadingtime. We invested EUR 7,506 thousand in the acquisition of machinery and technology development in 2011.The capital investments in 2011 included the expansion of steel blooms production with the 240 mm circle. The quality of the electric arc furnace charge was improved by installing a hydraulic packing press. During our “Research of the properties of new-generation high-temperature steel for application in superheater systems with ultrasupercritical parameters” project, we equipped the chemical laboratory, the metallographic laboratory and the mechanical testing laboratory with the necessary state-of-the-art technological equipment. The production of compressed air as a technological medium for many production devices was optimised by installing two screw compressors. Significant events also included the basic automation of carousel oven control that was performed using our own resources. In the area of environmental investment, wemodified the insulation of the transformer's catch tank and of the oil warehouse. In 2011, we performed repairs in the total amount of EUR 28,386 thousand, which is an increase of EUR 6,216 thousand compared to the previous year, inordertoensurethereliableoperationofthetechnologicalequipmentandinordertomaintainourstructuresandbuildings. Veryimportantrepairsofthesteelmill'stechnologicalequipmentandoftheseamlesstubesrollingmillwerecarriedoutinthepreviousyear.Themost significant and the most extensive in terms of the work performed was the repair of the mechanical and electrical parts of the push bench in the seamlesstubesrollingmill. We expended a total of EUR 254 thousand on research and development in 2011.We performed the bulk of our tasks in cooperation with a subsidiary, ŽPVVCs.r.o.,basedonacontractualrelationship.Thetaskswereaimedatintheareaofwaste,researchofthepropertiesofboilersteel,extensionofthe usefullifeoftoolsandthemodellingoftechnologicalprocesses. We paid special attention to the“Research of the properties of new-generation high-temperature steel for application in superheater systems with ultrasupercriticalparameters”,whichwasco-financedfromtheEuropeanRegionalDevelopmentFundandthestatebudgetoftheSlovakRepublic.The researchwillcontinuein2012. ResearchandDevelopment 2011 Ž E L E Z I A R N E P O D B R E Z O V Á A . S . REPORT BY THE BOARD OF DIRECTORS ON THE BUSINESS ACTIVITIES, ASSETS, AND FINANCIAL PERFORMANCE IN 2011 AND INFORMATION ON THE BUSINESS PLAN