Annual Report 2011

BUSINESS PLAN The business strategy pursued by Železiarne Podbrezová a.s. has for many years been focused on diversification, spread across three main pillars: metallurgy,heavyengineering,andtourism,withsubstantialsupportbyitsownservices. In2011,salesopportunitiesforallcompaniesinthegroupobjectivelyincreasedtosuchlevelsthatenabledustoapprovethe2012businessplan,which expectstheproductionandsalestechnologicalcapacitiestobefullyutilised. Our objective for 2012 is to report positive operating results in all subsidiaries and associates at such levels that would ensure appropriate development forthecompaniesandalsothepaymentofdividendstoshareholders. In the parent company, we intend to continue developing metallurgical production, focusing on the production of steel, seamless steel tubes and secondarymetallurgicalproduction.The2012businessplansetsoutthegoalofutilisingtheentireproductioncapacities,whichwillalsobereflectedin thewaythetechnologicalfacilitiesareoperated.In2012,throughourtradingcompanies,wewillensurethesaleofmerchandise,productsandservices totallingEUR272.2million,ofwhichmorethan90%willbeexportedtoforeignmarkets.Weareawareofthefactthattheglobaleconomicandfinancial crisis is still affecting global trade in all industries, includingmetallurgy and heavy engineering; therefore, our business plan has been determined very prudently,especiallyintermsofprices. WewillspendEUR27.2milliononrepairingtechnologicalequipmentandstructures;ofthisamount,theoverhaulandmediumrepairsoftechnological facilitiesareplannedintheamountofEUR7.6million. We intend to fund significant events in subsequent years. In the following two years, we plan to carry out a new three-stage dedusting of an electric steelworks,inwhichwearecountingonasubsidyfromEUfundsapprovedbytheMinistryoftheEnvironmentoftheSlovakRepublicintheamountofup to 30% of costs. In 2012 – 2014, we plan to refurbish and modernise the continuous casting of steel and to construct new vacuum equipment. New technologieswillbringaboutnewopportunitiesforlaunchingtheproductionofmore-sophisticatedproductswithhigheraddedvalue. Moreover, the 2012 investments are planned to amount to EUR 11.9million.Themost significant environmental investment will be the refurbishment of the dedusting system at the EAF and LF furnaces. Other significant investments in 2012 will include the lubrication of alloy mandrel bars and the model regulation of the rotary furnace heating system. As regards the modernisation of renewable electricity sources, we plan to modernise the TG1 turbinecontrollerinJasenie.Asforsecurity,weintendtoequipthecastingcraneinthesteelworkswithemergencybrakes. As regards research and development in 2012, we plan to carry out 16 internal R&D projects at a cost of EUR 195 thousand. We will mainly focus on improving the equipment's energy efficiency, improving production quality and optimising production processes. In 2012, we will continue to implement an R&D project entitled“Research of the properties of new-generation high-temperature steel for application in superheater systems with ultrasupercritical parameters”, which is co-funded using EU funds for regional development and the state budget of the Slovak Republic within the “Research and Development”operating programme of the Ministry of Education, Science, Research and Sport of the Slovak Republic, in the planned amount of EUR 950 thousand. The co-operation with our research company, ŽP VVC s.r.o., will be aimed at researching the properties of construction materials,tools,boilertubesandthemodellingoftechnologicalproductionprocesses. In quality assurance, we will continue to pursue the management system under ISO 9001:2008 - VDA 6.1. and ISO/TS 16949:2009 and the environmentalmanagementsystemundertheISO14001:2004standard. In 2012, the personnel, payroll and social policy programme for the Company's employees will be affected by the employment development from the preceding years and the corporate strategy will continue to include an efficientre-assessment of the headcounts in line with the current number of contractsandthevolumeofauxiliaryjobsandservices.Efficientspendingfortheemployeesocialprogrammewillberevisedinlinewiththereforms of the new Slovak government and developments in legislation in the relevant field. We will continue to develop the occupational health and safety management system certified under OHS 18001 Standards.We must also pay close attention to ensuring that the future workforce is of a high quality; therefore, we will support the education of a workforce qualified for the Company's needs at Železiarne Podbrezová's Private Secondary Apprentice School of Metallurgy and Železiarne Podbrezová's Private Secondary Grammar School in the future. We will strive to guide students' decisions in selectingcollegestoensurethat,iftheywishtoworkforourCompany,theywillalwaysbeprovidedwithinformationontherequestedfieldsofstudy. Theoperationanddevelopmentoftheinformationsystemintheparentcompanywillcontinuetobeoutsourcedtooursubsidiary,ŽPInformatikas.r.o., in2012.Thiscompanywillalsoprovideitsservicesinthelargestextentpossibletothesubsidiariesandwillcontinuetoexpanditsactivitiesforexternal entities.With regard to the development of the application software for Železiarne Podbrezová a.s., the emphasis in 2012 will be placed on supporting thebusinessactivitiesandunifyingthemforalltradingsubsidiaries. In recent years, the Company's financial situation has been balanced and stable mainly thanks to a single credit facility provided by the bank club.The maturity date of this credit facility in as late as 2013 provides a sufficient guarantee for stabilising the Company's financing in the future for the purpose ofgraduallyreducingexposureintheyearstofollow. Ž E L E Z I A R N E P O D B R E Z O V Á A . S . 30 REPORT BY THE BOARD OF DIRECTORS ON THE BUSINESS ACTIVITIES, ASSETS, AND FINANCIAL PERFORMANCE IN 2011 AND INFORMATION ON THE BUSINESS PLAN