Annual report 2012

ŽELEZIARNE PODBREZOVÁ A.S. ANNUAL REPORT 20 12 13 REPORT BY THE BOARD OF DIRECTORS ON THE BUSINESS ACTIVITIES, ASSETS, AND FINANCIAL PERFORMANCE IN 2012 AND INFORMATION ON THE BUSINESS PLAN The total revenues from the sale of our products, goods and services in 2012 amounted to EUR 264 427 thousand, which is a 4.0% decrease compared to the previous year. Out of the total sales, we supplied more than 90% of our products to export markets. The net profit for 2012 was calculated in line with International Accounting Standards and amounted to EUR 7 022 thousand, with a return on sales revenues of 2.66%. Thanks to our quality services and short supply periods, we maintained our significant position on European and global markets. In the area of investment development, we continued to proceedeconomically in2012; we invested a total of EUR5711 thousand, of which 79%was directed into the development of the technological base. The whole year was marked by preparations for 2013, whichwill be one of themost important milestones in terms of investments in the last two decades. The most important investment is the reconstruction of the facility for the continuous casting of steel, followed by the reconstruction of dedusting of the electric arc and ladle furnace. Together with other projects focused on energy savings andquality control, weplan to investmore thanEUR24 million in 2013. It is a very important action to maintain the Company's long-termstability. The Company's financing was balanced and stable throughout the year. The equity to assets ratio amounted to 67.5% as at the end of the year. Regarding external debt, bank loans cover 15.4% of assets. The club financing by four bank institutions is secured by a joint credit line until July 2013 that serves to finance the Company's general needs. The total assets amounted toEUR277443 thousand as at 31December 2012. There were no major changes in ownership interests in subsidiaries and joint ventures in 2012. All major companies in the Group reported profit for 2012 and the dividends paid to the parent company for the previous year totalling EUR 5 068 thousand contributed significantly to its financial result of operations in2012. The unstable situation in the public finances ofmany European countries foreshadows more cuts in expenditure and investment development support. Today, the crisis already affects several areas of social life and is gaining a serious social dimension. As a typical pro-export company, we fully recognise the threat of crisis periods in the coming years; therefore, we are very careful in forecasting future market development. Our competitive advantage lies in our high flexibility and the permanent quality of our production. BUSINESSACTIVITY Production andSales The business strategy has been centrally controlled by Železiarne Podbrezová a.s. and managed on a geogra- phical 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 people, along with the market recovery in 2012, ensured a sufficient number of contracts to utilise the technology equipment's production capacity sufficiently; however, at the end of the year, the demand for steel products produced at Podbrezová decreased so much that we were forced to take measures at some production plants, which led to a partial reduction in thenumber of employees. In 2012, we produced 368 754 tonnes of steel, which is a 1% growth compared to 2011 and it is historically the second greatest quantity of steel produced in a year. From the total produced quantity, we used 257 493 tonnes directly for our own production of steel tubes and we sold 111 261 tonnes directly to external customers. After the decision to invest in the reconstruction of the continuous casting facility, which was confirmed on 21 May 2012 by a ceremonious signing with the supplier of the new technology –– Danieli, we started to make inventories of input semi-finished goods for the tube rolling mill in the second half of the year. Therefore, we adjusted the production of steel for sale for this intent and its share in total production compared to the first half-year decreased by approximately 15%. The steel mill took several measures in terms of modernisation and improvements in technological efficiency. It is worth mentioning the implementation of the electrode cooling system gradually for all three arms of the EAF furnace, which contributed to a significant reduction in their consumption. In 2012, we produced 193 887 tonnes of hot-rolled seamless tubes, which is the greatest quantity in the history of Železiarne Podbrezová a.s. The above quantity represents a 5.9% increase compared to 2011. Equally, the greatest quantity in the Company's history was achieved in the production of hot-rolled seamless tubes, which amounted to 127968 tonnes – a growthof 7.8%compared to2011.Weused 63 642 tonnes from the total quantity of hot-rolled tubes for our own production of precision tubes and butt welding elbows. At the start of the year, we took measures to reduce necessary technological downtime and thus to increase the speed and time utilisation of the track, leading to record- breaking monthly production in the third month with the optimum composition of the rolling programme. The effort bore fruit also in the second half-year as we achieved record- breaking monthly production for sale in the tenth month and also record-breaking quantity of dispatched hot-rolled tubes. In the same month, increased demand for our tubes overseas was reflected in record-breaking production of UV varnished tubes.