Annual report 2012

ŽELEZIARNE PODBREZOVÁ A.S. 34 BUSINESSPLAN The business strategy pursued by Železiarne Podbrezová a.s. has for many years been focused on diversification, spread across three main pillars: metallurgy, heavy engineering, and tourism, with substantial support by its own services. In the parent company, we will continue to develop metallurgical production and focus on the production of steel, hot-rolled and cold-drawn seamless steel tubes and secondary metallurgical production. A negative economic outlook in Europe forces us to have a cautious attitude to the forecasting of sales tasks in 2013. Therefore, we set the sales plan down by around 7%compared to 2012; however, an important role is the downtime of the steel mill's technological equipment during its reconstruction and modernisation in September 2013. We expect that the market will recover gradually during 2013 and that we will utilise our production capacities to the full in the second half- year, and the operation of technological facilities will be adjusted accordingly. The sales plan is set cautiously, especially regarding prices. In 2013, through our trading companies, we will ensure the sale of products, merchandise and services totallingEUR241.2million. The year 2013 will be an important company milestone in terms of investment development as we plan to invest a total of EUR 24.2 million. The most significant event will be the reconstruction and modernisation of facility for continuous casting of steel, which will be renovated after 31 years. In the same period, we plan to implement new dedusting of the electric steel mill, which will be co-financed from the EU funds with a 30% share following the approval of the subsidy by the Ministry of Environment. Other important events in 2013 include the replacement of the gas turbine and the combined cycle control system, as well as new device for non-destructive testing of tubes. Implementation of these projects will ensure long-termstability of theCompany. A total of EUR 24.1 million will be spent on repairs of technological facilities andbuildings in2013. As regards research and development in 2013, we plan to carry out 14 internal projects. We will mainly focus on improving the equipment's energy efficiency, improving production quality andoptimisingproductionprocesses. In2013, wewill 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. The co-operation with our research company, ŽP VVC s.r.o., will be aimed at researching the properties of construction materials, tools, boiler tubes and the modelling of technological production processes. We intend to spend EUR 2.5 million on technological research anddevelopment in2013. 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 environmental management systemunder the ISO14001:2004 standard. In 2013, 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 efficient re- assessment of headcount in line with the current number of contracts and the volume of auxiliary jobs and services. Efficient spending for 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 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. Wewill strive to guide students' decisions in selecting colleges to ensure that, if they wish to work for our Company, they will always be provided with informationon the requested fields of study. 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 2013. This companywill also provide its services in the largest extent possible to the subsidiaries and will continue to expand its activities for external entities. With regard to the development of the application software for Železiarne Podbrezová a.s., the emphasis in 2013 will be placed on supporting the business activities andunifying themfor all trading subsidiaries. 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. In 2013, after negotiations with all major banks operating on the Slovak financial market, we intend to refinance this credit line and we will conclude new club terms for the funding of general needs of the company totalling EUR 39.0 million. A credit line under economically more-advantageous terms was contracted with Eximbanka SR to fund the investment development. With regard to the sales in the amount of EUR 241.2 million, the Board of Directors of Železiarne Podbrezová a.s. set a goal for 2012 to generate a net profit after tax in the amount of EUR 5.6 million. This amount will also include revenues from financial investments. The dividends to be received from subsidiaries in2013 areestimated at EUR4.3million. Weplan togenerate a profit in all subsidiaries in2013. We also plan to generate a profit in all subsidiaries in 2013. The objective is to achieve such profit so as to ensure their adequate development and dividends for the parent company. ANNUAL REPORT 2 012 REPORT BY THE BOARD OF DIRECTORS ON THE BUSINESS ACTIVITIES, ASSETS, AND FINANCIAL PERFORMANCE IN 2012 AND INFORMATION ON THE BUSINESS PLAN