Annual report 2015

Železiarne Podbrezová a.s. Annual report 2015 European metallurgy is currently facing an unprecedented crisis primarily due to cheap imports of metallurgical prod - ucts from China. Additionally, the constant downward pres - sure on the prices of steel products was intensified by sig - nificantly lower oil prices, resulting in a freeze in investment activities in this area and therefore, many manufacturers started to focus on our traditional range. Production over - capacity is so high that some European corporations started to reduce the shift work of their technological facilities and dismiss employees. The embargoes imposed on Russia as a political solution of the Russian and Ukrainian crisis worsened EU market con - ditions. The sanctions are not effective and their lifting is unlikely in the near future. In contrast, the opening of Eu - ropean markets and the abolition of customs duty on met - allurgical production from Ukraine resulted in more than 75 thousand tonnes of rolled steel tubes being imported to the EU in 2015, directly competing with the joint-stock com - pany’s core metallurgical production. A decrease in prices and in demand as of April 2015 caused a drop in revenues from the core operating activity by EUR 27 million compared with the previous year. A profit was only generated thanks to savings on operating expenses, which were cut by EUR 25 million compared with 2014. The reduction in material and energy consumption stan - dards was achieved by another gradual optimisation of tech - nical parameters of the technological facility for the continu - ous casting of steel and the rolling of seamless tubes, which was modernised in 2013 and 2014. The reported 2015 profit was primarily impacted by the profit/loss from financing activities, especially thanks to the dividends received from subsidiaries. At the end of 2015, re - ported assets totalled EUR 270.8 million and were covered by own funds at 70%. The 2016 business plan has been prepared with a great deal of caution taking into account the current business environ - ment in the metallurgical industry. Sales prices are expected to further decrease and account for a 17% drop in revenues; therefore, a loss from operating activities is expected of EUR 6.2 million. The Company’s Board of Directors plans to eliminate the operating loss by profit-making transactions related to financing activities. The investment development plan counts with essential expenses for the renewal of the technological facility totalling EUR 5.9 million. Business Activity Production and Sales Business strategy has long been centrally controlled by Žele - ziarne Podbrezová a.s. and managed on a geographical ba - sis via trading companies, PIPEX ITALIA S.p.A., ŽP Trade Bo - hemia, a.s., SLOVRUR Sp. z o.o., Pipex Deutschland GmbH and PIPEX SK s.r.o. Our sales people worked hard in 2015 to secure sufficient orders to utilise the capacity of the tech - nological equipment despite the extremely unfavourable situation on all territories. Sales prices often did not guaran - tee the profitability of individual business transactions, but there was no major reduction in shift work during the year, which would require making employees redundant. In 2015, we produced a total of 315 047 tonnes of steel, a decrease of 35 480 tonnes compared to the previous year. Of the total quantity produced, 219 839 tonnes were used for own production of steel tubes and 95 208 tonnes were sold to external customers. In 2015, we implemented several technological changes in the steel plant. In the first quarter, we successfully tested steel continuous casting of steel (CCS) using crystallizer inserts with parabolic conicity, which will improve the surface quality of the blocks at higher casting speeds. In October, we relaunched full production of an older type of block: a circle with a diameter of 240 mm. In 2015, we prepared production of the new smallest type: a quadrate with a side of 105 mm, which will be launched in 2016. A new slag additive was tested at the steel plant, which allowed us to achieve a record hearth life. In 2015, we produced a total of 179 601 tonnes of hot-rolled seamless tubes, of which 114 376 tonnes were available for sale and 65 225 tonnes were further processed in the plants of Železiarne Podbrezová a.s. Production output decreased by 12 099 tonnes (6.3%) compared to 2014. We were successful in technological innovation in 2015. We saw the full positive impact of the change in the geome - try of the input semi-finished good for the tube rolling mill. The overhaul of the calibration of push bench rollers and drawing reduction mill allowed us to discontinue the so- called small programme and extend the dimensional range of rolled tubes. The repair of the tube rolling mill in June involved putting into operation a new control system for the drawing reduction mill, the so-called New Carta. In the Report by the Board of Directors 13 on Business Activities, Assets, and Financial Performance in 2015 and Information on the Business Plan