Annual report 2016

ANNUAL REPORT 2016 • Železiarne Podbrezová a.s. 35 BUSINESS PLAN After disposing of some heavy mechanical engineer- ing activities, ie the sale of subsidiaries ŽĎAS a.s. and TS Plzeň a.s., the business strategy of Železiarne Pod - brezová a.s. will focus on consolidation in metallurgy, production of steel, hot-rolled and cold-drawn seam- less steel tubes with a strong support from its own ser- vices. The Company also has significant investments in the tourism sector via Tále, a.s. The sale of subsidiaries had a major impact on the reported positive results of operations in 2016. The Company used the funds from the sale of subsid- iaries to significantly decrease external debt financing, purchase trading companies for the sale of Železiarne Podbrezová products, and to pay dividends to the shareholders. The prospects for economic growth in the EU Member States and in the Company’s business sectors is still limited, nevertheless after the years of stagnation we are seeing moderate growth. The EU’s economic en- vironment is impacted by trade sanctions against Russia which have an uncertain time horizon. Glob- al production overcapacity of steel is still significant and the regional imbalance between production and consumption, in connection with government pres- sure to introduce protection measures, is a risk factor. In early 2017, the rolled steel tube market experienced a degree of recovery of demand, which provided space to increase production. Despite the positive news, the 2017 plan of Železiarne Podbrezová a.s. was cautious. Increasing input prices, which started to grow signifi - cantly at the end of 2016, must be reflected in the prices of final products, which will not be easy given the cur - rent market situation. Therefore, we plan to sell prod - ucts, goods and services to all our traditional territories in a total amount of EUR 209.4 million via our trading companies. Investments of EUR 5.55 million are planned for 2017. The most important technological investment projects will include installation of an additional system for pipe division directly on the push bench, replacement of the turbine and the cogeneration unit transmission, and modernisation of the elongator stand. The most important investment project of a construction nature in 2017 will be the reconstruction of the Podbrezovan apartment building that will provide 18 rented apart- ments to the Company’s employees in autumn 2017. The Company plans to spend a total of EUR 25.4 million in the repairs to technological facilities and buildings in 2017. In 2017, we plan to implement 14 internal R&D projects with planned costs of EUR 772 thousand. The main fo- cus will be further optimisation of production process- es, improving the quality of production and optimising materials for tools in the production of tubes. In 2017, we will continue to implement multi-year R&D proj- ects on tools, modelling and simulation of production processes and material engineering, which will subse- quently be used to optimise the Company’s production processes. As part of the EU 2014–2020 programming period, ŽP VVC s.r.o. will participate via its projects in the Research and Innovation programme. We will continue to strengthen the management system under ISO 9001:2008 - VDA 6.1. and ISO/TS 16949:2009 as regards quality assurance, and the en- vironmental management system under the ISO 14001:2004 standard. The personnel, payroll and social policy programme for Company employees has been approved for 2017. The corporate strategy will continue to include an effi - cient re-assessment of headcount in line with the cur- rent number of contracts and the volume of auxiliary jobs and services. The Company will continue to de- velop the occupational health and safety management system, certified under OHS 18001 standards. We will also continue to pay close attention to ensuring that the future workforce is highly skilled and, therefore, we will continue to support the training of employees to meet the Company’s needs at ŽP’s Private Secondary Metallurgy Apprentice School and ŽP’s Private Second - ary Grammar School. We will strive to guide students’ decisions when selecting colleges to ensure that if they wish to work for our Company, they are provided with information on the required study areas. REPORT BY THE BOARD OF DIRECTORS ON BUSINESS ACTIVITIES, ASSETS, AND FINANCIAL PERFORMANCE IN 2016 AND INFORMATION ON THE BUSINESS PLAN