Annual report 2017

2017 ANNUAL REPORT Železiarne Podbrezová a.s. 35 BUSINESS PLAN In the future, Železiarne Podbrezová a.s. will focus on consolidation in the production of steel, hot-rolled seamless steel tubes and cold-drawn precision tubes. The company intends to streamline its production processes by a series of smaller investments. The investments should impact the Company’s costs in the future and help resolve labour market problems. After selling a portion of foreign assets in 2016, the Company significantly reduced its loans, and a portion of the proceeds were paid out to its shareholders as dividends. However, due to the significant growth in revenues, input prices and finished products, the Company drew more than EUR 10 million in bank loans to finance operating capital in 2017. The European Union predicts a positive economic outlook for 2018 and 2019 and the World Steel Association has made similar predictions. Although this is a positive signal, we remain cautious, as the growth in steel consumption is still lower, i.e. it is not correlated as significantly with GDP growth as in the past. The greatest risk factor for the industry and the Company is the threat of protective measures on a global level, which could damage the comparative advantages of producers and consumers of steel products. In Q1 2018, strong demand for rolled and precision drawn tubes continued, which allowed us to achieve high production efficiency. However, constantly changing prices of input raw materials must be continually closely monitored and, if necessary, sales prices adjusted to reflect costs. Despite the positive predictions, the 2018 plan of Železiarne Podbrezová a.s. is cautious. In 2018, we plan to sell products, goods and services to all our traditional territories via our trading companies in a total amount of EUR 264.8 million. The 2018 investment plan is more than double compared to the last year, amounting to EUR 11.8 million. The most significant technological investments will include a new automated warehouse for finished products in the former welding mill, a treatment line in the drawing mill, modernisation of the punch press and an elongator in the rolling mill, a new furnace transformer and another tube division system on the drawing bench. The most important construction investment in 2018 will be new facilities for the training football stadium. In the Piesok block of flats, we plan to convert non-residential ground floor premises into 13 flats for rent as part of employee retention. We plan to spend a total of EUR 29.8 million on repairs to technological facilities and buildings in 2018. In 2018, we plan to implement 17 internal R&D projects with planned costs of EUR 1 222 thousand. The main focus will be on improving the quality of production, optimising materials for tools in the production of tubes and optimising production processes. In 2018, we will continue to implement multi-year R&D projects on tools, modelling and simulation of production processes and material engineering, which will subsequently be used to optimise the Company’s production processes. We will continue to optimise and maintain the management system under ISO 9001:2008 - VDA 6.1. and ISO/TS 16949:2009. The personnel, payroll and social policy programme for Company employees has been approved for 2018. It provides employees with a guaranteed contribution from the employer to the 3rd pension pillar, significantly cheaper meals, 24-hour insurance outside working hours, retirement payment and severance pay exceeding the legal minimum. The Company continues to develop and optimise the integrated management system that combines the environmental management system under ISO 14001 and the occupational health and safety management system under OHSAS 18001. We will continue to focus on training qualified staff by supporting their education at our secondary schools: ŽP’s Private Secondary Metallurgy Apprentice School and ŽP’s Private Secondary Grammar School. The operation and development of new information systems at the parent company and ŽP GROUP will continue to be outsourced to our subsidiary, ŽP Informatika s.r.o. in 2018. This company will also provide its services to the greatest extent possible to the subsidiaries, and to external entities to a lesser extent. As regards the development of application software for the parent company, the focus in 2018 will be on controlling applications, support for business activities for trading subsidiaries and the project of comprehensive change to the production information system, which will significantly improve the planning, monitoring, and management of production and technical processes. REPORT BY THE BOARD OF DIRECTORS ON BUSINESS ACTIVITIES, ASSETS, AND FINANCIAL PERFORMANCE IN 2017 AND INFORMATION ON THE BUSINESS PLAN