Annual report 2018

Železiarne Podbrezová a.s. ANNUAL REPORT 2018 14 REPORT BY THE BOARD OF DIRECTORS ON BUSINESS ACTIVITIES, ASSETS, AND FINANCIAL PERFORMANCE IN 2018 AND INFORMATIONON THE BUSINESS PLAN In 2018, we produced 379 008 tonnes of steel in total, which is 23 608 tonnes more than in the previous year and 4% more than the plan. During the year, the steel mill produced a record-breaking 34 642 tonnes per month. Of the total quantity produced, 262 731 tonnes were used for own production of steel tubes and 116 277 tonnes were sold to external customers. The KPIs for melting loss and production downtimes developed positively in 2018. In 2018, we implemented several technological changes and innovations in the steel mill. The most important changes include an investment that will significantly increase employee safety: an automatic device for extending graphite electrodes. In the rolling mill, we exceeded the planned production volume by more than 4% in 2018 and produced a record- breaking volume of 208 419 tonnes of tubes, which is 848 tonnes more than in the previous year. Of the produced volume, 137 172 tonnes were available for sale to external customers and 71 247 tonnes of rolled tubes were further processed by Železiarne Podbrezová a.s. Significant technological innovations in the tube rolling mill in 2018 included the application of hard-metal rollers in the baskets of the push bench and in the stands of the drawing reductionmill, whichwill significantly extend the roller life and improve the surface quality of tubes. In 2018, we continued our cooperation with our Research and Development Centre (ŽP VVC), which involved measurement and analysis of the surface temperatures of the rollers in the stands of the drawing reduction mill and adjustments of their cooling parameters to optimise cooling and to increase rolling finish temperatures. In July, we launched automatic setup of meltable baskets, which reduced technological downtime. In the second half of 2018, we launched a new automated warehouse for rolled and, partially, also for drawn tubes with a total capacity of 2 000 tonnes, which made it significantly easier to ship our products. Subsequently, we started moving a finishing line to the shipping warehouse in the tube rolling mill. The finishing line will be completed in the first half of 2019, increasing the finishing capacity, which is currently insufficient. In 2018, we produced 54 103 tonnes of precision cold- drawn tubes, which is 729 tonnes more than in 2017, and a record-breaking total length of over 37 000 km. The planned production volume was exceeded by more than 5%. We sold 53 066 tonnes of precision drawn tubes to external customers, of which 1 761 tonnes were with a galvanised finish and 2 532 tonnes of divided and hydraulic tubes. Demand for precision drawn tubes was stable in 2018 for most major product groups of the tube drawing mill. In 2018, we made several important investments. We installed and launched another tube division system directly on the drawing bench. Another important technological innovation was the installation of a comprehensive automated finishing line for small- diameter tubes, which will perform all operations from straightening to final packaging of products. For capacity reasons, we also changed the logistical flow of product finalisation to ensure more efficient grouping prior to shipping. Continuously-cast blooms, seamless hot-rolled tubes and precision cold-drawn tubes accounted for over 99% of the total production of Železiarne Podbrezová a.s. in 2018. Other products – butt welding elbows and reducers comprised a supplementary product range. In 2018, we produced 2 276 tonnes and sold 2 249 tonnes of welded elbows and 83 tonnes of reducers to our customers. Sales of main products in 2018 Total Sales of Products Slovakia - 5% Export - 95% Tonnes EUR '000 Share in sales Tonnes EUR '000 Tonnes EUR '000 Steel blooms 116 277 62 189 22 % 48 27 116 229 62 162 Seamless hot-rolled tubes 137 172 125 886 45 % 7 458 7 573 129 714 118 313 Precision seamless cold-drawn tubes 53 066 85 264 31 % 3 154 5 386 49 912 79 878 Butt welding elbows and reducers 2 332 4 100 2 % 78 154 2 254 3 946 Company store (1) 311 357 0 % 311 357 - - Total 309 158 277 796 100% 11 049 13 497 298 109 264 299 (1) Retail of seamless and welded tubes and butt welding elbows.