Annual report 2018

Železiarne Podbrezová a.s. ANNUAL REPORT 2018 30 TRANSMESA & TAP The product portfolio of TRANSMESA and TAP (Spanish companies) strengthens and complements the international position of the ŽP GROUP as regards production and sales of precision cold-drawn steel tubes. The boom in the market for metallurgical products last year led to much higher demand and prices, which resulted in a sufficient volume of orders for management to utilise the full production capacity of both Spanish manufacturing plants. In 2018, TRANSMESA and its subsidiary TAP produced 8 666 tonnes of precision steel tubes and profiles, with a total length of 25 300 km, a 6% increase compared to 2017. Of the total volume, 2 992 tonnes were finalised by electrolytic galvanising and 2 620 tonnes by mechanical division. Both companies supplied their customers with tubes in a total amount of 14 786 tonnes (of which 9 446 tonnes were of own production) and the consolidated revenues from the sale of goods, products and services totalled EUR 42.2 million. The 16% y/y increase in revenues was driven by a 12.7% increase in the sale of own products, and a significant increase in the sale of products of Železiarne Podbrezová a.s. (amounting to EUR 7.9 million). In 2018, the companies posted a consolidated profit after tax of EUR 2 765 thousand (TRANSMESA: EUR 2 616 thousand and TAP: EUR 149 thousand). Total assets as at 31 December 2018 amounted to EUR 44 647 thousand. Current assets amounted to EUR 19 830 thousand and equity amounting to EUR 20 300 thousand covered almost 46% of total assets. In 2018, TRANSMESA shipped its products to 36 countries, and the Spanish market comprised 30.7% of its total revenues. EU Member States, North America and Australia continued to be the main export markets. Investments were reduced after the significant investments were made in the relocation and modernisation of production in recent years. Nevertheless, several smaller projects totalling EUR 2 130 thousand were implemented in 2018. The companies invested in higher automation, improvement of production information systems, and expanding and streamlining warehouse management. The subsidiary, Transmesa USA, Inc., began installing a second flat surface grinding line in Sterling Heights to strengthen its presence in the US market. The plan for 2019 is to optimise production processes and investment in increasing production efficiency for small diameter tubes, with the goal of a 4.6% increase in weight and a 6% increase in length. Despite lower demand for industrial products and a planned decline in product sales, the business plan expects a 1.3% y/y increase in revenues to a total of EUR 42.7 million. Maximum use of ŽP GROUP synergies will be made when purchasing goods and entry rods. Under these conditions, we plan to maintain a high level of profitability and overall financial results in 2019. ŽP EKOQELET a.s. The company’s main activities are purchasing and selling new and collected scrap metal and automobile wrecks, and waste metal processing. The company has a dominant position on the scrap steel market in western and central Slovakia and is a leader in the collection, sorting and processing of steel waste in Slovakia. ŽP EKO QELET a.s. is the most important supplier of scrap steel to Železiarne Podbrezová a.s., and it supplied 65% of total scrap steel purchases last year. The most significant risk faced by the Company is scrap steel price fluctuations on regional and European markets. There is also a risk connected with economic development and the stability of strategic scrap steel buyers. The company continuously strengthened its position in 2018 by expanding its supplier and customer base, purchasing land under its collection points, and primarily by modernising machinery and handling equipment. The company has 45 collection points, including 15 centres, 29 purchase points and one external operation. The company had 203 employees as at 31 December 2018. In 2018, the company processed and disposed of 9 045 automobile wrecks at its ecological plant for processing scrap metal and old vehicles using SHREDER processing technology in Hliník nad Hronom, a 42% increase compared with the previous year. As a result, all targets set by the recycling fund for 2018 were met since the company received a contingent grant from the Recycling Fund to increase the collection and processing of old vehicles. The company shipped 5 229 tonnes of non-ferrous metals in 2018, an increase of almost 1 100 tonnes (26%). Average prices of non-ferrous metals increased considerably by 21% y/y, which exceeds the rise in steel scrap prices. The company shipped 247 thousand tonnes of scrap steel REPORT BY THE BOARD OF DIRECTORS ON BUSINESS ACTIVITIES, ASSETS, AND FINANCIAL PERFORMANCE IN 2018 AND INFORMATIONON THE BUSINESS PLAN