Annual report 2019

14 Železiarne Podbrezová a.s.: ANNUAL REPORT 2019 An important factor affecting the tube production industry is the price of crude oil and the volume of investment in its extraction and processing, as OCTGs are a major part of production. This sector is also experiencing a very turbulent period with significant fluctuations in oil prices. They are caused by the decline in consumer demand due to lower economic activity as a result of the pandemic and the reluctance of the largest oil producers to reach a consensus on the redistribution of cuts in oil extraction. For these reasons, the Board of Directors carefully evaluates the situation on the markets on a daily basis and adjusts production and all related management areas accordingly. Despite the extremely challenging and unpredictable situation, we believe that our management experience, sound financial situation, loyal customers and our own sales and supply network will help the Company to overcome this crisis and strengthen its position in the market and, consequently, its financial situation. BUSINESS ACTIVITIES PRODUCTION AND SALES Železiarne Podbrezová a.s. has its own sales network, which is managed on a geographical basis via our subsidiaries, PIPEX ITALIA S.p.A., ŽP Trade Bohemia, a.s., SLOVRUR Sp. z o. o., Pipex Deutschland GmbH and TRANSMESA. The year 2018 was successful, with several production records, but 2019wasmarked by lower production at all plants. Although the first months were still very strong in terms of production, the Company could not fully use all its production capacity with maximum efficiency throughout the year. In 2019, we produced 327 782 tonnes of steel in total, which is 51 226 tonnes less than in the previous excellent year, and an 11% decrease compared to the plan. In the first half of 2019, the production of the steel plant was relatively high, with an average monthly volume of almost 32 thousand tonnes. In March, we produced a record-breaking monthly volume: 34 671 tonnes of steel blooms. Unfortunately, there was a significant decrease in orders in the second half of the year, so the production plan was not met. Of the total quantity produced, 247 352 tonnes of steel were used for own production of steel tubes and 80 430 tonnes were sold to external customers. In 2019, we again achieved a positive development of the key operational indicator of the trial balance and we also reduced production downtime compared to the previous year. In 2019, we implemented several technological changes and innovations at the steel plant. The most significant investment was made in a multifunctional demolition machine, which significantly increases the efficiency and safety of employees in the repair of refractory linings of the hearth and foundry ladles. The year 2019 marked the 40th anniversary of operation of the tube rolling mill. We produced a total of 195 000 tonnes of tubes, which is 13 419 tonnes less than in the previous record-breaking year, a decrease of approximately 4% compared to the planned volume. Of the produced volume, 125 632 tonneswere for sale to external customers REPORT BY THE BOARD OF DIRECTORS ON BUSINESS ACTIVITIES, ASSETS AND FINANCIAL PERFORMANCE IN 2019 AND INFORMATION ON THE BUSINESS PLAN