Annual report 2019

37 Železiarne Podbrezová a.s.: ANNUAL REPORT 2019 In the tube industry, we did not see a significant decline in the first months of the pandemic, this was partly due to the fact that several of our competitors in Italy, Spain and Austria halted production and lower demand was covered by fewer producers. However, the situation has changed significantly in recent weeks and with a significant decline in orders, the outlook for the coming months remains uncertain. To cope with the current decline in sales, the Company has been forced to take unpopular measures, such as limiting the number of production shifts, reducing the number of fixed-term employees and reducing the number of hours worked by employees. The sales plan of Železiarne Podbrezová a.s. for 2020 was not optimistic, but given the current situation we can be certain that the Company will incur an operating loss this financial year. It is likely that dividends from subsidiaries will not cover the loss, and the Company could end the year with a loss overall. The 2020 investment plan is based on the medium-term plan and at EUR 14.6 million it significantly exceeds depreciation charges. The most important technological investments will include upgrade and automation of the tube division system, which will significantly simplify production flow in the finishing hall of the tube rolling mill. The relocation and significant modification of the straightening dividing line will have a similar effect on production processes. The plan is to purchase a new modern dividing centre and to purchase another three-part toothed bar of the push bench. Planned construction investments include the renovation of the private school workshops and the complete renovation of the welding school. In 2020, we will continue to expand rental housing for employees and reconstruct the staff quarters into twelve new rental flats. We plan to spend a total of EUR 34 million on repairs and maintenance of technological facilities and buildings in 2020. In 2020, our subsidiary ŽP Výskumno-vývojové centrum will carry out 6 internal R&D projects for us, with planned expenses of EUR 964 thousand. The research is aimed at improving production quality, optimising materials for tools in tube production and optimising production processes. In 2020, the Company will continue to implement multi-year R&D projects on tools, modelling and simulation of production processes and material engineering, which can be applied by the Company to production. We are continuously improving the quality management system under ISO 9001:2015 and IATF 16949:2016. The Company will continue to develop and optimise the integrated management system that combines the environmental management system under ISO 14001:201 and the occupational health and safety management system under ISO 45001:2018. In 2020, the Board of Directors will continue the personnel, payroll and social policy programme for Company employees. This provides employees with guaranteed benefits over and above legal requirements, such as contributions to the 3rd pension pillar, subsidised meals, 24-hour insurance outside working hours, retirement payment and severance pay exceeding the legal minimum. We will continue to prepare and educate new employees at our Private United School (Súkromná spojená škola ŽP). In2020, wewill continue our cooperationwith the subsidiary ŽP Informatika s.r.o., which operates and develops new information systems for the parent company and other companies in the ŽP GROUP as needed, by IT outsourcing. As regards the development of application software, the focus in 2020 will be on the medium- term project of comprehensive change to the production information system to improve the planning, monitoring, and management of production and technical processes in the Company. REPORT BY THE BOARD OF DIRECTORS ON BUSINESS ACTIVITIES, ASSETS AND FINANCIAL PERFORMANCE IN 2019 AND INFORMATION ON THE BUSINESS PLAN