ADDRESS FROM THE CHAIRMAN OF THE BOARD OF DIRECTORS

Size: px

Start display at page:

Download "ADDRESS FROM THE CHAIRMAN OF THE BOARD OF DIRECTORS"

Juliana Stewart
5 years ago
Views:

1 A N N U A L R E P O R T

CONTENT Ž E L E Z I A R N E P O D B R E Z O V Á ADDRESS FROM THE CHAIRMAN OF THE BOARD OF DIRECTORS... 3 COMPANY BACKGROUND... 4 Board of directors... 4 Supervisory board... 7 Key performance data.

2 CONTENT Ž E L E Z I A R N E P O D B R E Z O V Á ADDRESS FROM THE CHAIRMAN OF THE BOARD OF DIRECTORS... 3 COMPANY BACKGROUND... 4 Board of directors... 4 Supervisory board... 7 Key performance data... 8 Production and sales REPORT BY THE BOARD OF DIRECTORS Business activities Evironmental policy Human resources Report by the board of directors on assets, funds and financial management Significant events that occurred after the end of the reporting period Report on the activities of entities included in consolidation Business plan Conclusion INFORMATION FOR SHAREHOLDERS REPORT ON THE ACTIVITY OF THE SUPERVISORY BOARD CONSOLIDATED FINANCIAL STATEMENTS BASIC INFORMATION ON THE COMPANY CONTACTS... 72

3 A N N U A L R E P O R T

ADDRESS FROM THE CHAIRMAN OF THE BOARD OF DIRECTORS Ž E L E Z I A R N E P O D B R E Z O V Á 3 Dear Shareholders.

It is necessary to consider, however, that we began to experience a shortage of contracts for the entire product range as early as the third quarter of 2008.

Nevertheless, the official conversion rate put all Slovak exporters at considerable disadvantage.

4 ADDRESS FROM THE CHAIRMAN OF THE BOARD OF DIRECTORS Ž E L E Z I A R N E P O D B R E Z O V Á 3 Dear Shareholders. The results we achieved in 2008 are very good despite the emerging financial and economic crisis. We achieved profit at one-third of last year s level. It is necessary to consider, however, that we began to experience a shortage of contracts for the entire product range as early as the third quarter of In that period, a positive decision was made by the European Central Bank on the transition from the Slovak crown to the euro in the Slovak Republic. Nevertheless, the official conversion rate put all Slovak exporters at considerable disadvantage. As early as September 2008, the Company s Board of Directors began to thoroughly analyse the future outlook in terms of the emerging economic crisis. As we were expecting the blow of the spreading financial and economic crisis, crisis management was set up for the parent company as well as its subsidiaries. Therefore, we made considerable cost reductions, which resulted in the profit generated in The synergic effects from the acquisition of the Spanish company Transformaciones Metalurgicas S.A. (TRANSMESA) influenced the positive results of operations in late 2008 as well. We continued to implement measures in 2009 and after having assessed the results of our operations for the previous year, we adopted a decision to discontinue the production in ŽP PRAKO and ŽP Tažírny trub Svinov. In the first quarter of 2009, we were utilising our production capacities at 50%, with the headcount reduced by 23% and dramatic cost cutting implemented in all areas. The Company s Board of Directors gained experience from revitalising in the previous year, perfectly understanding not only the companies and their production programmes but also the situation on the European and global markets. As a result, the Board of Directors was able to make preparations so that positive results of operations can also be expected in 2009 despite the negative developments on the market. I believe that all measures adopted to mitigate the impacts of the financial and economic crisis were correct. Another important fact is that the measures adopted by the parent company were also implemented in the subsidiaries and I firmly believe that they will also achieve positive results of operations once the financial and economic crisis is over. Dear Shareholders. It has been said in the past that good years are always followed by hard times and we have to be prepared for when they come. I would like to take this opportunity to thank all of you who acknowledge and understand that there will be times when we do not achieve positive results. In January 2009, the Slovak Republic adopted the euro, which substantially facilitated planning. It is also a guarantee that we will not be sensitive to fluctuations of exchange rates, which we experienced in the past. I am grateful to all the banking institutions, thanks to which we did not experience any financial difficulties in the monitored period, and I believe that we will keep on this track in the future. We are prepared to take advantage of our experience to ensure that Železiarne Podbrezová continues to be a flagship among the seamless steel tubes manufacturers, not only in the Slovak Republic, but also across Europe. I would like to express my gratitude to all company employees, including our management and partners. I hope that the impacts of this unprecedented economic crisis, which is principally attributable to a severe decline in financial market morale as supported by rating agencies and financial speculators, will be minimal for all of us. I am convinced that the hard times will be a test for all companies and that those who took sound care of their companies will eventually be strengthened by the crisis. Ing. Vladimír Soták Chairman of the Board of Directors and General Director

BOARD OF DIRECTORS 4 A N N U A L R E P O R T 2 0 0 8 Ing.

Soták has held the position of CEO of the Company since 1994 and has been a member of

He was elected as CEO at the extraordinary shareholders meeting in 1994. Ing.

Kurčík has held the position of CFO since 1993 and has been a member of the Board of

Ing. Ľudovít IHRING Member of the Board of Directors and Director of Capital and Assets

Ihring has held the position of Director of Capital and Assets Management of the

Vice Chairman of the Board of Directors. Ing.

5 BOARD OF DIRECTORS 4 A N N U A L R E P O R T Ing. Vladimír SOTÁK Chairman of the Board of Directors and CEO Born in 1955, Mr. Soták has held the position of CEO of the Company since 1994 and has been a member of the Board of Directors since the Company was founded in He was elected as CEO at the extraordinary shareholders meeting in Ing. Marian KURČÍK Vice Chairman of the Board of Directors and CFO Born in Mr. Kurčík has held the position of CFO since 1993 and has been a member of the Board of Directors since He was elected Vice Chairman of the Board of Directors in Ing. Ľudovít IHRING Member of the Board of Directors and Director of Capital and Assets Management Born in Mr. Ihring has held the position of Director of Capital and Assets Management of the Company since 1993 and has been a member of the Board of Directors since the Company was founded in From 1994 to 2002 he held the position of Vice Chairman of the Board of Directors. Ing. Július KRIVÁŇ Member of the Board of Directors and Sales Director Born in Mr. Kriváň has held the position of Sales Director since 1990 and has been a member of the Board of Directors since the company was founded in 1992.

Ž E L E Z I A R N E P O D B R E Z O V Á 5 Ing.

and Human Resource Director Born in 1958. Mrs.

and member of the Board of Directors since 2006.

Directors and Technical Director Born in 1953.

Directors and Production Director Born in 1951.

Director since 1994 and has been a member of

6 Ž E L E Z I A R N E P O D B R E Z O V Á 5 Ing. Mária NIKLOVÁ Member of the Board of Directors and Human Resource Director Born in Mrs. Niklová has held the position of HR Director and member of the Board of Directors since Ing. Ľubor SCHWARZBACHER Member of the Board of Directors and Technical Director Born in Mr. Schwarzbacher has held the position of Technical Director and member of the Board of Directors since Ing. Vladimír ZVARÍK Member of the Board of Directors and Production Director Born in Mr. Zvarík has held the position of Production Director since 1994 and has been a member of the Board of Directors since 1994.

7 6 A N N U A L R E P O R T

8 SUPERVISORY BOARD Ž E L E Z I A R N E P O D B R E Z O V Á 7 Ing. Ján BANAS Chairman of the Supervisory Board Ing. Jozef MARČOK Member of the Supervisory Board Ing. Vladimír SOTÁK ml. Member of the Supervisory Board Luigi CUZZOLIN Member of the Supervisory Board Ing. Milan MUTIŠ Member of the Supervisory Board elected by employees Milan WEISS Member of the Supervisory Board elected by employees

KEY PERFORMANCE DATA 8 A N N U A L R E P O R T 2 0 0 8 Development of Selected Data (SKK thousand) exclusive of consolidated entities 2004 2005 (1) 2006 (1) 2007 (1) 2008 (1) 2008 (3) EUR million

9 KEY PERFORMANCE DATA 8 A N N U A L R E P O R T Development of Selected Data (SKK thousand) exclusive of consolidated entities (1) 2006 (1) 2007 (1) 2008 (1) 2008 (3) EUR million Sales revenues Value added Profit before tax Net profit Dividends Total assets Equity Registered capital Interest bearing loans and borrowings Return 3.51% 9.57% 10.30% 11.73% 4.31% 4.31% Return on equity 7.41% 19.24% 18.24% 19.50% 7.35% 7.35% Earnings per share, net (SKK) EUR 6 Equity per share (SKK) EUR 75 Year-end share price in stock-exchange (SKK) (2) (2) EUR 70 (1) Transition to IFRS accounting. (2) The shares have not been publicly tradable since 10 May The number specifies the price of share transfers performed at the end of 2007 and (3) Informative translation using the conversion exchange rate of SKK/EUR Equity per share (SKK) Year-end share price (SKK)

KEY PERFORMANCE DATA Ž E L E Z I A R N E P O D B R E Z O V Á 9 Development of Selected Data (SKK thousand) inclusive of consolidated entities (under IFRS) 2004 2005 2006 2007 2008 2008 (1) EUR

10 KEY PERFORMANCE DATA Ž E L E Z I A R N E P O D B R E Z O V Á 9 Development of Selected Data (SKK thousand) inclusive of consolidated entities (under IFRS) (1) EUR million Revenues Operating profit Profit before tax Net profit of which share attributable to the Company's shareholders Total assets Equity Registered capital Interest bearing loans and borrowings Return 3.19% 8.66% 8.08% 8.57% 3.59% 3.59% Return on equity 6.69% 19.54% 18.18% 18.33% 9.20% 9.20% Earnings per share (SKK) EUR 10 Equity per share (SKK) EUR 106 (1) Informative translation using the conversion exchange rate of SKK/EUR Revenues (SKK million) Profit (SKK million)

PRODUCTION AND SALES 10 A N N U A L R E P O R T 2 0 0 8 PRODUCTION PROGRAMME Continuously cast steel billets Seamless hot-rolled steel tubes tubes for steel structures tubes for mechanical working

11 PRODUCTION AND SALES 10 A N N U A L R E P O R T PRODUCTION PROGRAMME Continuously cast steel billets Seamless hot-rolled steel tubes tubes for steel structures tubes for mechanical working and machine units pressure and heat installation tubes heat exchanger tubes screwing and welding tubes combustible gas and liquid transportation tubes oil tubes Beamless precision steel cold drawn tubes standard precision tubes tubes for hydraulic and pneumatic cylinders tubes for pressure hydraulic and pneumatic circuits automotive tubes injection tubes bearing tubes Welded precision steel tubes Welded tubes with large diameters Seamless welded elbows and reductions Semi-finished tubes Use of products in % Mechanical engineering 40% Power generation Building industry 17% 8% Automotive industry 6% Steel engineering constructions 2% Other 27%

PRODUCTION AND SALES Ž E L E Z I A R N E P O D B R E Z O V Á 11 CERTIFICATION Our quality management system is certified under ISO 9001:2000 by SGS Yarsley International Certification Services

12 PRODUCTION AND SALES Ž E L E Z I A R N E P O D B R E Z O V Á 11 CERTIFICATION Our quality management system is certified under ISO 9001:2000 by SGS Yarsley International Certification Services Limited. Our automotive industry products are certified under ISO 9001:2001 VDA 6.1 and ISO/TS 16949:2002, issued by SGS ICS Gesellschaft für Zertifizierungen m.b.h. und Umweltgutachten. Železiarne Podbrezová a.s. owns product certificates issued by renowned certification companies such as Lloyd's Register of EMEA, TÜV NORD, Bureau Veritas, API, Germanischer Lloyd, Det Norske Veritas, TSÚS, and individual certificates for the production and testing of steel, seamless hot rolled tubes, precision tubes, precision calibrate and welded tubes, large-diameter welded tubes and welded tube elbows. The environmental activities of the Company are certified by SGS European Quality Certification Institute, E.E.S.V., under ISO 14001:2004. Sale of core products in 2008 Total sale Slovakia Export SKK million % SKK million % SKK million % Steel billets Hot rolled tubes Precision tubes Welded precision tubes Welded tubes Elbows Secondary metallurgical production Hydraulic and pneumatic tubes Tube adapting pieces and tubes for demountable pipes Other sale (merchandise, services) Total sale

13 12 A N N U A L R E P O R T

REPORT BY THE BOARD OF DIRECTORS on Business Activities, Assets, and Financial Performance in 2008 and Information on Business Strategy Ž E L E Z I A R N E P O D B R E Z O V Á 13 The Board of

14 REPORT BY THE BOARD OF DIRECTORS on Business Activities, Assets, and Financial Performance in 2008 and Information on Business Strategy Ž E L E Z I A R N E P O D B R E Z O V Á 13 The Board of Directors of Železiarne Podbrezová, a.s. (hereinafter Železiarne Podbrezová or the Company ) considers the results of the 2008 financial year successful even though not all of its objectives, which were specified in the business strategy prepared and presented to the Company s shareholders during the global boom in all production industries activities, were met. Under those circumstances, the Company met its customers expectations to an extent comparable to the previous year while fully utilising, albeit only for the first three quarters of the year, the technological facilities. In the following months, the Company experienced a decrease in demand for steel tubes across the entire production range, which stabilised below 50% of usual demand. As a result of the global financial and economic crisis, which gradually influenced all industrial production sectors, the reduced demand for products, works and services in late 2008 was also reflected in other group companies to various extents, which in effect negatively affected the Company s consolidated results. In order to mitigate the impacts of the economic crisis, the Board of Directors of Železiarne Podbrezová, as well as other statutory bodies of the group companies, has adopted a set of cost-cutting measures, which include headcount reduction, the effects of which are expected to be seen in In 2008, we delivered products and services to our customers totalling SKK million (EUR million), which is a 6.5% increase from 2007 and, in absolute figures, this amount represents the highest sales in the Company s history. Out of all the Company s products, 89% were sold on foreign markets, mostly in the European Union. In 2008, the Company generated a net profit after taxation in the amount of SKK thousand (EUR thousand) in line with the International Financial Reporting Standards (IFRS). The equity to asset ratio reached 64%. The Company s funding was balanced and stable throughout the year. In the period before the adoption of the euro as the official currency in the Slovak Republic, the bulk of the reported profit was represented by the currency derivatives as hedging operations against exchange rate risk. In 2008, the profit from such transactions amounted to SKK million (EUR 13.4 million). BUSINESS ACTIVITIES Production and Sale The business policy in 2008 was centrally controlled by Železiarne Podbrezová and managed on a regional basis by the trading companies: PIPEX International AG; PIPEX ITALIA S.p.A.; ŽP Trade Bohemia, a.s.; and SLOVRUR Sp. z o.o. The trading companies contracted an optimum volume of orders throughout the three quarters. Because of the decreased demand in all territories in late 2008, we did not achieve the planned production volumes of weight units in the core production plants and did not exceed the 2007 levels. In the steel mill, tonnes of continuously cast steel billets were produced. In the rolling mill for seamless hot-rolled steel tubes, tonnes were produced. In the tube mill, tonnes of drawn seamless tubes were produced in We produced tonnes of welded tube elbows, tonnes of welded calibrated tubes, tonnes of large-diameter welded tubes, and tonnes of secondary metallurgical products for the automotive industry supplies.

15 REPORT BY THE BOARD OF DIRECTORS 14 A N N U A L R E P O R T Geographical areas of sale in 2008 PODBREZOVÁ BRATISLAVA

REPORT BY THE BOARD OF DIRECTORS Ž E L E Z I A R N E P O D B R E Z O V Á 15 Share in the EU production of selected products in 2008 Steel seamless precision cold drawn tubes Steel seamless cold drawn

16 REPORT BY THE BOARD OF DIRECTORS Ž E L E Z I A R N E P O D B R E Z O V Á 15 Share in the EU production of selected products in 2008 Steel seamless precision cold drawn tubes Steel seamless cold drawn tubes other than for precision application Steel seamless hot rolled tubes up to diameter of mm 91 % 93% 93% 9% 7% 7% EU producers Železiarne Podbrezová When making our overall production performance evaluation in 2008, we stated that the quality of products was high, which was a result of implementing several technological innovations in recent years. The quality management system is certified according to ISO/TS 16949:2002, API Q1, and VDA 6.1 standards. Procedures standardised in accordance with the certificates above allow us to deliver our products to all segments, including the automotive industry. The system of environmental management is certified according to ISO : 2004; the occupational health and safety system is certified under the BSi OHSAS standard. Despite the decreased demand at the end of the year, we sold our customers products, works, and services worth a record-breaking SKK million (EUR million). In 2008, Železiarne Podbrezová products were purchased by customers in 37 countries. The regional sales structure did not fundamentally change in 2008, with the dominant market segment continuing to be EU countries in the following order: the Czech Republic, Germany, Poland, Italy and Hungary.

REPORT BY THE BOARD OF DIRECTORS 16 A N N U A L R E P O R T 2 0 0 8 Regional sales structure developments (Sales in SKK million) 2004 2005 2006 2007 2008 (Sales in SKK million)(sales in SKK millio

17 REPORT BY THE BOARD OF DIRECTORS 16 A N N U A L R E P O R T Regional sales structure developments (Sales in SKK million) (Sales in SKK million)(sales in SKK millio Slovak Republic Czech Republic EU countries Other European countries Other export Total sale Purchase of Strategic Raw Materials and Energy Being in compliance with ISO standards in business relationships with suppliers of raw materials and having a stringent payment discipline have enabled us to further improve supply activities, especially in terms of quality and delivery terms. In 2008, we purchased raw materials totalling SKK million (EUR million), of which 12.9% were imported goods. As usual, with regard to our purchase of raw materials, scrap steel, ferro-alloys and raw iron were priorities; heat-resistant materials, thick tin-sheets and steel tapes also represent priority purchases. In 2008, we purchased a total of tonnes of scrap steel, of which 1.8% represents an imported supply, principally from Hungary. By gaining control over the ownership of ŽP EKO QELET a.s., KBZ s.r.o. and ŽIAROMAT a.s., we gained full self-sufficiency in the purchase of the steel scrap and heat-resistant materials necessary for steel production. In 2008, we purchased a total of MWh of electricity, of which 77% was purchased in the Czech Republic. Our water power plants and co-generation unit produced MWh of electricity, representing 23% of our total annual consumption. In 2008, we purchased thousand m 3 of natural gas from Slovenský plynárenský priemysel, a. s. In comparison to 2007, the actual growth in the prices of purchased electricity and natural gas represented 12.6% and 30.0%, respectively. Non-Current Assets and Technology Management In 2008, we invested a total of SKK million (EUR 12.0 million) in the acquisition of non-current tangible assets. At the same time, we disposed of redundant and fully depreciated non-current assets at a cost of SKK 88.5 million (EUR 2.9 million). In 2008, we spent a total of SKK million (EUR 7.9 million) on new machinery and refurbishing our original technological equipment. The finishing line for steel precision drawn tubes represents our biggest investment. Another major technological investment was second stage of the automated drawn tubes warehouse, which considerably accelerates expedition.

REPORT BY THE BOARD OF DIRECTORS Ž E L E Z I A R N E P O D B R E Z O V Á 17 For the purpose of saving thermal energy, we completed the second and final stage of the heat management rationalisation at

18 REPORT BY THE BOARD OF DIRECTORS Ž E L E Z I A R N E P O D B R E Z O V Á 17 For the purpose of saving thermal energy, we completed the second and final stage of the heat management rationalisation at the old plant in 2008; to replace the steam heating system, local gas boiler rooms and gas infrared heaters were installed. We invested a total of SKK million (EUR 3.7 million) in construction. Reconstruction of the steel mill social building combined with the canteen refurbishment represented a key construction investment. Another major construction investment was the refurbishment of the former Piesok dormitory: the facility was transformed into an accommodation facility, allowing Železiarne Podbrezová to provide rental apartments to its employees for stabilisation purposes. In order to ensure operational reliability of the technological equipment and, with regard to the maintenance of buildings and structures, we invested a total of SKK million (EUR 27.3 million) for repairs in We made a substantial change in organising and managing maintenance and repairs in Železiarne Podbrezová, when after more than a decade we fully centralised all maintenance activities into the Central Maintenance Unit. ENVIRONMENTAL POLICY A responsible approach to environmental issues is a prerequisite for retaining a Železiarne Podbrezová s leading position in the competitive environment. The Certified System of Environmental Management under EN ISO is a permanent instrument used for environmental protection and the promotion of the positive environmental profile of our company. The efficient maintenance and improvement of the Environmental Management system under the new standard EN ISO 14001:2004 was confirmed by the supervisory audit carried out in 2008 by SGS Slovakia spol. s.r.o. With respect to waste management, we implemented the Programme for the Decontamination and Replacement of Equipment Containing Polychlorinated Biphenyls and constructed an isolated waste deposit for the disposal of neutralisation and phosphate sediments from production. In 2008, the five-year Kyoto trading period commenced for Železiarne Podbrezová as a participant in the trading scheme for carbon oxide emission quotas. Železiarne Podbrezová was actively involved in the entire process of the preparation and allocation of emission quotas. In compliance with legislative requirements, during the previous year we ensured the monitoring and regular evaluation of produced carbon oxide emissions. Research and Development In 2008, R&D activities focused mainly on the verification of the creep features of boiler alloyed and construction tubes designated for the automotive industry. We focused on optimising the technological parameters of steel and tube production, and extending the useful life of shaping tools. Actual R&D costs amounted to SKK thousand (EUR 43.4 thousand).

REPORT BY THE BOARD OF DIRECTORS 18 A N N U A L R E P O R T 2 0 0 8 HUMAN RESOURCES Company success is also considerably determined by the dynamics, stability and sufficient performance of its

19 REPORT BY THE BOARD OF DIRECTORS 18 A N N U A L R E P O R T HUMAN RESOURCES Company success is also considerably determined by the dynamics, stability and sufficient performance of its employees. This can be achieved by continuous systematic human resources care at all management levels. Each year, the Employee Care Programme is prepared in line with the Company s financial plan and focuses on investments in education, the health of our employees and their families, and in cultural and sports activities. The scheme of our personnel, payroll, and social security and occupational health and safety policy was laid out in the 2008 Collective Agreement concluded between ZO OZ KOVO and the Board of Directors of Železiarne Podbrezová, and the Employee Care Programme of the Board of Directors of Železiarne Podbrezová a.s. The Company has fully performed its liabilities arising from the Collective Agreement and the Employee Care Programme of the Board of Directors. Expenditures from the social fund amounted to SKK 16.1 million (EUR 536 thousand) and were incurred, in particular, on organising medical and rehabilitation stays for our employees and for blood donors, which totalled SKK 2.8 million (EUR 91.8 thousand). The Company also provided preventative medical examinations for employees in exposure units and selected managers. A twenty-four hour accident policy was implemented for all employees, also during leisure activities in the amount of SKK 2.5 million (EUR 82 thousand). As part of employee care, we organised cultural and children programmes and summer camps for children totalling SKK 1.0 million (EUR 31.7 thousand) and enabled the use of summer and winter sports locations, which totalled SKK 0.8 million (EUR 25.3 thousand). We continuously provided our employees with catering services as well as an opportunity to purchase subsidised frozen food, which totalled SKK 4.6 million (EUR thousand). In 2008, we drew SKK 0.6 million (EUR 20.8 thousand) from the social fund for social assistance and SKK 3.7 million (EUR thousand) for regeneration of the workforce in the form of vouchers for pharmaceuticals and vitamins. The Employee Care Programme was considerably broader than the expenses covered from the social fund or arising from the Collective Agreement and the Programme of the Board of Directors. The major expenses include, in particular: Rehabilitation stays for employees, preventative medical examinations for employees in exposure units and selected middle management:... SKK 2.5 million (EUR 81.4 thousand); Bonuses provided for significant working anniversaries or birthdays:... SKK 4.4 million (EUR thousand); Employer contributions for supplementary pension scheme:... SKK 26.4 million (EUR 875 thousand); Improvement and enhancement of employee qualifications:... SKK 5.9 million (EUR thousand); Preparation of future workforce at SSOŠH and SG and granting of scholarships:... SKK 19.8 million (EUR thousand); Protective work equipment for employees, drinking regime for all employees:... SKK 16.0 million (EUR thousand); Comprehensive programme of recuperative measures:... SKK 48.8 million (EUR thousand); Implemented employee benefits programme at Allianz Slovenská poisťovňa a.s.

20 REPORT BY THE BOARD OF DIRECTORS Ž E L E Z I A R N E P O D B R E Z O V Á 19 Personnel expenses (SKK thousand) Wages and salaries Mandatory remittances from salaries Training, education Protective work equipment Secondary expenses Social fund Total Expenses per employee Added value per employee (SKK thousand) Expenses per employee (SKK thousand)

REPORT BY THE BOARD OF DIRECTORS 20 A N N U A L R E P O R T 2 0 0 8 An integral part of the Employee Care Programme was the centre of auxiliary works and activities, which had approximately 50

Fulfilling the strategic vision is impossible without the targeted training of its future workforce.

21 REPORT BY THE BOARD OF DIRECTORS 20 A N N U A L R E P O R T An integral part of the Employee Care Programme was the centre of auxiliary works and activities, which had approximately 50 employees who lost their work capability or whose work capacity is limited. The results of the centre had a considerable impact on the quality of the Company s working environment. Fulfilling the strategic vision is impossible without the targeted training of its future workforce. Therefore, the Company pays maximum attention to the general and professional education of its future employees at the Private Secondary Apprentice School of Metallurgy of Železiarne Podbrezová metallurgists, electricians and mechanics, and at the Private Secondary Grammar School of Železiarne Podbrezová in Lopej. After graduating in 2008, 42 graduates were hired; in 2009, 45 graduates are expected, 24 of whom will be employed by the Company, and 18 people applied for university studies. Furthermore, a three-year study programme will be completed by 15 apprentices who will then start working for Železiarne Podbrezová. Preparation of employees in the areas required by Železiarne Podbrezová remains our priority for the future. In the Private Secondary Grammar School of Železiarne Podbrezová, we assist students when they make decisions on their preferred course of study at university. If they are interested in working for us, we provide them with sufficient information on the professional specialisation desired at Železiarne Podbrezová. At the same time, we closely cooperate with universities, mainly with the Technical University in Košice with which we facilitate, under a contract, external bachelor s study. Last year, 21 employees completed the study programme, 19 of whom decided to continue with second level studies. In 2009, the bachelor s study programme will be completed by 15 employees. The cooperation with universities is targeted, with the offer of possible scholarships, professional practice, and graduation theses being focused in order to gain professionally experienced employees. Number of Employees (FTE Average Headcount) 100% 75% % 25% % Women Men

REPORT BY THE BOARD OF DIRECTORS Ž E L E Z I A R N E P O D B R E Z O V Á 21 The development of the Company s employment rate depends on the scope of contracts and is adjusted to the production needs.

22 REPORT BY THE BOARD OF DIRECTORS Ž E L E Z I A R N E P O D B R E Z O V Á 21 The development of the Company s employment rate depends on the scope of contracts and is adjusted to the production needs. Each year, the effectiveness of individual working positions is assessed in relation to the management structure. In 2008, Železiarne Podbrezová continued to streamline its overall management structure and all systemised working positions individually by units. In the last quarter of 2008, the Company was affected by the first impacts of the crisis; in November and December particularly, we experienced a shortage of contracts. The first measure taken with regard to human resources was the decision not to extend the employment contracts concluded for a definite period, which resulted in a headcount reduction of 53 employees. We laid off 48 employees who were already pension beneficiaries or to whom the pension entitlement arose at that time. Compared to the previous year, the Company has 58 fewer FTE employees. In 2008, the Company employed employees on average (an FTE number). The average monthly salary in 2008 amounted to SKK (EUR 848) per employee, representing a year-on-year increase of 2.0%. The average monthly salary in 2008 for blue collar positions was SKK (EUR 724) per employee, which represents a year-on-year increase of 4.6%. Work productivity from added value per employee amounted to SKK thousand (EUR 22.8 thousand). In 2008, the subsidiaries and associated undertakings in Slovakia employed an additional employees. In 2008, the subsidiaries in the Czech Republic employed people and another 218 employees in other countries. The longest-running company newspaper in Slovakia, Podbrezovan, which has been published continuously for 65 years, plays a significant role in facilitating communication and information. Together with the company radio broadcasting, the newspaper represents an irreplaceable medium for informing company employees and the general public in the region. Besides these traditional communication tools, Železiarne Podbrezová uses new progressive forms of information media. The use of the company intranet and the Internet is part of the new information strategy with the parent company, the subsidiary, and associated undertakings. Qualification structure Age structure of Employees of Employees in 2008 in % 100% 6% 37% 48% 9% Primary education Secondary professional Secondary accomplished University 1% 13% 25% 29% 32% Up to 20 years 21 to 30 years 31 to 40 years 41 to 50 years Above 51 years

REPORT BY THE BOARD OF DIRECTORS 22 A N N U A L R E P O R T 2 0 0 8 REPORT BY THE BOARD OF DIRECTORS ON ASSETS, FUNDS AND FINANCIAL MANAGEMENT Assets and Funds Recognised as at 31 December 2008 in

23 REPORT BY THE BOARD OF DIRECTORS 22 A N N U A L R E P O R T REPORT BY THE BOARD OF DIRECTORS ON ASSETS, FUNDS AND FINANCIAL MANAGEMENT Assets and Funds Recognised as at 31 December 2008 in accordance with International Financial Reporting Standards, the Company s total assets amounted to SKK million (EUR million), which represents an increase of 0.65% year-on-year. Non-current assets increased by SKK million (EUR 12.5 million) mainly due to a new acquisition the Transmesa Group in Spain, in the total amount of SKK million (EUR 14.5 million), which was performed by Železiarne Podbrezová a.s. in the period of the economic boom in the steel industry. In contrast, current assets decreased by SKK million (EUR 10.7 million) as a result of a significant decrease in receivables, i.e. by SKK million (EUR 14.2 million), and in inventories, i.e. by SKK 78.9 million (EUR 2.6 million), while cash and cash equivalents increased. In 2008, the liabilities structure showed positive changes. Despite significant capital investments in non-current assets, the share of own funds in the Company s funding increased to 64% (an increase of 2%). As at 31 December 2008, the equity was recognised in the amount of SKK million (EUR million), which represents SKK (EUR 75) per share. The Company s liabilities decreased by SKK million (EUR 4.9 million), with mainly trade payables decreasing by SKK million (EUR 4.5 million) and the gearing increasing by SKK million (EUR 9.6 million). Structure of Assets Structure of Liabilities as at as at % 100% Property, plant and equipment 33% Financial assets Receivables 34% 14% Inventories 17% Other assets 2% Interest-bearing loans and borrowings Equity 64% 20% Other non-current liabilities 4% Other current liabilities 12%

REPORT BY THE BOARD OF DIRECTORS Ž E L E Z I A R N E P O D B R E Z O V Á 23 Financial Management The signing of the loan contract at the end of 2005 with the Bank Club, which comprises four banking

24 REPORT BY THE BOARD OF DIRECTORS Ž E L E Z I A R N E P O D B R E Z O V Á 23 Financial Management The signing of the loan contract at the end of 2005 with the Bank Club, which comprises four banking houses for a five-year period, resulted in the stabilisation of the Company s current and non-current financing. Citibank (Slovakia) a.s., HSBC Bank plc., Tatrabanka, a.s. and CALYON S.A. provided Železiarne Podbrezová with sufficient funds at unified terms, which allowed us to fully use the positive effect of the club financing. An 85% share of a foreign currency on the total financing of the credit facility corresponded with the share of export on total sales. Given our economic effectiveness, we again took advantage of the opportunity to draw short-term loan facilities denominated in Slovak crowns to refinance export receivables in the amount of SKK 200 million (EUR 6.6 million). We appreciate the trust expressed to us by the banks when providing financing to purchase an ownership interest in the Spanish company Transformaciones Metalurgicas, S.A., in July The Bank Club and other banking houses accepted the Company s business name as an exclusive guarantee for the credit facility. No other guarantees were required to obtain the financing. Before the Euro conversion in the Slovak Republic, the Company was largely exposed to the SKK/EUR exchange rate risk. As a result, in 2008 the Company performed financial derivatives (forwards, option structures) at the nominal value of EUR million (SKK million) in order to achieve the exchange rate set by the financial plan for 2008 and Derivatives totalling EUR 93.5 million (SKK million) became due in 2008 and derivatives in the nominal value of EUR 33.0 million (SKK million) fell due in After the announcement of the SKK/EUR conversion rate, the Company prematurely closed the derivates falling due in 2009; other derivatives were continually closed in Total gains on hedging transactions in SKK/EUR amounted to SKK million (EUR 13.6 million), with the achieved average exchange rate of SKK/EUR Given the currency exposure in Czech crowns, the Company concluded SKK/CZK derivatives totalling CZK 180 million with a loss of SKK 5.3 million (EUR thousand) and achieved an average exchange rate of CZK/SKK The maturity of the derivative transactions corresponded with expected cash flows within coopera ting commercial banks. In 2008, out of the Company s total debt, 85% represented funds denominated in euros. All the borrowed funds bear interest at the EURIBOR floating interest rate. In order to eliminate the risk of variations in the floating interest rate, the Company entered into three interest rate swaps in 2008 and generated a profit of SKK 8.28 million (EUR thousand). Thanks to close co-operation with the banking houses and thorough preparation throughout the year, we successfully managed the conversion from the national currency (Slovak crown) to the euro as at 1 January Satisfaction of Liabilities Last year, the Company s financial position was balanced and stable. We fulfilled our obligations to financial institutions, state and public authorities, as well as to all suppliers and employees in a due and timely manner.

REPORT BY THE BOARD OF DIRECTORS 24 A N N U A L R E P O R T 2 0 0 8 Data from Separate IFRS Balance Sheet as at 31 December 2008 (SKK thousand) As at 31. 12.

25 REPORT BY THE BOARD OF DIRECTORS 24 A N N U A L R E P O R T Data from Separate IFRS Balance Sheet as at 31 December 2008 (SKK thousand) As at As at ASSETS NON-CURRENT ASSETS Property, plant and equipment Intangible assets Investments in subsidiaries, joint-ventures and associates Available-for-sale investments Other financial assets Total non-current assets CURRENT ASSETS Inventories Trade receivables and other financial assets Tax receivables Other current assets Cash and cash equivalents Total current assets TOTAL ASSETS EQUITY AND LIABILITIES CAPITAL AND RESERVES Share capital Treasury shares Legal and other funds Retained earnings Total equity LIABILITIES NON-CURRENT LIABILITIES Interest-bearing loans and borrowings Other financial liabilities Payables from employee benefits Provisions Deferred tax liability Total non-current liabilities CURRENT LIABILITIES Interest-bearing loans and borrowings Trade and other payables Income tax payables Total current liabilities Total liabilities TOTAL EQUITY AND LIABILITIES

26 REPORT BY THE BOARD OF DIRECTORS Ž E L E Z I A R N E P O D B R E Z O V Á 25 Expenses, Revenues and Profit for 2008 In 2008, Železiarne Podbrezová reported a profit of SKK thousand (EUR 13.2 million), which represents the difference between total revenues of SKK thousand (EUR million) and total expenses of SKK thousand (EUR million). The structure of revenues did not substantially change in comparison to the previous year. The structure of expenses in 2008 was similar to the previous year: - Consumed material % - Consumed energy % - Costs of goods sold % - Services % - Personnel expenses % - Depreciation of non-current assets % - Financial expenses % - Taxes and fees % - Other expenses % Profitability measured to expenses and revenues represented 4.34% and 4.16%, respectively. Financial data as presented in the Annual Report corresponds to the data disclosed in Železiarne Podbrezová s separate IFRS (International Financial Reporting Standards) financial statements. Financial data were translated from Slovak crowns to euros in the Annual Report using the conversion exchange rate of SKK/EUR Data from Separate IFRS Income Statement for the year ended 31 December 2008 (SKK thousand) For 2008 For 2007 Revenues Changes in inventories of finished products and work in progress Own work capitalized Raw material and consumables used Services Personnel expenses Depreciation and amortization Other operating revenues (+)/expenses (-), net Interest income Interest expense Other financial income (+)/expenses (-), net Profit before tax Income tax expense Profit for the year

REPORT BY THE BOARD OF DIRECTORS 26 A N N U A L R E P O R T 2 0 0 8 Data from Separate IFRS Statement of Changes in Equity for the year ended 31 December 2008 (SKK thousand) Share capital Treasury

27 REPORT BY THE BOARD OF DIRECTORS 26 A N N U A L R E P O R T Data from Separate IFRS Statement of Changes in Equity for the year ended 31 December 2008 (SKK thousand) Share capital Treasury shares Legal reserve fund Hedging Retained earnings Opening Balance at Dividends paid Allocation of statutory profit Treasury shares Hedging derivatives Deferred tax on hedging derivatives Net profit for the year Closing Balance at Total Dividends paid Allocation of statutory profit Treasury shares Hedging derivatives Deferred tax on hedging derivatives Net profit for the year Closing Balance at

REPORT BY THE BOARD OF DIRECTORS Ž E L E Z I A R N E P O D B R E Z O V Á 27 SIGNIFICANT EVENTS THAT OCCURRED AFTER THE END OF THE REPORTING PERIOD In line with Act of the National Council of the

28 REPORT BY THE BOARD OF DIRECTORS Ž E L E Z I A R N E P O D B R E Z O V Á 27 SIGNIFICANT EVENTS THAT OCCURRED AFTER THE END OF THE REPORTING PERIOD In line with Act of the National Council of the Slovak Republic no. 659/2007 Coll. on the Introduction of the Euro Currency in the Slovak Republic, the Company s Board of Directors decided to convert the nominal value of the Company s shares and registered capital from Slovak crowns to euros using the method of rounding up the nominal value per share to the nearest euro at the conversion exchange rate of SKK/EUR as follows: - The nominal value per share in the amount of SKK after conversion amounts to EUR The Company s registered capital in the amount of SKK after the conversion of its nominal value amounts to EUR In connection with this change in the nominal value of the shares and registered capital from Slovak crowns to euros, the Company s Board of Directors also decided to amend the Company s Articles of Association. All the shareholders were notified of this change by a written notice. In February 2009, the Company s Board of Directors decided to discontinue the production of precision tubes and tube elbows in ŽP Tažírny trub Svinov, spol. s r.o. (with effect from 1 May 2009) due to insufficient customer contracts. Technological equipment was conserved, with a possibility to resume the production when the market recovers. A metallurgical material warehouse for retail and regular customers from Moravia and Poland will be established at the Company s premises. All customer demands for precision tubes manufactured by ŽP Tažírny trub Svinov, spol. s r. will be fulfilled by Železiarne Podbrezová products. In April 2009, the Company s Board of Directors decided to discontinue the production in ŽP PRAKO s.r.o. with effect from 1 June The entity reported high losses in the past two years. Despite ŽP PRAKO s.r.o. s turnover and the adopted efficiency and technological measures aimed to increase production quality and process management, more customers were lost during the economic crisis. The decision to discontinue production in ŽP PRAKO s.r.o. is final and the plant site, including the technological equipment, was offered for sale. In March 2009, the legal form of ŽP-Invest s.r.o. changed from a limited liability company to a joint stock company. In the past two years, ŽP-Invest s.r.o. practically performed no activities. All ŽP-Invest s.r.o. s were offered for sale.

29 28 A N N U A L R E P O R T

REPORT BY THE BOARD OF DIRECTORS Ž E L E Z I A R N E P O D B R E Z O V Á 29 REPORT ON THE ACTIVITIES OF ENTITIES INCLUDED IN CONSOLIDATION As of 31 December 2008, the net value of Železiarne

30 REPORT BY THE BOARD OF DIRECTORS Ž E L E Z I A R N E P O D B R E Z O V Á 29 REPORT ON THE ACTIVITIES OF ENTITIES INCLUDED IN CONSOLIDATION As of 31 December 2008, the net value of Železiarne Podbrezová s financial assets, as disclosed on the balance sheet under IFRS totalled, SKK million (EUR 94.8 million), which is 33.9% of the Company s total assets. Compared to the previous year, this represented an absolute increase of SKK million (EUR 13.4 million). Financial investments and other ownership interests at 31 December 2008 Legal name Strategic companies Registered office Investment in SKK '000 (1) Interest in share capital Ownership interest Consolidated ŽĎAS, a.s. Žďár nad Sázavou, Czech Republic % direct yes Tále, a.s. Horná Lehota, SR % direct yes Production companies ŽP EKO QELET a.s. Martin, SR % direct yes Transformaciones Metalurgicas S.A. (TRANSMESA) Barcelona, Spain % (2) direct yes Tubos de Acero de Precisión, S.L. (TAP) Barcelona, Spain % (2) direct and indirect ŽIAROMAT a.s. Kalinovo, SR % direct yes KBZ s.r.o. Košice, SR % direct yes ŽP Tažírny trub Svinov, spol. s r.o. Ostrava, Czech Republic yes % direct yes ŽP PRAKO s.r.o. Prakovce, SR % direct yes TS Plzeň a.s. Plzeň, Czech Republic % indirect yes Sales and distribution companies PIPEX International AG Nidau, Switzerland % direct yes PIPEX ITALIA S.p.A. Arona, Italy % direct yes SLOVRUR Sp. z o. o. Stalowa Wola, Poland % direct yes ZANINONI SLOVAKIA, s.r.o. Valaská, SR % direct yes TS STEEL PIPE & FITTINGS S.r.l. Flero, Italy % indirect yes ŽĎAS SGS, GmbH Bonen, Germany % indirect yes

REPORT BY THE BOARD OF DIRECTORS 30 A N N U A L R E P O R T 2 0 0 8 Legal name Services Registered office Investment in SKK '000 (1) Interest in share capital Ownership interest Consolidated

31 REPORT BY THE BOARD OF DIRECTORS 30 A N N U A L R E P O R T Legal name Services Registered office Investment in SKK '000 (1) Interest in share capital Ownership interest Consolidated ŽP-Invest s.r.o. Podbrezová, SR % direct yes ŽP Gastroservis, s.r.o. Valaská, SR % direct yes ŽP Informatika s.r.o. Podbrezová, SR % direct yes ŽP Šport, a.s. Podbrezová, SR % direct yes ŽP BYTOS, s.r.o. Podbrezová, SR % direct yes ŽP VVC s.r.o. Podbrezová, SR % direct yes Motor-Car Podbrezová s.r.o. Podbrezová, SR % direct yes HRON - AIR s.r.o. Podbrezová, SR % direct yes Other capital participation Nadácia Železiarne Podbrezová Podbrezová, SR % direct yes STABILITA, d.d.s., a.s. Košice, SR % no Hutnictví železa, a.s. Praha, Czech Republic % no (1) Net carrying amount (net of created provisions). Investments in a foreign currency translated at the NBS Exchange rate as at 31 December (2) Železiarne Podbrezová a.s. holds 100% of the voting rights in Transformaciones Metalurgicas S.A. and TAP Tubos de Acero de Precisión, S.L. Additions to and disposals of financial investments in 2008 are described in detail in the notes to the consolidated financial statements. TRANSMESA and TAP The most significant transaction is considered the acquisition of a 64.5% share in Transformaciones Metalurgicas S.A. and a 50% share in its subsidiary TAP Tubos de Acero de precisión, S.L. This acquisition strengthened the international position of both companies among European and global competitors in the manufacturing and sale of precision cold drawn steel tubes. In economic terms, 2008 can be considered successful as the plan was slightly exceeded and the consolidated net profit after taxation amounted to EUR 503 thousand (SKK 15.2 million). These results were attributable to a stable contract base, mostly in the first three quarters of A gradual downturn in demand was experienced in late 2008 due to the impacts of the global economic crisis. Production quality was maintained in line with the quality management system certified under the ISO 9001:2000 standard and the Environmental Management System under the ISO 14001:2004 standard. Apart from the sufficient number of contracts, the positive results throughout the year were attributable to the continuing trend of increasing sales prices. The exceeded planned increase was caused by higher demand for galvanised tubes and an increase in input prices of rolled material. In 2008, the Company supplied its customers with products in the total volume of tonnes; the

REPORT BY THE BOARD OF DIRECTORS Ž E L E Z I A R N E P O D B R E Z O V Á 31 consolidated revenues reached EUR 31 017 thousand (SKK 934.4 million).

32 REPORT BY THE BOARD OF DIRECTORS Ž E L E Z I A R N E P O D B R E Z O V Á 31 consolidated revenues reached EUR thousand (SKK million). The comparison of the individual markets shows a change in the territorial structure and an ongoing downturn on the domestic Spanish market. This development is caused by the transfer of production by customers abroad and a drop in the automotive industry. The EU countries, USA and Australia remain the dominant market segment; other markets include Turkey, Ukraine, Iran, Chile, Mexico and Egypt. In the second half-year, the Company synchronised the sales activities of its Sales department and commission agents with the centralised sales efforts of Železiarne Podbrezová, which were managed on a territorial basis by means of its trading companies in Italy, the Czech Republic, and Poland. The total consolidated assets as at 31 December 2008 amounted to EUR thousand (SKK million). The major investment in 2008 was the purchase of an automated warehouse of finished products, which will enhance the sales logistics on adjacent territories within the entire ŽP Group. The consolidated current assets as at 31 December 2008 amounted to EUR 18.3 million (SKK million). In spite of significant capital expenditures, the share of own funds on the financing of the companies was 57.6%. In 2008, both companies had a total of 194 employees. In late 2008, when the contracted volumes dropped and production was curtailed, the headcount was decreased, mostly among temporary workers. These measures did not produce additional personnel expenses. The average number of employees for the year was 187. The plan for the next year is to continue expanding the network of customers and to ensure the fulfilment of the set production and financial objectives in spite of the difficult market situation by using the synergic effects in sales and input materials. ŽĎAS, a.s. In economic terms, we regard 2008 as the most successful year in the new history of ŽĎAS, a.s., one of the leading heavy industry producers. All supplies to customers are carried out through own external assembly and high quality of servicing activities. Exports represent a significant group of customers, accounting for 58% of the total sales in The most significant customers are from Russia, Germany, India, Spain the Slovak Republic, and other countries, predominantly in the European Union. Sales of finished goods, merchandise and services for 2008 amounted to CZK million (SKK million, i.e. EUR million). Profit after tax was reported in the amount of CZK million (SKK million, i.e. EUR 15.2 million). In terms of capital expenditures, in 2008 ŽĎAS, a.s. invested a total of CZK million (SKK million, i.e. EUR 12.0 million), of which CZK million (SKK million, i.e. EUR 9.9 million) was invested in new technologies and the modernisation of manufacturing equipment. Tále, a.s. Tále, a.s., is an integral part of the business of Železiarne Podbrezová in the field of tourism. A separate resort consists of a sports area comprising a ski centre with artificial snow production and a golf centre comprising an 18-hole championship golf course: Gray Bear. The resort includes two hotels providing, apart from standard services, also congress tourism and golf vacations. In 2008, Tále, a.s. sold services totalling SKK million (EUR 4.1 million) and reported a profit of SKK 1.1 million (EUR 36.4 thousand). The average number of employees was 105. Tále, a.s. s total assets as at 31 December 2008 amounted to SKK million (EUR 16.0 million), with external debt accounting for 11%.

REPORT BY THE BOARD OF DIRECTORS 32 A N N U A L R E P O R T 2 0 0 8 ŽP EKO QELET a.s. ŽP EKO QELET a.s. is the leading supplier of steel scrap the most fundamental manufacturing raw material.

33 REPORT BY THE BOARD OF DIRECTORS 32 A N N U A L R E P O R T ŽP EKO QELET a.s. ŽP EKO QELET a.s. is the leading supplier of steel scrap the most fundamental manufacturing raw material. In 2008, ŽP EKO QELET a.s. reported sales of merchandise, finished goods, and services in the amount of SKK million (EUR 90.7 million). In 2008, ŽP EKO QELET a.s. supplied Železiarne Podbrezová a.s. with a total of thousand tonnes of steel scrap. After another increase in registered capital, ŽP EKO QELET a.s. finished the year with total capital of SKK million (EUR 16.9 million) and reported a total profit after taxation of SKK 45.7 million (EUR 1.5 million). KBZ s.r.o. KBZ s.r.o. is the second largest supplier of steel scrap to Železiarne Podbrezová. In 2008, KBZ s.r.o. reported sales of merchandise, finished goods, and services in the total amount of SKK million (EUR 26.4 million). In 2008, KBZ s.r.o. supplied Železiarne Podbrezová a.s. with a total of 70.9 thousand tonnes of steel scrap and finished the year with a profit after taxation of SKK 3.5 million (EUR thousand). ŽIAROMAT a.s. ŽIAROMAT a.s. is a traditional producer of heat-resistant materials. In terms of its production range, its main production consists of fire-clay materials, refractory castables, and other heat resistant materials. In spite of a gradual decrease in measured consumption of heat-resistant materials in the process of steel and non-ferrous metal production, ŽIAROMAT established its position on the market after necessary investments in technology. In 2008, ŽIAROMAT reported sales of merchandise, finished goods, and services in the total amount of SKK million (EUR 8.2 million) and closed the year with a profit after taxation amounting to SKK 21.1 million (EUR 700 thousand). ŽP Tažírny trub Svinov, spol. s r.o. ŽP Tažírny trub Svinov, spol. s r.o. (ŽP TTS) production was focused on precision cold drawn steel tubes and tube elbows. Its product range complemented the production plan of Železiarne Podbrezová. In 2008, ŽP TTS produced and sold finished goods and services in the total amount of CZK million (SKK million, i.e. EUR 11.7 million). ŽP TTS s registered capital amounts to CZK 50.0 million (SKK 56.6 million, i.e. EUR 1.9 million) and its profit after taxation amounted to CZK 13.0 million (SKK 14.7 million, i.e. EUR thousand). As stated in the report above, ŽP TTS suspended its production as at 1 April 2009 due to an insufficient number of contracts.

34 REPORT BY THE BOARD OF DIRECTORS Ž E L E Z I A R N E P O D B R E Z O V Á 33 ŽP PRAKO s.r.o. ŽP PRAKO s.r.o. manufactures forged flanges and other die forgings for the mechanical engineering and energy sectors and the automotive industry was the second successive year when ŽP PRAKO reported a high loss from its operations in the amount of SKK 70.3 million (EUR 2.3 million). In spite of the ŽP PRAKO s turnover and implementation of rationalisation and other technical measures aimed to improve production quality, the financial results did not improve as ŽP PRAKO lost its customers at the time of the emerging economic crisis. A significant item in the negative results of operations represents the revaluation of inventories in the amount of SKK 13.5 million (EUR thousand). As stated elsewhere in the report, in April 2009 a decision was made to discontinue the operations of ŽP PRAKO and to sell the plant. PIPEX International AG In 2008, PIPEX International AG (PIPEX Int) reported revenues from the sale of finished goods of Železiarne Podbrezová in the total amount of CHF 91.8 million (SKK million, i.e. EUR 61.3 million). PIPEX Int s registered capital amounts to CHF 1 million (SKK 20.1 million, i.e. EUR thousand), and its profit after taxation totalled CHF thousand (SKK 20.2 million, i.e. EUR thousand). PIPEX ITALIA S.p.A. In 2008 PIPEX ITALIA S.p.A. reported sales of finished goods totalling EUR 56.4 million (SKK million). PIPEX ITALIA s registered capital amounts to EUR 258 thousand (SKK 7.8 million), and its profit after taxation amounted to EUR thousand (SKK 15.6 million). In March 2008, PIPEX ITALIA purchased the remaining equity share in TS STEEL PIPE & FITTINGS S.r.l., increasing its share of the registered capital to 99%. PIPEX ITALIA also completed the tubes warehouse in the Bergamo region using its own funds. This investment significantly strengthened its position on the Italian market. SLOVRUR Sp. z o.o. SLOVRUR Sp. z o.o. arranged for the sale of Železiarne Podbrezová products on the Polish market. In 2008, SLOVRUR generated revenues from the sale of Železiarne Podbrezová finished goods in the total amount of PLN million (SKK million, i.e. EUR 30.4 million). SLOVRUR s registered capital amounts to PLN 100 thousand (SKK thousand, i.e. EUR 24.1 thousand) and its profit after taxation totalled PLN thousand (SKK 29.5 million, i.e. EUR thousand).

REPORT BY THE BOARD OF DIRECTORS 34 A N N U A L R E P O R T 2 0 0 8 ZANINONI SLOVAKIA, s.r.o.

35 REPORT BY THE BOARD OF DIRECTORS 34 A N N U A L R E P O R T ZANINONI SLOVAKIA, s.r.o. The core business of ZANINONI SLOVAKIA, s.r.o. is the provision of forwarding services for the transportation of Železiarne Podbrezová products to all markets. In 2008, ZANINONI SLOVAKIA arranged for transports. In 2008, services provided by ZANINONI SLOVAKIA totalled SKK million (EUR 13.7 million). ZANINONI SLOVAKIA s registered capital amounts to SKK 1 million (EUR 33.2 thousand) and its profit after taxation totalled SKK 15.3 million (EUR thousand). ŽP Gastroservis, s.r.o. ŽP - Gastroservis, s.r.o. produces fresh, refrigerated and frozen meals. It also provides comprehensive services in catering for employees of the parent company and for external customers. In the long term, the proportion of meals delivered to external customers is approximately one half of the total number of prepared meals. In 2008, this figure represented 51%. In the previous year, ŽP - Gastroservis generated revenues from sales of finished goods, merchandise, and services totalling SKK 93.7 million (EUR 3.1 million). Its registered capital amounts to SKK 28.0 million (EUR thousand) and its profit after taxation totalled SKK 326 thousand (EUR 10.8 thousand). ŽP Informatika s.r.o. As a subcontractor, ŽP Informatika s.r.o. provides comprehensive services to Železiarne Podbrezová in the field of information technology and information systems. In 2008, ŽP Informatika reported sales of merchandise and services in the total amount of SKK million (EUR 3.8 million). ŽP Informatika s registered capital amounts to SKK 25.0 million (EUR thousand) and the previous year s profit after taxation amounted to SKK 7.5 million (EUR thousand). ŽP Šport, a.s. The core activities of ŽP Šport, a.s. focus mainly on sports, advertising, and promotion. It provided for the development of professional and amateur mass sports activities for the employees of the parent company and the general public. In 2008, ŽP Šport generated revenues from sales of merchandise and advertising totalling SKK 61.7 million (EUR 2.0 million). ŽP Šport s registered capital amounts to SKK 15.4 million (EUR thousand) and closed the year with a loss of SKK 7.8 million (EUR thousand). For 2009 and subsequent years, ŽP Šport has adopted cost-cutting measures and terminated some sports teams. ŽP BYTOS, s.r.o. In 2008, the core activities of ŽP BYTOS, s.r.o. included the management of rental apartments owned by Železiarne Podbrezová and the management of privately-owned apartments under management contracts. ŽP BYTOS generated revenues from sales of services totalling SKK 5.4 million (EUR thousand). ŽP BYTOS s registered capital amounts to SKK 2.1 million (EUR 69.7 thousand) and the previous year s profit after taxation amounted to SKK 462 thousand (EUR 15.3 thousand).

36 REPORT BY THE BOARD OF DIRECTORS Ž E L E Z I A R N E P O D B R E Z O V Á 35 ŽP VVC s.r.o. With the establishment of the research and development centre in August 2008, fundaments were laid for a systematic work targeted on steel production and ferrous metal forming in the metallurgical plants of Železiarne Podbrezová a.s., as well as in other group companies. Even though the monitored period is fairly short, ŽP VVC s.r.o. reached specific outputs from solved issues aimed at optimising the structure and features of alloyed boiler tubes, increasing the durability of forming instruments and also performing tasks focusing on environment-friendly production. As part of the EUREKA project, ŽP VVC s.r.o. started to develop microalloyed steel tube production technology. Motor-Car Podbrezová s.r.o. Motor-Car Podbrezová s.r.o. is engaged in the sale and servicing of KIA passenger vehicles, using the premises of a former customs office (the property of Železiarne Podbrezová) under a lease contract. Its financial results are insignificant for Železiarne Podbrezová. HRON AIR s.r.o. HRON AIR s.r.o. entered the liquidation proceedings in 2008 and will be deleted from the Commercial Register in 2009 without affecting the profit/loss of Železiarne Podbrezová.

37 36 A N N U A L R E P O R T

REPORT BY THE BOARD OF DIRECTORS Ž E L E Z I A R N E P O D B R E Z O V Á 37 BUSINESS PLAN The long-term business strategy pursued by Železiarne Podbrezová is based on diversification spread out to

38 REPORT BY THE BOARD OF DIRECTORS Ž E L E Z I A R N E P O D B R E Z O V Á 37 BUSINESS PLAN The long-term business strategy pursued by Železiarne Podbrezová is based on diversification spread out to three main pillars: metallurgy, heavy engineering, and tourism, with substantial support by own services. While efforts to achieve the quantitative and qualitative growth of the entire production were dominant in the past, the business plan for 2009 is based on a different principle. The global financial crisis affected all aspects of the Company's business operations. As a result, we had to objectively assess our reduced sales opportunities and capabilities and adjust the business plans for 2009 to this situation throughout Železiarne Podbrezová Group. Our objective for 2009 is to report positive operating results in all companies of Železiarne Podbrezová Group. Where the objective is unrealistic, we are ready to terminate loss-making businesses and/or companies. Within the parent company (the first pillar), we intend to develop core metallurgical production, focusing on steel production and seamless steel tubes, secondary metallurgical production and the production of precision welded tubes. The technological equipment operations, however, will need to be adjusted to reduced demand per individual products. To fulfil our business plan for 2009, through our trading companies we will ensure the sale of products and services totalling to, at least, EUR million (SKK million), of which more than 92% will be exported to foreign markets. This objective accounts for 53% of last year's sales and is attributable to reduced production volumes and an anticipated decrease in selling prices. As the sales crisis has affected the global market, losses from reduced production can only be mitigated by stringent cost-cutting measures. In late 2008 and early 2009, the Company s Board of Directors adopted a set of measures aimed at generating a profit despite a dramatic reduction in the production and sales volumes. These measures focus primarily on reducing personnel costs (a 23% headcount reduction throughout the entire organisation), reducing the costs of repairs, which we plan to decrease by more than 40% when compared to the previous year, as well as curtailing all other costs, especially overhead. The amount of planned capital investments has also been impacted by the economic crisis. In 2009, we plan to make a total investment of only EUR 4.5 million (SKK million), which represents only 64% of simple reproduction. The biggest investment project will be the construction of a tube galvanising plant, which introduces a new product for the Company. We will invest no more than EUR 19.9 million (SKK million) in technological equipment repairs. The complete overhaul of a punching press and a rotary hearth furnace in the seamless tubes rolling mill is particularly crucial. To support core metallurgical production, we will continue to develop the technical background of the controlled entities ŽP EKO QELET a.s. and KBZ s.r.o., which are engaged in processing waste metal. In addition, we are ready to present the ecological importance of a new scrap metal processing and waste metal treatment plant in Hliník nad Hronom during the time of the economic crisis. In quality assurance, we will continue to pursue the management system under ISO 9001:2000 -VDA 6.1., ISO/TS 16949:2002, and the Environmental Management System under the ISO :2004 standard. Through our subsidiary ŽP VVC s.r.o. we will finance specific projects in applied R&D by allotting EUR 304 thousand (SKK 9.2 million). We are considering extending our cooperation and capital investment in the Technical University in Košice in The personnel, payroll and social policy programme for the Company s employees will be affected by the impacts of the economic crisis in 2009 and, therefore, the corporate strategy and measures for mitigation of the impacts will also include efficient re-assessment of the headcounts in line with the number of contracts and volume of auxiliary jobs and services. Therefore, we will assess the headcounts, working regimes, salary developments, and all employee care costs on a monthly

REPORT BY THE BOARD OF DIRECTORS 38 A N N U A L R E P O R T 2 0 0 8 basis.

We will continue developing the occupational health and safety management system certified under the OHSAS 18001 Standards.

39 REPORT BY THE BOARD OF DIRECTORS 38 A N N U A L R E P O R T basis. Despite the adopted measures, it remains crucial for us to ensure that our employees receive adequate care and work in a safe environment. We will continue developing the occupational health and safety management system certified under the OHSAS Standards. We must also keep in mind the high-quality preparation of the future workforce. Therefore, we will support educating a qualified workforce for the Company s needs at the Private Secondary Apprentice School of Metallurgy in Lopej and the Private Secondary Grammar School in the following years. The operation and development of the information system in the parent company, as well as the subsidiaries, will be outsourced to our subsidiary ŽP Informatika s.r.o. in As Železiarne Podbrezová plans to cut costs for such services, ŽP Informatika s.r.o. will compensate for the shortage by extending the services to external entities. In recent years, the Company s financial situation has been balanced and stable. Despite the difficult conditions, we want to keep it balanced and stable in 2009 and in the years to follow. Therefore, we will efficiently use the credit facility extended by the Bank Club, the terms and conditions of which are valid until With regard to ensuring the sale of finished goods in the amount of EUR million (SKK million), the Board of Directors set a goal for 2009: to generate a net profit after taxation in the amount of EUR 693 thousand (SKK 20.9 million). This amount will also include revenues from financial investments. The dividends to be received from the subsidiaries in 2009 are estimated at EUR 5.9 million (SKK million) and will form a substantial portion of the total profit from financial activities. We have decided to discontinue the operations of the subsidiaries whose results are not expected to be favourable in 2009 and whose operations do not offer good prospects in the mid-term: - HRON - AIR s.r.o. entered into liquidation, which will be completed with no impact on the profit of Železiarne Podbrezová in Production will be discontinued in ŽP PRAKO s.r.o. with effect from 1 June 2009, with massive layoff of all employees and subsequent liquidation (anticipated between 1 September 2009 and the year-end). - Due to an insufficient number of contracts, the production in ŽP Tažírny trub Svinov, spol. s r.o. was discontinued with effect from 1 April 2009, with massive layoff of almost all employees. A minimum number of employees will run a metallurgical material warehouse in the Ostrava region. - ŽP-Invest s.r.o. (a limited liability company) was transformed to a joint-stock company, with all shares offered for sale. - A 50% share in Motor-Car Podbrezová s.r.o. is offered for sale. If the impacts of the crisis on other subsidiaries deteriorate in 2009, Železiarne Podbrezová s Board of Directors will immediately adopt measures inevitable to mitigate losses. The second main pillar of our diversification business plan includes heavy-engineering and metallurgical products. ŽĎAS, a.s., has in its production plan rolling mill equipment, shaping machines and tools, casts, forged pieces and models. Along with TS Plzeň a.s., ŽĎAS, a.s. has created a tandem that ranks among the top heavy-engineering and metallurgical companies in the Czech Republic and has won worldwide recognition. Their mutual cooperation will allow the further use of the synergic effects resulting from the dominant position in the shaping machine supplies sector. Despite the lower demand for products, especially in the metallurgy sector, both companies have enough contracts for 2009 to meet their business plans and to contribute to improving the consolidated results of Železiarne Podbrezová. In recent years, the Company s business activities in tourism were gradually integrated in the subsidiary Tále a.s. Today, this is the third main pillar of the diversification of our business activities. We intend to further invest in developing this segment. By having efficient operations and

REPORT BY THE BOARD OF DIRECTORS Ž E L E Z I A R N E P O D B R E Z O V Á 39 rationalising the management structure of the recreational and sports premises, we will aim at further improving rendered

40 REPORT BY THE BOARD OF DIRECTORS Ž E L E Z I A R N E P O D B R E Z O V Á 39 rationalising the management structure of the recreational and sports premises, we will aim at further improving rendered services and winning recognition from among a wide range of customers. The scope of the business activities carried out by Železiarne Podbrezová is also supported by the activities of other subsidiaries and associated undertakings, which contribute to the consolidated economic results. Upon meeting the planned revenues from sales of merchandise, finished goods and services at the consolidated group level of EUR million (SKK 9.0 billion), we expect to generate a consolidated profit attributable to Železiarne Podbrezová in the amount of EUR 3.0 million (SKK 90.4 million). CONCLUSION We regard the results of operations achieved in 2008 as positive despite the decreased dynamics of the growth of some qualitative indicators of economic efficiency. The global boom of the metallurgical industry continued in the first six months of 2008, resulting in pressure on the growth of the input prices of raw materials, namely steel scrap and ferro-alloys. On the other hand, insufficient sales opportunities in the last quarter resulted in the inefficient use of the technological facilities and increased overhead costs. Despite the difficult times, however, our profitability in the metallurgy sector amounted to 4.3%. The long-term experience of the personnel, under the leadership of mature management, made good use of the year-long work drive, although the overall results were impaired by the sales crisis at the year-end. The result, as recognised in the separate financial statements, was net profit of SKK thousand (EUR 13.2 million). Based on the requirements of Slovak legislation, Act No. 431/2002 Coll. on Accounting, the Company prepared separate financial statements for the period from 1 January 2008 until 31 December 2008 in accordance with the International Financial Reporting Standards as adopted by the European Union. The subsidiaries and associated undertakings also played an active part in generating profits for Železiarne Podbrezová. The consolidated group generated revenues of SKK thousand (EUR million). The profit of SKK thousand (EUR 23.3 million) was assigned to the shareholder, Železiarne Podbrezová, as a consolidating reporting enterprise. The Company s prosperity in the long term represented a guarantee for the successful operation of small- and medium-sized businesses in the region. Jobs and steady income provided by Železiarne Podbrezová and its subsidiaries created an encouraging social background in the district of Brezno. The Board of Directors of Železiarne Podbrezová wishes to express their gratitude and appreciation to all our colleagues, as without their contribution the presented results could not have been achieved. Additionally, we would like to extend our thanks to our suppliers, customers, banks and financial institutions, and to all our business partners for their co-operation. We wish to further promote our good trade relations in forthcoming periods. Thank you for your confidence. Approved by the decision of the Board of Directors on 15 May 2009.

41 40 A N N U A L R E P O R T

INFORMATION FOR SHAREHOLDERS Ž E L E Z I A R N E P O D B R E Z O V Á 41 The Company's registered capital is divided into 2 384 135 ordinary shares with a nominal value of EUR 34 per share.

42 INFORMATION FOR SHAREHOLDERS Ž E L E Z I A R N E P O D B R E Z O V Á 41 The Company's registered capital is divided into ordinary shares with a nominal value of EUR 34 per share. Until 14 February 2009, the nominal value of one share was SKK The shares are in certificate form and registered in the names of the individual shareholders. The Company provides for the maintenance and updates of the list of shareholders. The Company delegated, under a contract, the maintenance of the list of shareholders on the Central Securities Depository of the Slovak Republic, which registers the issue of the Company s shares under No.: LP The shares are not publicly tradable on the stock market. The shares can be transferred subject to the Company s approval. Shareholders of the Company as at 31 December 2008 Share in the registered capital ŽP TRADE s.r.o % CPA s.r.o % ŽP Trade Bohemia, a.s % Other legal entities 0.49% Individuals 25.68% 100% 100% 85% Slovak shareholders 74% Legal entities 15% Foreign shareholders 26% Private individuals

INFORMATION FOR SHAREHOLDERS 42 A N N U A L R E P O R T 2 0 0 8 Dear shareholders. Despite the fact that the Company generated a net profit of SKK 166 (EUR 5.

43 INFORMATION FOR SHAREHOLDERS 42 A N N U A L R E P O R T Dear shareholders. Despite the fact that the Company generated a net profit of SKK 166 (EUR 5.5) per share, the Company s Board of Directors suggests that the General Meeting keep the funds as the working capital of the Company. The Company needs to maintain its financial stability to overcome the difficult times of the global economic crisis with as little harm as possible. Thank you for your confidence and the trust you have expressed in Železiarne Podbrezová to date. Proposed Distribution of Profit for 2008 (presented at the Annual General Meeting held on 24 June 2009) Profit for 2008 (in accordance with IFRS) SKK EUR Distribution: 10% mandatory allotment to reserve fund SKK EUR Payout of dividends to shareholders SKK 0 EUR 0 Royalties SKK 0 EUR 0 Transfer to retained earning from prior years SKK EUR

REPORT ON THE ACTIVITY OF THE SUPERVISORY BOARD Ž E L E Z I A R N E P O D B R E Z O V Á 43 Dear shareholders.

and valid legislation. No misconduct of duties was identified.

In May 2009, the Supervisory Board reviewed the separate and consolidated financial statements prepared as at 31 December 2008 and the proposed distribution of profit as presented by the Board of

44 REPORT ON THE ACTIVITY OF THE SUPERVISORY BOARD Ž E L E Z I A R N E P O D B R E Z O V Á 43 Dear shareholders. During the year, the Supervisory Board continuously monitored the activities of the Board of Directors and the Company s business activities with regard to compliance with the Articles of Association and valid legislation. No misconduct of duties was identified. Individual members of the Board of Directors conducted their duties with due professional care; their work and achieved results have confirmed the reputation of high-quality management. In May 2009, the Supervisory Board reviewed the separate and consolidated financial statements prepared as at 31 December 2008 and the proposed distribution of profit as presented by the Board of Directors. The Supervisory Board recommended that the General Meeting approve the separate and consolidated financial statements prepared as at 31 December 2008, and the proposed distribution of profit for The Supervisory Board informs the General Meeting that, through its day-to-day activities, the Board of Directors demonstrates that its top priority is to eliminate the negative impacts of the global economic crises on the Company s operations. The Board of Directors adopts and implements critical measures that, in the opinion of the Supervisory Board, establish both adequate conditions to sustain the financial stability of the Company and opportunities to strengthen its position on the market. Podbrezova, 20 May 2009 Ing. Ján Banas Chairman of the Supervisory Board

45 CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2008 (Presented in accordance with International Financial Reporting Standards as adopted by the EU) 44 A N N U A L R E P O R T

46 INDEPENDENT AUDITOR S REPORT 45

47 CONSOLIDATED BALANCE SHEET As at 31 December 2008 (in thousands of SKK) 46 ASSETS NON-CURRENT ASSETS Note 31 December December 2007 Property, plant and equipment Intangible assets Goodwill Investments in associates Other financial assets Deferred tax asset Total non-current assets CURRENT ASSETS Inventories Trade receivables and other financial assets Income tax receivable Other assets Cash and cash equivalents Total current assets TOTAL ASSETS EQUITY AND LIABILITIES CAPITAL AND RESERVES Share capital Treasury shares Legal and other funds Retained earnings Equity attributable to equity holders of ŽP Minority interests Total equity LIABILITIES NON-CURRENT LIABILITIES Interest-bearing loans and borrowings Other financial liabilities Payables from employee benefits Provisions Deferred tax liability Total non-current liabilities CURRENT LIABILITIES Interest-bearing loans and borrowings Trade and other financial payables Income tax payable Other liabilities Total current liabilities Total liabilities TOTAL EQUITY AND LIABILITIES

CONSOLIDATED STATEMENT OF PROFIT AND LOSS For the year ended 31 December 2008 (in thousands of SKK) Note Year ended 31 December 2008 Year ended 31 December 2007 Revenues 22 19 512 373 16 030 132

48 CONSOLIDATED STATEMENT OF PROFIT AND LOSS For the year ended 31 December 2008 (in thousands of SKK) Note Year ended 31 December 2008 Year ended 31 December 2007 Revenues Changes in inventories of finished goods and work in progress Own work capitalized Consumed material and energy Services Personnel expenses Depreciation and amortization Other operating revenues (+)/expenses (-), net Interest income Interest expense Income from associates Other financial income (+)/expenses (-), net Profit before tax Income tax expense Profit for the year Profit attributable to: Equity holders of ŽP Minority interest Total

49 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the year ended 31 December 2008 (in thousands of SKK) 48 Total Minority interests Equity attributable to equity holders of ŽP Retained earnings Hedging and translation reserve Legal reserve fund Treasury shares Share capital Opening Balance at Dividends paid Net profit for the year Movement in translation reserve Distribution of profit Own shares Cash flow hedges (Note 28) Deferred tax on cash flow hedges Acquisition of new companies and increase of ŽP share in current subsidiaries (Notes 5 and 7) Closing Balance at Dividends paid Net profit for the year Movement in translation reserve Distribution of profit Own shares Cash flow hedges (Note 28) Deferred tax on cash flow hedges Acquisition of new companies and increase of ŽP share in current subsidiaries (Notes 5 and 7) Closing Balance at

50 CONSOLIDATED STATEMENT OF CASH FLOWS For the year ended 31 December 2008 (in thousands of SKK) Operating activities Year ended 31 December 2008 Year ended 31 December 2007 Profit before tax Depreciation and amortization Amortization of goodwill (+)/negative goodwill (-) Provisions Provisions for receivables, inventories and investments, net Loss on impairment of property, plant and equipment Unrealized foreign exchange differences Interest, net Financial derivatives Profit from sale of property, plant and equipment and intangible assets Profit from sale of financial investments Employee benefits Other non-cash items Operating cash flows before movements in working capital Changes in receivables Changes in inventories Changes in payables Changes in other assets and liabilities Cash generated from operations Interest received Interest paid Income tax paid Net cash from operating activities Investing activities Proceeds on disposal of property, plant and equipment and intangible assets Acquisition of property, plant and equipment and intangible assets Acquisition of subsidiaries less acquired cash and cash equivalents Acquisition of financial investments Acquisition of additional shares in current subsidiaries Acquisition of investment in an associate Disposal of subsidiaries net of cash and cash equivalents Net cash used in investing activity Financing activities Change in loans and borrowings Change in obligations under finance lease Dividends paid Proceeds from minority shareholders on increase of registered Net cash used in (-)/from (+) financing activity Net decrease (-)/increase (+) of cash and cash equivalents Cash and cash equivalents at the beginning of the year (Note 15) Cash and cash equivalents at the end of the year (Note 15)

51 50 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2008 (in thousands of SKK)

52 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2008 (in thousands of SKK) 51

53 52 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2008 (in thousands of SKK)

54 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2008 (in thousands of SKK) 53

55 54 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2008 (in thousands of SKK)

56 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2008 (in thousands of SKK) 55

57 56 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2008 (in thousands of SKK)

58 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2008 (in thousands of SKK) 57

59 58 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2008 (in thousands of SKK)

60 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2008 (in thousands of SKK) 59

61 60 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2008 (in thousands of SKK)

62 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2008 (in thousands of SKK) 61

63 62 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2008 (in thousands of SKK)

64 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2008 (in thousands of SKK) 63

65 64 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2008 (in thousands of SKK)

66 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2008 (in thousands of SKK) 65

67 66 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2008 (in thousands of SKK)

68 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2008 (in thousands of SKK) 67

69 68 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2008 (in thousands of SKK)

70 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2008 (in thousands of SKK) 69

71 70 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2008 (in thousands of SKK)

72 Ž E L E Z I A R N E P O D B R E Z O V Á 71 THANKS to all who cooperated with us in We look forward to our collaboration in the future. Management of the Company

BASIC INFORMATION ON THE COMPANY 72 A N N U A L R E P O R T 2 0 0 8 Trade name: Železiarne Podbrezová Legal form: Joint-stock company Seat: Kolkáreň 35 976 81 Podbrezová Slovak Republic Date of

73 BASIC INFORMATION ON THE COMPANY 72 A N N U A L R E P O R T Trade name: Železiarne Podbrezová Legal form: Joint-stock company Seat: Kolkáreň Podbrezová Slovak Republic Date of establishment: 21 April 1992 Date of incorporation: 1 May 1992 Company Registration No.: VAT Registration: SK Železiarne Podbrezová a.s. is incorporated with the Commercial Registry of Banská Bystrica District Court, Section Sa, Insert No.: 69/S. Both separate and consolidated financial statements and the Annual Report for 2008 have been approved by the General Shareholders Meeting and are available to shareholders at the Company s seat, and in electronic form on the Company s website. CONTACTS Telephone: admin@zelpo.sk Shareholders: Telephone: , Telefax: shareholders@zelpo.sk Železiarne Podbrezová a.s. Export sales Telephone: , Telefax: admin@zelpo.sk Domestic sales Telephone: , Telefax: admin@zelpo.sk ŽP Trade Bohemia, a.s. Telephone: , Telefax: info@zptrade.cz Contacts for business partners PIPEX ITALIA S.p.A. Telephone: Telefax: info@pipex.it PIPEX International AG Telephone: , Telefax: pipex@zelpo.sk SLOVRUR Sp. z o.o. Telephone: Telefax: slovrur@tg.onet.pl

74 SEPARATE FINANCIAL STATEMENTS For the year ended 31 December 2008 (Presented in accordance with International Financial Reporting Standards as adopted by the EU) Ž E L E Z I A R N E P O D B R E Z O V Á

76 INDEPENDENT AUDITOR S REPORT 3

77 SEPARATE BALANCE SHEET As at 31 December 2008 (in thousands of SKK) 4 ASSETS NON-CURRENT ASSETS Note 31 December December 2007 Property, plant and equipment Intangible assets Investments in subsidiaries, joint-ventures and associates Available-for-sale investments Other financial assets Total non-current assets CURRENT ASSETS Inventories Trade receivables and other financial assets Tax receivables Other current assets Cash and cash equivalents Total current assets TOTAL ASSETS EQUITY AND LIABILITIES CAPITAL AND RESERVES Share capital Treasury shares Legal and other funds Retained earnings Total equity LIABILITIES NON-CURRENT LIABILITIES Interest-bearing loans and borrowings Other financial liabilities Payables from employee benefits Provisions Deferred tax liability Total non-current liabilities CURRENT LIABILITIES Interest-bearing loans and borrowings Trade and other payables Income tax payables Total current liabilities Total liabilities TOTAL EQUITY AND LIABILITIES

78 SEPARATE STATEMENT OF PROFIT AND LOSS For the year ended 31 December 2008 (in thousands of SKK) Note Year ended 31 December 2008 Year ended 31 December 2007 Revenues Changes in inventories of finished products and work in progress Own work capitalized Raw material and consumables used Services Personnel expenses Depreciation and amortization Other operating revenues (+)/expenses (-), net Interest income Interest expense Other financial income (+)/expenses (-), net Profit before tax Income tax expense Profit for the year

79 SEPARATE STATEMENT OF CHANGES IN EQUITY For the year ended 31 December 2008 (in thousands of SKK) 6 Share capital Treasury shares Legal reserve fund Hedging Retained earnings Opening Balance at Dividends paid Allocation of statutory profit Treasury shares Hedging derivatives Total Deferred tax on hedging derivatives Net profit for the year Closing Balance at Dividends paid Allocation of statutory profit Treasury shares Hedging derivatives Deferred tax on hedging derivatives Net profit for the year

80 SEPARATE STATEMENT OF CASH FLOWS For the year ended 31 December 2008 (in thousands of SKK) Operating activities Year ended 31 December 2008 Year ended 31 December 2007 Profit before tax Depreciation and amortization Payables from employee benefits Provisions for liabilities - 72 Changes in provisions, net Loss from impairment of tangible fixed assets Unrealised foreign exchange differences Interests, net Financial derivatives Dividends received Profit from sale of tangible and intangible fixed assets Profit from sale of financial investments Write-off receivables Other non-cash items Operating cash flows before movements in working capital Changes in receivables Changes in inventories Changes in payables Cash generated from operations Interest received Interest paid Income tax paid Net cash from operating activities Investing activities Proceeds on disposal of tangible and intangible fixed assets Proceeds on disposal of financial investments Dividends received and other income Acquisition of property, plant and equipment and intangible assets Acquisition of financial investments Net cash used in investing activity Financing activities Change in loans and borrowings Change in obligations under finance lease Dividends paid Treasury shares sold Net cash from (+)/used in (-) financing activity Net increase (+)/decrease (-) of cash and cash equivalents Cash and cash equivalents at the beginning of the year (Note 12) Exchange differences on conversion of cash and cash equivalents Cash and cash equivalents at the end of the year (Note 12)

81 8 NOTES TO THE SEPARATE FINANCIAL STATEMENTS For the year ended 31 December 2008 (in thousands of SKK)

82 NOTES TO THE SEPARATE FINANCIAL STATEMENTS For the year ended 31 December 2008 (in thousands of SKK) 9

83 10 NOTES TO THE SEPARATE FINANCIAL STATEMENTS For the year ended 31 December 2008 (in thousands of SKK)

84 NOTES TO THE SEPARATE FINANCIAL STATEMENTS For the year ended 31 December 2008 (in thousands of SKK) 11

85 12 NOTES TO THE SEPARATE FINANCIAL STATEMENTS For the year ended 31 December 2008 (in thousands of SKK)

86 NOTES TO THE SEPARATE FINANCIAL STATEMENTS For the year ended 31 December 2008 (in thousands of SKK) 13

87 14 NOTES TO THE SEPARATE FINANCIAL STATEMENTS For the year ended 31 December 2008 (in thousands of SKK)

88 NOTES TO THE SEPARATE FINANCIAL STATEMENTS For the year ended 31 December 2008 (in thousands of SKK) 15

89 16 NOTES TO THE SEPARATE FINANCIAL STATEMENTS For the year ended 31 December 2008 (in thousands of SKK)

90 NOTES TO THE SEPARATE FINANCIAL STATEMENTS For the year ended 31 December 2008 (in thousands of SKK) 17

91 18 NOTES TO THE SEPARATE FINANCIAL STATEMENTS For the year ended 31 December 2008 (in thousands of SKK)

92 NOTES TO THE SEPARATE FINANCIAL STATEMENTS For the year ended 31 December 2008 (in thousands of SKK) 19

93 20 NOTES TO THE SEPARATE FINANCIAL STATEMENTS For the year ended 31 December 2008 (in thousands of SKK)

94 NOTES TO THE SEPARATE FINANCIAL STATEMENTS For the year ended 31 December 2008 (in thousands of SKK) 21

95 22 NOTES TO THE SEPARATE FINANCIAL STATEMENTS For the year ended 31 December 2008 (in thousands of SKK)

96 NOTES TO THE SEPARATE FINANCIAL STATEMENTS For the year ended 31 December 2008 (in thousands of SKK) 23

97 24 NOTES TO THE SEPARATE FINANCIAL STATEMENTS For the year ended 31 December 2008 (in thousands of SKK)

98 NOTES TO THE SEPARATE FINANCIAL STATEMENTS For the year ended 31 December 2008 (in thousands of SKK) 25

99 26 NOTES TO THE SEPARATE FINANCIAL STATEMENTS For the year ended 31 December 2008 (in thousands of SKK)

100

1. Introduction of the Company

1. Introduction of the Company ANNUAL REPORT 2009 Table of Contents 1... Introduction of the Company 2... General Manager s Speech 3... Evaluation of the Business Plan 4... Balance of Assets and Economic Performance - Independent Auditor