ANNUAL REPOR T 2008 · 2020-04-07 · ADDRESS FROM THE CHAIRMAN OF THE BOARD OF DIRECTORS ŽELEZIARNE PODBREZ O VÁ Dear Shareholders. The results we achieved in 2008 are very good

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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 ................................................................................................................................................ 10

REPORT BY THE BOARD OF DIRECTORS ............................................................................................................ 13

Business activities ...................................................................................................................................................... 13

Evironmental policy .................................................................................................................................................... 17

Human resources ....................................................................................................................................................... 18

Report by the board of directors on assets, funds and financial management ............................... 22

Significant events that occurred after the end of the reporting period ................................................ 27

Report on the activities of entities included in consolidation ................................................................... 29

Business plan ............................................................................................................................................................... 37

Conclusion .................................................................................................................................................................... 39

INFORMATION FOR SHAREHOLDERS .................................................................................................................. 41

REPORT ON THE ACTIVITY OF THE SUPERVISORY BOARD ....................................................................... 43

CONSOLIDATED FINANCIAL STATEMENTS ....................................................................................................... 44

BASIC INFORMATION ON THE COMPANY .......................................................................................................... 72

CONTACTS ........................................................................................................................................................................ 72

Annual_Report_2008:Layout 1 19.6.2009 9:14 Page 1

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ADDRESS FROM THE CHAIRMAN OF THE BOARD OF DIRECTORS


Dear Shareholders.The results we achieved in 2008 are very good despite the emergingfinancial and economic crisis. We achieved profit at one-third of lastyear’s level. It is necessary to consider, however, that we began to experience a shortage of contracts for the entire product range asearly as the third quarter of 2008. In that period, a positive decision wasmade by the European Central Bank on the transition from the Slovakcrown 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 Directorsbegan to thoroughly analyse the future outlook in terms of the emerging economic crisis. As we were expecting the blow of thespreading financial and economic crisis, crisis management was setup for the parent company as well as its subsidiaries. Therefore,

we made considerable cost reductions, which resulted in the profit generated in 2008. 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 PRAKOand ŽP Tažírny trub Svinov. In the first quarter of 2009, we were utilising our production capacitiesat 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 makepreparations 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 impactsof the financial and economic crisis were correct. Another important fact is that the measuresadopted by the parent company were also implemented in the subsidiaries and I firmly believe thatthey 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 isalso a guarantee that we will not be sensitive to fluctuations of exchange rates, which we experiencedin 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 SlovakRepublic, 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 SotákChairman of the Board of Directors and General Director

3


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BOARD OF DIRECTORS

Ing. Vladimír SOTÁKChairman 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 1992. He was elected as CEO at the extraordinary

shareholders’ meeting in 1994.

Ing. Marian KURČÍK Vice Chairman

of the Board of Directors and CFO

Born in 1958. Mr. Kurčík has held the position

of CFO since 1993 and has been a member

of the Board of Directorssince 1994. He was

elected Vice Chairman of the Board of Directors

in 2002.

Ing. Ľudovít IHRINGMember of the Board

of Directors and Director of Capital and Assets

Management

Born in 1952. 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 1992. From 1994to 2002 he held the

position of Vice Chairman of the Board of Directors.

Ing. Július KRIVÁŇMember of the Board

of Directors and Sales Director

Born in 1955. 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 Á5

Ing. Mária NIKLOVÁMember of the Board of Directors and Human Resource Director

Born in 1958. Mrs. Niklová has held the position of HR Director and memberof the Board of Directorssince 2006.

Ing. Ľubor SCHWARZBACHERMember of the Board of Directors and Technical Director

Born in 1953. Mr. Schwarzbacher has heldthe position of Technical Director and member of the Board of Directorssince 2006.

Ing. Vladimír ZVARÍKMember of the Board of Directors and Production Director

Born in 1951. Mr. Zvarík has held the position of Production Director since1994 and has been a member of the Board of Directors since 1994.


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SUPERVISORY BOARD


Ing. Jozef MARČOKMember of the Supervisory Board

Ing. Vladimír SOTÁK ml.Member of the Supervisory Board

Milan WEISSMember of the Supervisory Board elected by employees

Ing. Milan MUTIŠMember of the SupervisoryBoard elected by employees

Ing. Ján BANAS Chairman of the Supervisory Board

Luigi CUZZOLINMember of the Supervisory Board


KEY PERFORMANCE DATA

Development of Selected Data (SKK thousand) exclusive of consolidated entities

2004 2005 (1) 2006 (1) 2007 (1) 2008 (1) 2008 (3)

EUR million

Sales revenues 6 336 274 7 746 752 8 216 646 8 639 012 9 200 758 305.4

Value added 1 871 687 2 726 650 2 695 561 2 985 381 2 572 377 85.4

Profit before tax 284 232 915 290 1 002 348 1 207 875 498 004 16.5

Net profit 222 323 741 424 846 050 1 013 280 396 788 13.1

Dividends 119 207 357 620 238 414 119 207 0 0

Total assets 5 713 916 6 748 150 7 364 554 8 379 828 8 434 345 279.9

Equity 3 000 015 3 853 473 4 639 194 5 195 485 5 398 425 179.2

Registered capital 2 384 135 2 384 135 2 384 135 2 384 135 2 384 135 79.1

Interest bearing loans and borrowings 1 005 427 1 825 476 1 521 998 1 419 590 1 710 272 56.8

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) 93 311 355 425 166 EUR 6

Equity per share (SKK) 1 258 1 616 1 946 2 179 2 264 EUR 75

Year-end share price in stock-exchange (SKK) 850 1 908 1 800 2 100 (2) 2 100 (2) EUR 70

(1) Transition to IFRS accounting.(2) The shares have not been publicly tradable since 10 May 2007. The number specifies the price of share transfers performed at the end

of 2007 and 2008.(3) Informative translation using the conversion exchange rate of SKK/EUR 30.1260.

Equity per share (SKK) Year-end share price (SKK)

1 258

2004

1 616

2005

1 946

2006

2 179

2007

2 264

2008 2004 2005 2006 2007 2008

850

1 908 1 8002 100 2 100

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KEY PERFORMANCE DATA


Development of Selected Data (SKK thousand) inclusive of consolidated entities (under IFRS)

9

2004 2005 2006 2007 2008 2008 (1)

EUR million

Revenues 11 411 375 13 508 134 15 529 865 16 030 132 19 512 373 647.7

Operating profit 493 419 1 682 641 1 638 150 1 870 092 1 267 235 42.1

Profit before tax 506 699 1 669 949 1 624 977 1 810 848 1 012 182 33.6

Net profit 321 669 1 289 541 1 333 436 1 397 442 744 523 24.7

of which share attributable tothe Company's shareholders 363 801 1 169 590 1 254 301 1 373 117 700 725 23.3

Total assets 10 642 056 11 188 409 12 372 012 14 351 045 14 814 736 491.8

Equity 5 440 793 5 985 496 6 899 656 7 490 397 7 613 115 252.8

Registered capital 2 384 135 2 384 135 2 384 135 2 384 135 2 384 135 79.1

Interest bearing loans andborrowings 2 060 977 2 787 970 2 580 984 2 946 358 3 639 181 120.8

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) 153 491 526 576 294 EUR 10

Equity per share (SKK) 2 282 2 511 2 894 3 142 3 193 EUR 106

(1) Informative translation using the conversion exchange rate of SKK/EUR 30.1260.

Revenues (SKK million) Profit (SKK million)

11 411

2004

13 508

2005

15 530

2006

16 030

2007

19 512

2008 2004 2005 2006 2007 2008

364

1 170 1 254 1 373

701


PRODUCTION AND SALES

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 2008

Other

Power generation

Building industry

Mechanical engineering 40%

27%

17%

8%

Automotive industry 6%

Steel engineering constructions 2%

100%

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PRODUCTION AND SALES

CERTIFICATIONOur 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/TS16949:2002, issued by SGS ICS Gesellschaft für Zertifizierungen m.b.H. und Umweltgutachten.Železiarne Podbrezová a.s. owns product certificates issued by renowned certification companiessuch as Lloyd's Register of EMEA, TÜV NORD, Bureau Veritas, API, Germanischer Lloyd, Det NorskeVeritas, TSÚS, and individual certificates for the production and testing of steel, seamless hot rolledtubes, precision tubes, precision calibrate and welded tubes, large-diameter welded tubes andwelded 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 2 266 24.63 15 0.16 2 251 24.47

Hot rolled tubes 3 416 37.13 380 4.13 3 037 33.00

Precision tubes 2 204 23.95 209 2.27 1 995 21.68

Welded precision tubes 121 1.32 37 0.40 84 0.92

Welded tubes 120 1.30 36 0.39 84 0.92

Elbows 200 2.17 15 0.16 185 2.01

Secondary metallurgical production 144 1.56 46 0.50 97 1.06

Hydraulic and pneumatic tubes 24 0.26 1 0.01 23 0.25

Tube adapting pieces 8 0.09 1 0.01 7 0.07

and tubes for demountable pipes 294 3.19 294 3.19 0 0.00

Other sale (merchandise, services) 405 4.40 0 0.00 405 4.40

Total sale 9 201 100 1 033 11.22 8 168 88.78



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REPORT BY THE BOARD OF DIRECTORS


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 itsobjectives, which were specified in the business strategy prepared and presented to the Company’sshareholders during the global boom in all production industries’ activities, were met. Under thosecircumstances, 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 technologicalfacilities. In the following months, the Company experienced a decrease in demand for steel tubesacross the entire production range, which stabilised below 50% of usual demand. As a result of theglobal 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 groupcompanies 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 beseen in 2009.In 2008, we delivered products and services to our customers totalling SKK 9 200.8 million (EUR305.4 million), which is a 6.5% increase from 2007 and, in absolute figures, this amount representsthe 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 396 788 thousand(EUR 13 171 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 hedgingoperations against exchange rate risk. In 2008, the profit from such transactions amounted to SKK 404.7 million (EUR 13.4 million).

BUSINESS ACTIVITIES

Production and SaleThe 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 TradeBohemia, 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 late2008, we did not achieve the planned production volumes of weight units in the core productionplants and did not exceed the 2007 levels.In the steel mill, 366 623 tonnes of continuously cast steel billets were produced. In the rolling millfor seamless hot-rolled steel tubes, 183 480 tonnes were produced. In the tube mill, 49 722 tonnesof drawn seamless tubes were produced in 2008. We produced 3 635 tonnes of welded tube elbows, 3 701 tonnes of welded calibrated tubes, 2 833 tonnes of large-diameter welded tubes, and2 544 tonnes of secondary metallurgical products for the automotive industry supplies.

13

on Business Activities, Assets, and Financial Performance in 2008 and Information on Business Strategy


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Geographical areas of sale in 2008

PODBREZOVÁ

BRATISLAVA




Share in the EU production of selected products in 2008

15

EU producers Železiarne Podbrezová

91 % 93%

7%9%

93%

7%

Steel seamless precision cold drawntubes

Steel seamless cold drawn tubes other than for precision application

Steel seamless hot rolled tubes up todiameter of 168.3 mm

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 recentyears. 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 todeliver our products to all segments, including the automotive industry.The system of environmental management is certified according to ISO 14001 : 2004; the occupational health and safety system is certified under the BSi OHSAS 18001 standard.Despite the decreased demand at the end of the year, we sold our customers products, works, andservices worth a record-breaking SKK 9 200.8 million (EUR 305.4 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 segmentcontinuing to be EU countries in the following order: the Czech Republic, Germany, Poland, Italy and Hungary.


Regional sales structure developments (Sales in SKK million)

(Sales in SKK million)(Sales in SKK millio

Purchase of Strategic Raw Materials and EnergyBeing in compliance with ISO standards in business relationships with suppliers of raw materialsand 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 5 258.6 million (EUR 174.6 million), of which 12.9% were imported goods. As usual, with regardto our purchase of raw materials, scrap steel, ferro-alloys and raw iron were priorities; heat-resistantmaterials, thick tin-sheets and steel tapes also represent priority purchases. In 2008, we purchaseda total of 326 148 tonnes of scrap steel, of which 1.8% represents an imported supply, principallyfrom Hungary. By gaining control over the ownership of ŽP EKO QELET a.s., KBZ s.r.o. and ŽIAROMAT a.s., wegained 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 205 048 MWh of electricity, of which 77% was purchased in the Czech Republic. Our water power plants and co-generation unit produced 59 027 MWh of electricity, representing 23% of our total annual consumption. In 2008, we purchased 43 660 thousand m3 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 ManagementIn 2008, we invested a total of SKK 361.6 million (EUR 12.0 million) in the acquisition of non-currenttangible 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 238.2 million (EUR 7.9 million) on new machinery and refurbishingour original technological equipment. The finishing line for steel precision drawn tubes representsour biggest investment. Another major technological investment was second stage of the automated drawn tubes warehouse, which considerably accelerates expedition.

2004 2005 2006 2007 2008

Slovak Republic 819 1 039 1 103 1 074 1 033

Czech Republic 1 641 1 779 2 044 2 007 1 916

EU countries 3 269 4 106 4 156 4 989 5 582

Other European countries 204 248 367 195 313

Other export 373 575 524 375 356

Total sale 6 306 7 747 8 194 8 639 9 201


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For the purpose of saving thermal energy, we completed the second and final stage of the heatmanagement rationalisation at the old plant in 2008; to replace the steam heating system, local gasboiler rooms and gas infrared heaters were installed.We invested a total of SKK 110.1 million (EUR 3.7 million) in construction. Reconstruction of the steelmill social building combined with the canteen refurbishment represented a key construction investment. Another major construction investment was the refurbishment of the former Piesokdormitory: 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 823.5 million (EUR 27.3 million)for repairs in 2008. 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 main-tenance activities into the Central Maintenance Unit.

ENVIRONMENTAL POLICYA 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 14001 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 andReplacement of Equipment Containing Polychlorinated Biphenyls and constructed an isolatedwaste 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 participantin 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 compliancewith legislative requirements, during the previous year we ensured the monitoring and regular evaluation of produced carbon oxide emissions.

Research and DevelopmentIn 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 1 308.0 thousand (EUR 43.4 thousand).

17



HUMAN RESOURCESCompany success is also considerably determined by the dynamics, stability and sufficient performance of its employees. This can be achieved by continuous systematic human resourcescare at all management levels. Each year, the Employee Care Programme is prepared in line with the Company’s financial plan andfocuses on investments in education, the health of our employees and their families, and in culturaland sports activities. The scheme of our personnel, payroll, and social security and occupationalhealth and safety policy was laid out in the 2008 Collective Agreement concluded between ZO OZKOVO and the Board of Directors of Železiarne Podbrezová, and the Employee Care Programme ofthe Board of Directors of Železiarne Podbrezová a.s. The Company has fully performed its liabilitiesarising 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 forblood 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 activitiesin 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 totalledSKK 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 154.1 thousand). In 2008, we drew SKK 0.6 million (EUR 20.8 thousand) from the social fundfor social assistance and SKK 3.7 million (EUR 121.2 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 thesocial 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 146.2 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 196.6 thousand);• Preparation of future workforce at SSOŠH and SG and granting of scholarships:

.................................................................................................................. SKK 19.8 million (EUR 657.6 thousand);• Protective work equipment for employees, drinking regime for all employees:

................................................................................................................. SKK 16.0 million (EUR 530.6 thousand);• Comprehensive programme of recuperative measures:

.............................................................................................................. SKK 48.8 million (EUR 1 619.8 thousand);• Implemented employee benefits programme at Allianz – Slovenská poisťovňa a.s.

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Personnel expenses (SKK thousand)

19

2004 2005 2006 2007 2008

Wages and salaries 994 188 1 055 130 1 039 628 1 149 185 1 129 813

Mandatory remittances from salaries 309 335 329 536 329 119 355 638 364 874

Training, education 9 431 21 275 31 288 31 174 25 734

Protective work equipment 14 706 14 872 15 058 16 406 15 986

Secondary expenses 12 278 12 130 11 616 11 817 7 254

Social fund 12 806 13 725 15 538 12 684 16 148

Total 1 352 744 1 446 668 1 442 247 1 576 904 1 559 809

Expenses per employee 331 365 381 414 416

Added value per employee (SKK thousand) Expenses per employee (SKK thousand)

457

331365

688

381

712

414

784

416

686

2004 2005 2006 2007 2008



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 islimited. 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 itsfuture employees at the Private Secondary Apprentice School of Metallurgy of Železiarne Podbrezová – metallurgists, electricians and mechanics, and at the Private Secondary GrammarSchool of Železiarne Podbrezová in Lopej. After graduating in 2008, 42 graduates were hired; in2009, 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 forthe future. In the Private Secondary Grammar School of Železiarne Podbrezová, we assist studentswhen they make decisions on their preferred course of study at university. If they are interested inworking 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, mainlywith the Technical University in Košice with which we facilitate, under a contract, external bachelor’sstudy. Last year, 21 employees completed the study programme, 19 of whom decided to continuewith 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)

Women Men

4 092

3 164

928

2004

3 966

3 057

909

2005

3 788

2 921

867

2006

3 807

2 912

895

2007

3 749

2 853

896

2008

100%

75%

50%

25%

0%

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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 tostreamline its overall management structure and all systemised working positions individually byunits. 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 measuretaken with regard to human resources was the decision not to extend the employment contractsconcluded for a definite period, which resulted in a headcount reduction of 53 employees. We laidoff 48 employees who were already pension beneficiaries or to whom the pension entitlement aroseat that time.Compared to the previous year, the Company has 58 fewer FTE employees. In 2008, the Companyemployed 3 749 employees on average (an FTE number). The average monthly salary in 2008amounted to SKK 25 541 (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 21 802 (EUR 724) per employee, which represents a year-on-year increase of 4.6%. Work productivity from added valueper employee amounted to SKK 686.1 thousand (EUR 22.8 thousand). In 2008, the subsidiaries and associated undertakings in Slovakia employed an additional 5 038 employees. In 2008, the subsidiaries in the Czech Republic employed 3 210 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 mediumfor informing company employees and the general public in the region. Besides these traditionalcommunication 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 structureof Employees of Employeesin 2008 in 2008

21

Secondary professional

Secondary accomplished

Primary education6%

37%

48%

University9%

21 to 30 years

31 to 40 years

Up to 20 years1%

13%

25%

41 to 50 years

Above 51 years

29%

32%

100%100%



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 8 434.3 million (EUR 280.0 million), whichrepresents an increase of 0.65% year-on-year.Non-current assets increased by SKK 375.5 million (EUR 12.5 million) mainly due to a new acquisition– the Transmesa Group in Spain, in the total amount of SKK 436.9 million (EUR 14.5 million), whichwas performed by Železiarne Podbrezová a.s. in the period of the economic boom in the steel industry. In contrast, current assets decreased by SKK 321.0 million (EUR 10.7 million) as a result of a significantdecrease in receivables, i.e. by SKK 427.7 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 innon-current assets, the share of own funds in the Company’s funding increased to 64% (an increaseof 2%). As at 31 December 2008, the equity was recognised in the amount of SKK 5 398.4 million(EUR 179.2 million), which represents SKK 2 264 (EUR 75) per share. The Company’s liabilities decreased by SKK 148.4 million (EUR 4.9 million), with mainly trade payables decreasing by SKK 136.1 million (EUR 4.5 million) and the gearing increasing by SKK 290.7 million (EUR 9.6 million).

Structure of Assets Structure of Liabilitiesas at 31. 12. 2008 as at 31. 12. 2008

100%

Financial assets

Receivables

Property, plant and equipment 33%

34%

14%

Inventories 17%

Other assets 2%

100%

Interest-bearing loans and borrowings

Other non-current liabilities

Equity 64%

20%

4%

Other current liabilities 12%

A N N U A L R E P O R T 2 0 0 822




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 usethe positive effect of the “club financing”. An 85% share of a foreign currency on the total financingof 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-termloan 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 2008.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 theSKK/EUR exchange rate risk. As a result, in 2008 the Company performed financial derivatives (forwards, option structures) at the nominal value of EUR 126.5 million (SKK 3 810.9 million) in orderto achieve the exchange rate set by the financial plan for 2008 and 2009. Derivatives totalling EUR 93.5 million (SKK 2 816.8 million) became due in 2008 and derivatives in the nominal value ofEUR 33.0 million (SKK 994.2 million) fell due in 2009. After the announcement of the SKK/EUR conversion rate, the Company prematurely closed the derivates falling due in 2009; other derivativeswere continually closed in 2008. Total gains on hedging transactions in SKK/EUR amounted to SKK 410.0 million (EUR 13.6 million), with the achieved average exchange rate of SKK/EUR 34.918.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 175.8 thousand) and achieved an average exchange rate of CZK/SKK 1.2357. 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 ofvariations in the floating interest rate, the Company entered into three interest rate swaps in 2008and generated a profit of SKK 8.28 million (EUR 274.8 thousand) .Thanks to close co-operation with the banking houses and thorough preparation throughout theyear, we successfully managed the conversion from the national currency (Slovak crown) to theeuro as at 1 January 2009.

Satisfaction of Liabilities Last year, the Company’s financial position was balanced and stable. We fulfilled our obligations tofinancial institutions, state and public authorities, as well as to all suppliers and employees in a dueand timely manner.

23



Data from Separate IFRS Balance Sheet as at 31 December 2008 (SKK thousand)

EQUITY AND LIABILITIESCAPITAL AND RESERVES Share capital 2 384 135 2 384 135Treasury shares - -67 673Legal and other funds 388 071 429 059Retained earnings 2 626 219 2 449 964Total equity 5 398 425 5 195 485LIABILITIESNON-CURRENT LIABILITIESInterest-bearing loans and borrowings 1 054 087 877 222Other financial liabilities 47 945 236 843Payables from employee benefits 149 768 162 988Provisions 1 288 1 288Deferred tax liability 85 211 98 860Total non-current liabilities 1 338 299 1 377 201CURRENT LIABILITIESInterest-bearing loans and borrowings 656 185 542 368Trade and other payables 1 041 436 1 222 989Income tax payables - 41 785Total current liabilities 1 697 621 1 807 142Total liabilities 3 035 920 3 184 343TOTAL EQUITY AND LIABILITIES 8 434 345 8 379 828

As at 31. 12. 2008 As at 31. 12. 2007ASSETSNON-CURRENT ASSETSProperty, plant and equipment 2 760 788 2 701 525Intangible assets 1 451 2 666Investments in subsidiaries, joint-ventures and associates 2 857 421 2 453 654Available-for-sale investments 3 837 6 714Other financial assets 4 788 88 209Total non-current assets 5 628 285 5 252 768CURRENT ASSETSInventories 1 480 281 1 559 194Trade receivables and other financial assets 1 095 611 1 523 278Tax receivables 63 873 -Other current assets 9 092 15 478Cash and cash equivalents 157 203 29 110Total current assets 2 806 060 3 127 060TOTAL ASSETS 8 434 345 8 379 828

A N N U A L R E P O R T 2 0 0 824




Expenses, Revenues and Profit for 2008In 2008, Železiarne Podbrezová reported a profit of SKK 396 788 thousand (EUR 13.2 million), whichrepresents the difference between total revenues of SKK 9 671 703 thousand (EUR 321.0 million)and total expenses of SKK 9 274 915 thousand (EUR 307.9 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55.8%- Consumed energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.0%- Costs of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.7%- Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.4%- Personnel expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.5%- Depreciation of non-current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.7%- Financial expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3%- Taxes and fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1%- Other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.5%

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 ŽeleziarnePodbrezová’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 30.1260.

Data from Separate IFRS Income Statement for the year ended 31 December 2008 (SKK thousand)

25

For 2008 For 2007Revenues 9 200 758 8 639 012Changes in inventories of finished products and work in progress 64 864 178 289Own work capitalized 257 500 266 220

Raw material and consumables used -6 355 363 -5 512 040Services -595 382 -586 100Personnel expenses -1 618 686 -1 642 777Depreciation and amortization -247 687 -248 672Other operating revenues (+)/expenses (-), net -25 296 58 060

Interest income 11 295 3 291Interest expense -98 015 -72 058Other financial income (+)/expenses (-), net -95 984 124 650

Profit before tax 498 004 1 207 875Income tax expense -101 216 -194 595Profit for the year 396 788 1 013 280



Data from Separate IFRS Statement of Changes in Equity for the year ended

31 December 2008 (SKK thousand)

Share capital

Treasuryshares

Legal reserve

fundHedging Retained

earnings Total

Opening Balance at 1. 1. 2007 2 384 135 - 198 067 297 291 1 759 701 4 639 194

Dividends paid - - - - -238 412 -238 412

Allocation of statutory profit - - 84 605 - -84 605 -

Treasury shares - -67 673 - - - -67 673

Hedging derivatives - - - -186 301 - -186 301

Deferred tax on hedging derivatives - - - 35 397 - 35 397

Net profit for the year - - - - 1 013 280 1 013 280

Closing Balance at 31. 12. 2007 2 384 135 -67 673 282 672 146 387 2 449 964 5 195 485

Dividends paid - - - - -119 205 -119 205


Treasury shares - 67 673 - - - 67 673



Net profit for the year - - - - 396 788 396 788

Closing Balance at 31. 12. 2008 2 384 135 - 384 000 4 071 2 626 219 5 398 425

A N N U A L R E P O R T 2 0 0 826




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 Introductionof the Euro Currency in the Slovak Republic, the Company’s Board of Directors decided to convertthe nominal value of the Company’s shares and registered capital from Slovak crowns to eurosusing the method of rounding up the nominal value per share to the nearest euro at the conversionexchange rate of SKK/EUR 30.1260 as follows: - The nominal value per share in the amount of SKK 1 000 after conversion amounts to EUR 34.- The Company’s registered capital in the amount of SKK 2 384 135 000 after the conversion of its

nominal value amounts to EUR 81 060 590. In connection with this change in the nominal value ofthe shares and registered capital from Slovak crowns to euros, the Company’s Board of Directorsalso decided to amend the Company’s Articles of Association. All the shareholders were notifiedof 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 possibilityto resume the production when the market recovers. A metallurgical material warehouse for retailand regular customers from Moravia and Poland will be established at the Company’s premises. Allcustomer 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 2009. 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 aimedto 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. AllŽP-Invest s.r.o.’s were offered for sale.

27


A N N U A L R E P O R T 2 0 0 828




REPORT ON THE ACTIVITIES OF ENTITIES INCLUDED IN CONSOLIDATIONAs of 31 December 2008, the net value of Železiarne Podbrezová’s financial assets, as disclosed onthe balance sheet under IFRS totalled, SKK 2 857.4 million (EUR 94.8 million), which is 33.9% of theCompany’s total assets. Compared to the previous year, this represented an absolute increase of SKK 403.7 million (EUR 13.4 million).

Financial investments and other ownership interests at 31 December 2008

29

Legal name Registered office Investment in SKK '000 (1)

Interest in share capital

Ownership interest Consolidated

Strategic companies

ŽĎAS, a.s. Žďár nad Sázavou,Czech Republic 706 002 100.00% direct yes

Tále, a.s. Horná Lehota, SR 448 900 98.27% direct yes

Production companies

ŽP EKO QELET a.s. Martin, SR 811 138 66.27% direct yes

Transformaciones MetalurgicasS.A. (TRANSMESA) Barcelona, Spain 338 472 64.82% (2) direct yes

Tubos de Acero de Precisión,S.L. (TAP) Barcelona, Spain 98 405 82.41% (2) direct and

indirect yes

ŽIAROMAT a.s. Kalinovo, SR 145 929 100.00% direct yes

KBZ s.r.o. Košice, SR 90 929 50.00% direct yes

ŽP Tažírny trub Svinov, spol. s r.o.

Ostrava, Czech Republic 51 989 100.00% direct yes

ŽP PRAKO s.r.o. Prakovce, SR 0 100.00% direct yes

TS Plzeň a.s. Plzeň, Czech Republic - 100.00% indirect yes

Sales and distribution companies

PIPEX International AG Nidau, Switzerland 40 051 85.00% direct yes

PIPEX ITALIA S.p.A. Arona, Italy 10 779 95.00% direct yes

SLOVRUR Sp. z o. o. Stalowa Wola, Poland 758 68.00% direct yes

ZANINONI SLOVAKIA, s.r.o. Valaská, SR 500 50.00% direct yes

TS STEEL PIPE & FITTINGS S.r.l. Flero, Italy - 94.05% indirect yes

ŽĎAS SGS, GmbH Bonen, Germany - 67.00% indirect yes



TRANSMESA and TAPThe most significant transaction is considered the acquisition of a 64.5% share in TransformacionesMetalurgicas 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 globalcompetitors 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 theconsolidated 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 2008.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 systemcertified under the ISO 9001:2000 standard and the Environmental Management System under theISO 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 wascaused by higher demand for galvanised tubes and an increase in input prices of rolled material. In2008, the Company supplied its customers with products in the total volume of 9 517 tonnes; the

(1) Net carrying amount (net of created provisions). Investments in a foreign currency translated at the NBS Exchange rate as at 31 December 2008.

(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 theconsolidated financial statements.

Legal name Registered office Investment in SKK '000 (1)

Interest in share capital

Ownership interest Consolidated

Services

ŽP-Invest s.r.o. Podbrezová, SR 41 268 100.00% direct yes

ŽP – Gastroservis, s.r.o. Valaská, SR 28 000 100.00% direct yes

ŽP Informatika s.r.o. Podbrezová, SR 25 000 100.00% direct yes

ŽP Šport, a.s. Podbrezová, SR 15 320 99.80% direct yes

ŽP BYTOS, s.r.o. Podbrezová, SR 2 100 100.00% direct yes

ŽP VVC s.r.o. Podbrezová, SR 1 000 100.00% direct yes

Motor-Car Podbrezová s.r.o. Podbrezová, SR 560 49.00% direct yes

HRON - AIR s.r.o. Podbrezová, SR 121 34.00% direct yes

Other capital participation

Nadácia Železiarne Podbrezová Podbrezová, SR 200 100.00% direct yes

STABILITA, d.d.s., a.s. Košice, SR 0 5.17% no

Hutnictví železa, a.s. Praha, Czech Republic 0 2.34% no

A N N U A L R E P O R T 2 0 0 830




consolidated revenues reached EUR 31 017 thousand (SKK 934.4 million). The comparison of theindividual 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 customersabroad 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 thesecond 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 managedon 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 28 976 thousand (SKK 872.9 million). The major investment in 2008 was the purchase of an automated warehouseof finished products, which will enhance the sales logistics on adjacent territories within the entireŽP Group. The consolidated current assets as at 31 December 2008 amounted to EUR 18.3 million(SKK 551.3 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 volumesdropped and production was curtailed, the headcount was decreased, mostly among temporaryworkers. These measures did not produce additional personnel expenses. The average number ofemployees 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 byusing 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., oneof 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 ofcustomers, accounting for 58% of the total sales in 2008. The most significant customers are fromRussia, 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 5 131.2 million (SKK 5 803.2 million, i.e. EUR 192.6 million).Profit after tax was reported in the amount of CZK 404.0 million (SKK 456.9 million, i.e. EUR 15.2 mil-lion). In terms of capital expenditures, in 2008 ŽĎAS, a.s. invested a total of CZK 319.8 million (SKK361.7 million, i.e. EUR 12.0 million), of which CZK 262.4 million (SKK 296.8 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 productionand a golf centre comprising an 18-hole championship golf course: Gray Bear. The resort includestwo hotels providing, apart from standard services, also congress tourism and golf vacations. In2008, Tále, a.s. sold services totalling SKK 124.9 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 483.5 million (EUR 16.0 million), with externaldebt accounting for 11%.

31



ŽP EKO QELET a.s.ŽP EKO QELET a.s. is the leading supplier of steel scrap – the most fundamental manufacturingraw material. In 2008, ŽP EKO QELET a.s. reported sales of merchandise, finished goods, and services in the amount of SKK 2 734.0 million (EUR 90.7 million). In 2008, ŽP EKO QELET a.s. supplied Železiarne Podbrezová a.s. with a total of 212.6 thousand tonnes of steel scrap. After another increase in registered capital, ŽP EKO QELET a.s. finished the year with total capital of SKK 510.0 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 794.8 mil-lion (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 114.6 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 inthe process of steel and non-ferrous metal production, ŽIAROMAT established its position on themarket after necessary investments in technology. In 2008, ŽIAROMAT reported sales of merchandise, finished goods, and services in the total amountof SKK 247.6 million (EUR 8.2 million) and closed the year with a profit after taxation amounting toSKK 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 steeltubes 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 ofCZK 310.8 million (SKK 351.5 million, i.e. EUR 11.7 million). ŽP TTS’s registered capital amounts toCZK 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 489.3 thousand). As stated in the report above, ŽP TTSsuspended its production as at 1 April 2009 due to an insufficient number of contracts.

A N N U A L R E P O R T 2 0 0 832




ŽP PRAKO s.r.o.ŽP PRAKO s.r.o. manufactures forged flanges and other die forgings for the mechanical engineeringand energy sectors and the automotive industry. 2008 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 mil-lion). In spite of the ŽP PRAKO’s turnover and implementation of rationalisation and other technicalmeasures aimed to improve production quality, the financial results did not improve as ŽP PRAKOlost 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 448.1 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 AGIn 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 1 846.8 million, i.e. EUR 61.3 million). PIPEX Int’s registered capital amounts to CHF 1 million (SKK 20.1 million, i.e. EUR 668.3 thousand), and its profit after taxation totalled CHF 1 001 thousand (SKK 20.2 million, i.e. EUR669.1 thousand).

PIPEX ITALIA S.p.A.In 2008 PIPEX ITALIA S.p.A. reported sales of finished goods totalling EUR 56.4 million (SKK 1 698.9 million). PIPEX ITALIA’s registered capital amounts to EUR 258 thousand (SKK 7.8 million),and its profit after taxation amounted to EUR 518.6 thousand (SKK 15.6 million). In March 2008,PIPEX ITALIA purchased the remaining equity share in TS STEEL PIPE & FITTINGS S.r.l., increasingits share of the registered capital to 99%. PIPEX ITALIA also completed the tubes warehouse in theBergamo region using its own funds. This investment significantly strengthened its position on theItalian 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 inthe total amount of PLN 126.0 million (SKK 915.5 million, i.e. EUR 30.4 million). SLOVRUR’s registered capital amounts to PLN 100 thousand (SKK 726.6 thousand, i.e. EUR 24.1 thousand) andits profit after taxation totalled PLN 4 064 thousand (SKK 29.5 million, i.e. EUR 980.2 thousand).

33



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 SLOVAKIAarranged for 8 025 transports. In 2008, services provided by ZANINONI SLOVAKIA totalled SKK412.8 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 506.5 thousand).

ŽP–Gastroservis, s.r.o.ŽP - Gastroservis, s.r.o. produces fresh, refrigerated and frozen meals. It also provides comprehensiveservices in catering for employees of the parent company and for external customers. In the longterm, the proportion of meals delivered to external customers is approximately one half of the totalnumber 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 929.4 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 Podbrezováin the field of information technology and information systems. In 2008, ŽP Informatika reportedsales of merchandise and services in the total amount of SKK 114.9 million (EUR 3.8 million). ŽP Informatika’s registered capital amounts to SKK 25.0 million (EUR 829.8 thousand) and the previous year’s profit after taxation amounted to SKK 7.5 million (EUR 249.7 thousand).

ŽP Šport, a.s.The core activities of ŽP Šport, a.s. focus mainly on sports, advertising, and promotion. It providedfor the development of professional and amateur mass sports activities for the employees of theparent 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 509.5 thousand) and closed the year with a loss of SKK 7.8 million (EUR 259.2 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 ownedby Železiarne Podbrezová and the management of privately-owned apartments under managementcontracts. ŽP BYTOS generated revenues from sales of services totalling SKK 5.4 million (EUR 179.6 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).

A N N U A L R E P O R T 2 0 0 834




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 thoughthe monitored period is fairly short, ŽP VVC s.r.o. reached specific outputs from solved issues aimedat optimising the structure and features of alloyed boiler tubes, increasing the durability of forminginstruments and also performing tasks focusing on environment-friendly production. As part of theEUREKA 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, usingthe 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.

35


A N N U A L R E P O R T 2 0 0 836




BUSINESS PLANThe long-term business strategy pursued by Železiarne Podbrezová is based on diversificationspread 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 toobjectively assess our reduced sales opportunities and capabilities and adjust the business plansfor 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 andthe production of precision welded tubes. The technological equipment operations, however, willneed 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 151.7 million (SKK 4 569.5 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 globalmarket, 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 aimedat generating a profit despite a dramatic reduction in the production and sales volumes. Thesemeasures focus primarily on reducing personnel costs (a 23% headcount reduction throughout theentire 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 135.6 million), which representsonly 64% of simple reproduction. The biggest investment project will be the construction of a tubegalvanising plant, which introduces a new product for the Company. We will invest no more thanEUR 19.9 million (SKK 599.5 million) in technological equipment repairs. The complete overhaul ofa 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 ofthe controlled entities ŽP EKO QELET a.s. and KBZ s.r.o., which are engaged in processing wastemetal. 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 economiccrisis. In quality assurance, we will continue to pursue the management system under ISO 9001:2000 -VDA6.1., ISO/TS 16949:2002, and the Environmental Management System under the ISO 14 001:2004standard. Through our subsidiary ŽP VVC s.r.o. we will finance specific projects in applied R&D by allottingEUR 304 thousand (SKK 9.2 million). We are considering extending our cooperation and capital investment in the Technical University in Košice in 2009.The personnel, payroll and social policy programme for the Company’s employees will be affectedby the impacts of the economic crisis in 2009 and, therefore, the corporate strategy and measuresfor mitigation of the impacts will also include efficient re-assessment of the headcounts in line withthe number of contracts and volume of auxiliary jobs and services. Therefore, we will assess theheadcounts, working regimes, salary developments, and all employee care costs on a monthly

37



basis. Despite the adopted measures, it remains crucial for us to ensure that our employees receiveadequate care and work in a safe environment. We will continue developing the occupational healthand safety management system certified under the OHSAS 18001 Standards. We must also keepin 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 thesubsidiaries, will be outsourced to our subsidiary ŽP Informatika s.r.o. in 2009. 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 2010. With regard to ensuring the sale of finished goods in the amount of EUR 151.7 million (SKK 4 569.5 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 fromfinancial investments. The dividends to be received from the subsidiaries in 2009 are estimated atEUR 5.9 million (SKK 177.7 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 expectedto 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 2009.- 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 andthe 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 allshares 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 Boardof 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 ma-chines and tools, casts, forged pieces and models. Along with TS Plzeň a.s., ŽĎAS, a.s. has createda tandem that ranks among the top heavy-engineering and metallurgical companies in the CzechRepublic and has won worldwide recognition. Their mutual cooperation will allow the further use ofthe 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 theconsolidated 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

A N N U A L R E P O R T 2 0 0 838




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 theactivities of other subsidiaries and associated undertakings, which contribute to the consolidatedeconomic results. Upon meeting the planned revenues from sales of merchandise, finished goodsand services at the consolidated group level of EUR 298.7 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).

CONCLUSIONWe regard the results of operations achieved in 2008 as positive despite the decreased dynamicsof 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 growthof 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 technologicalfacilities and increased overhead costs. Despite the difficult times, however, our profitability in themetallurgy sector amounted to 4.3%. The long-term experience of the personnel, under the leadership of mature management, madegood use of the year-long work drive, although the overall results were impaired by the sales crisisat the year-end.The result, as recognised in the separate financial statements, was net profit of SKK 396 788 thousand (EUR 13.2 million). Based on the requirements of Slovak legislation, Act No. 431/2002Coll. 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 ReportingStandards as adopted by the European Union.The subsidiaries and associated undertakings also played an active part in generating profits forŽeleziarne Podbrezová. The consolidated group generated revenues of SKK 19 512 373 thousand(EUR 647.7 million). The profit of SKK 700 725 thousand (EUR 23.3 million) was assigned to theshareholder, Železiarne Podbrezová, as a consolidating reporting enterprise. The Company’s prosperity in the long term represented a guarantee for the successful operationof small- and medium-sized businesses in the region. Jobs and steady income provided byŽeleziarne Podbrezová and its subsidiaries created an encouraging social background in the districtof Brezno.

The Board of Directors of Železiarne Podbrezová wishes to express their gratitude and appreciationto all our colleagues, as without their contribution the presented results could not have beenachieved. 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 furtherpromote 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.

39


A N N U A L R E P O R T 2 0 0 840


INFORMATION FOR SHAREHOLDERS


The Company's registered capital is divided into 2 384 135 ordinary shares with a nominal value ofEUR 34 per share. Until 14 February 2009, the nominal value of one share was SKK 1 000. Theshares 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 Companydelegated, under a contract, the maintenance of the list of shareholders on the Central SecuritiesDepository of the Slovak Republic, which registers the issue of the Company’s shares under No.: LP0000806226.

The shares are not publicly tradable on the stock market. The shares can be transferred subject tothe Company’s approval.

Shareholders of the Company as at 31 December 2008

41

Share in the registered capital

ŽP TRADE s.r.o. 41.49%

CPA s.r.o. 18.49%

ŽP Trade Bohemia, a.s. 13.85%

Other legal entities 0.49%

Individuals 25.68%

Foreign shareholders

Slovak shareholders85%

15% Private individuals

Legal entities74%

26%

100%100%


INFORMATION FOR SHAREHOLDERS

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 workingcapital 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 396 788 066.91 EUR 13 170 950.90

Distribution:

10% mandatory allotment to reserve fund SKK 39 678 806.69 EUR 13 170 95.09

Payout of dividends to shareholders SKK 0 EUR 0

Royalties SKK 0 EUR 0

Transfer to retained earning from prior years SKK 357 109 260.22 EUR 11 853 855.81

A N N U A L R E P O R T 2 0 0 842


REPORT ON THE ACTIVITY OF THE SUPERVISORY BOARD


Dear shareholders.

During the year, the Supervisory Board continuously monitored theactivities of the Board of Directors and the Company’s businessactivities with regard to compliance with the Articles of Associationand 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 andconsolidated financial statements prepared as at 31 December2008 and the proposed distribution of profit as presented by theBoard of Directors. The Supervisory Board recommended that the General Meetingapprove the separate and consolidated financial statements

prepared as at 31 December 2008, and the proposed distribution of profit for 2008.The Supervisory Board informs the General Meeting that, through its day-to-day activities, the Boardof 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 conditionsto sustain the financial stability of the Company and opportunities to strengthen its position on themarket.

Podbrezova, 20 May 2009

Ing. Ján BanasChairman of the Supervisory Board


A N N U A L R E P O R T 2 0 0 844

CONSOLIDATED FINANCIAL STATEMENTS

For the year ended 31 December 2008(Presented in accordance with International Financial Reporting

Standards as adopted by the EU)


INDEPENDENT AUDITOR’S REPORT

45


46

CONSOLIDATED BALANCE SHEETAs at 31 December 2008

(in thousands of SKK)

EQUITY AND LIABILITIES

CAPITAL AND RESERVES

Share capital 16 2 384 135 2 384 135

Treasury shares 16 - -67 673

Legal and other funds 16 -11 229 468 774

Retained earnings 4 719 827 4 326 125

Equity attributable to equity holders of ŽP 7 092 733 7 111 361

Minority interests 520 382 379 036

Total equity 7 613 115 7 490 397

LIABILITIES

NON-CURRENT LIABILITIES

Interest-bearing loans and borrowings 17 1 624 692 1 462 260

Other financial liabilities 18 305 031 258 487

Payables from employee benefits 19 187 215 202 519

Provisions 20 219 629 91 349

Deferred tax liability 11 203 521 314 090

Total non-current liabilities 2 540 088 2 328 705

CURRENT LIABILITIES

Interest-bearing loans and borrowings 17 2 014 489 1 484 098

Trade and other financial payables 21 2 420 785 2 695 202

Income tax payable 95 771 132 067

Other liabilities 130 488 220 576

Total current liabilities 4 661 533 4 531 943

Total liabilities 7 201 621 6 860 648

TOTAL EQUITY AND LIABILITIES 14 814 736 14 351 045

Note 31 December2008

31 December2007

ASSETS

NON-CURRENT ASSETS

Property, plant and equipment 8 7 022 812 6 322 433

Intangible assets 9 63 902 71 226

Goodwill 9 53 273 26 168

Investments in associates 7 35 748 30 685

Other financial assets 10 60 016 227 316

Deferred tax asset 11 16 656 21 422

Total non-current assets 7 252 407 6 699 250

CURRENT ASSETS

Inventories 12 3 351 335 3 208 294

Trade receivables and other financial assets 14 3 411 420 3 910 526

Income tax receivable 92 055 14 283

Other assets 25 008 38 406

Cash and cash equivalents 15 682 511 480 286

Total current assets 7 562 329 7 651 795

TOTAL ASSETS 14 814 736 14 351 045


CONSOLIDATED STATEMENT OF PROFIT AND LOSSFor the year ended 31 December 2008 (in thousands of SKK)

47

NoteYear ended

31 December2008

Year ended 31 December

2007

Revenues 22 19 512 373 16 030 132

Changes in inventories of finished goods and work in progress 252 172 317 392

Own work capitalized 23 303 389 403 997

Consumed material and energy 24 -12 127 741 -9 400 754

Services -1 797 686 -1 475 830

Personnel expenses 25 -3 768 523 -3 471 311

Depreciation and amortization -683 204 -650 147

Other operating revenues (+)/expenses (-), net -423 545 116 613

Interest income 18 669 10 805

Interest expense -192 261 -128 419

Income from associates -776 -274

Other financial income (+)/expenses (-), net 26 -80 685 58 644

Profit before tax 1 012 182 1 810 848

Income tax expense 27 -267 659 -413 406

Profit for the year 744 523 1 397 442

Profit attributable to:

Equity holders of ŽP 700 725 1 373 117

Minority interest 43 798 24 325

Total 744 523 1 397 442


48

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the year ended

31 December 2008 (in thousands of SKK)

Sha

re

capi

tal

Trea

sury

shar

es

Lega

l re

serv

efu

nd

Hed

ging

an

d tr

ansl

atio

n re

serv

e

Ret

aine

d

earn

ings

Eq

uity

at

trib

utab

leto

eq

uity

ho

lder

s o

f ŽP

Min

orit

y in

tere

sts

Tota

l

Ope

ning

Bal

ance

at 1

. 1. 2

007

2 38

4 13

5-

192

840

280

513

3 86

7 24

86

724

736

174

920

6 89

9 65

6

Div

iden

ds p

aid

--

--

-238

412

-238

412

-18

076

-256

488

Net

pro

fit fo

r the

yea

r-

--

-1

373

117

1 37

3 11

724

325

1 39

7 44

2

Mov

emen

t in

trans

latio

n re

serv

e-

--

16 6

33-

16 6

33-

16 6

33

Dis

tribu

tion

of p

rofit

--

104

623

--1

04 6

23-

--

Ow

n sh

ares

--6

7 67

3-

--

-67

673

--6

7 67

3

Cas

h flo

w h

edge

s (N

ote

28)

--

--1

55 3

52-

-155

352

--1

55 3

52

Def

erre

d ta

x on

cas

h flo

w h

edge

s-

--

29 5

17-

29 5

17-

29 5

17

Acq

uisi

tion

of n

ew c

ompa

nies

and

incr

ease

of Ž

Psh

are

in c

urre

nt s

ubsi

diar

ies

(Not

es 5

and

7)

--

--

-571

205

-571

205

197

867

-373

338

Clo

sing

Bal

ance

at 3

1. 1

2. 2

007

2 3

84

13

5-6

7 6

73

297

46

317

1 3

114

32

6 1

25

7 1

11 3

6137

9 0

36

7 4

90

397

Div

iden

ds p

aid

--

--

-119

205

-119

205

-14

663

-133

868

Net

pro

fit fo

r the

yea

r-

--

-70

0 72

570

0 72

543

798

744

523

Mov

emen

t in

trans

latio

n re

serv

e-

--

-326

909

--3

26 9

09-

-326

909

Dis

tribu

tion

of p

rofit

--

119

953

--1

19 9

53-

--

Ow

n sh

ares

-67

673

--

-67

673

--6

7 67

3

Cas

h flo

w h

edge

s (N

ote

28)

--

--3

45 7

33-

-345

733

--3

45 7

33

Def

erre

d ta

x on

cas

h flo

w h

edge

s-

--

72 6

86-

72 6

86-

72 6

86

Acq

uisi

tion

of n

ew c

ompa

nies

and

incr

ease

of Ž

Psh

are

in c

urre

nt s

ubsi

diar

ies

(Not

es 5

and

7)

--

--

-67

865

-67

865

112

211

44 3

46

Clo

sing

Bal

ance

at 3

1. 1

2. 2

00

82

38

4 1

35

-41

7 4

16-4

28

64

54

719

827

7 0

92

73

35

20

38

27

613

115


CONSOLIDATED STATEMENT OF CASH FLOWSFor the year ended 31 December 2008 (in thousands of SKK)

49


2008


2007

Operating activities

Profit before tax 1 012 182 1 810 848

Depreciation and amortization 591 678 569 319

Amortization of goodwill (+)/negative goodwill (-) -19 676 9 276

Provisions 128 280 -4 945

Provisions for receivables, inventories and investments, net -34 227 -140 097

Loss on impairment of property, plant and equipment 91 559 71 552

Unrealized foreign exchange differences -443 571 -17 464

Interest, net 173 592 117 614

Financial derivatives 306 521 -57 379

Profit from sale of property, plant and equipment and intangible assets -7 711 -4 934

Profit from sale of financial investments - 6 553

Employee benefits 1 703 23 121

Other non-cash items 3 536 6 459

Operating cash flows before movements in working capital 1 803 866 2 389 923

Changes in receivables 739 125 -54 226

Changes in inventories 59 964 -614 481

Changes in payables -802 283 -45 491

Changes in other assets and liabilities -76 494 88 655

Cash generated from operations 1 724 178 1 764 380

Interest received 18 669 10 805

Interest paid -173 419 -115 305

Income tax paid -421 954 -442 211

Net cash from operating activities 1 147 474 1 217 669

Investing activities

Proceeds on disposal of property, plant and equipment and intangible assets 23 838 19 178

Acquisition of property, plant and equipment and intangible assets -921 698 -1 147 134

Acquisition of subsidiaries less acquired cash and cash equivalents -382 796 -124 090

Acquisition of financial investments -11 138 -2 872

Acquisition of additional shares in current subsidiaries -176 943 -11 354

Acquisition of investment in an associate - -36 929

Disposal of subsidiaries net of cash and cash equivalents 1 772 -18 081

Net cash used in investing activity -1 466 965 -1 321 282

Financing activities

Change in loans and borrowings 731 170 225 916

Change in obligations under finance lease -75 586 -31 375

Dividends paid -133 868 -256 488

Proceeds from minority shareholders on increase of registered - 50 000

Net cash used in (-)/from (+) financing activity 521 716 -11 947

Net decrease (-)/increase (+) of cash and cash equivalents 202 225 -115 560

Cash and cash equivalents at the beginning of the year (Note 15) 480 286 595 846

Cash and cash equivalents at the end of the year (Note 15) 682 511 480 286


50

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended 31 December 2008 (in thousands of SKK)


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 31 December 2008 (in thousands of SKK)

51


52





53


54





55


56





57


58





59


60





61


62





63


64





65


66





67


68





69


70





THANKS

to all who cooperated with us in 2008.

We look forward to our collaboration in the future.

Management of the Company


A N N U A L R E P O R T 2 0 0 872

BASIC INFORMATION ON THE COMPANY

Trade name: Železiarne Podbrezová

Legal form: Joint-stock companySeat: Kolkáreň 35

976 81 PodbrezováSlovak Republic

Date of establishment: 21 April 1992Date of incorporation: 1 May 1992

Company Registration No.: 31 562 141VAT Registration: SK2020458704

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.

CONTACTSTelephone: + 421 48 645 1111

E-mail: [email protected]

www.steeltube.skwww.zpgroup.sk

Shareholders:Telephone: + 421 48 645 2365, 645 2361

Telefax: + 421 48 645 2362E-mail: [email protected]

Contacts for business partners Železiarne Podbrezová a.s.

Export salesTelephone: + 421 48 645 3030, 645 3033

Telefax: + 421 48 645 [email protected]

Domestic salesTelephone: + 421 48 645 3070, 645 3080


ŽP Trade Bohemia, a.s.Telephone: + 420 2 3530 1190, 3530 0731


PIPEX ITALIA S.p.A.Telephone: + 39 0322 23551

Telefax: + 39 0322 [email protected]

PIPEX International AGTelephone: + 421 48 645 2300, 645 1717


SLOVRUR Sp. z o.o.Telephone: + 48 15 84 48045


www.slovrur.pl


SEPARATE FINANCIAL STATEMENTS For the year ended 31 December 2008(Presented in accordance with International Financial Reporting Standards as adopted by the EU)


INDEPENDENT AUDITOR’S REPORT

3

4

SEPARATE BALANCE SHEETAs at 31 December 2008


Note 31 December2008

31 December2007

ASSETS

NON-CURRENT ASSETS

Property, plant and equipment 5 2 760 788 2 701 525

Intangible assets 6 1 451 2 666

Investments in subsidiaries, joint-ventures and associates 7 2 857 421 2 453 654

Available-for-sale investments 3 837 6 714

Other financial assets 8 4 788 88 209

Total non-current assets 5 628 285 5 252 768

CURRENT ASSETS

Inventories 9 1 480 281 1 559 194

Trade receivables and other financial assets 10 1 095 611 1 523 278

Tax receivables 63 873 -

Other current assets 11 9 092 15 478

Cash and cash equivalents 12 157 203 29 110

Total current assets 2 806 060 3 127 060

TOTAL ASSETS 8 434 345 8 379 828

EQUITY AND LIABILITIES

CAPITAL AND RESERVES

Share capital 13 2 384 135 2 384 135

Treasury shares 13 - -67 673

Legal and other funds 13 388 071 429 059

Retained earnings 2 626 219 2 449 964

Total equity 5 398 425 5 195 485

LIABILITIES

NON-CURRENT LIABILITIES

Interest-bearing loans and borrowings 14 1 054 087 877 222

Other financial liabilities 15 47 945 236 843

Payables from employee benefits 16 149 768 162 988

Provisions 1 288 1 288

Deferred tax liability 17 85 211 98 860

Total non-current liabilities 1 338 299 1 377 201

CURRENT LIABILITIES

Interest-bearing loans and borrowings 14 656 185 542 368

Trade and other payables 18 1 041 436 1 222 989

Income tax payables - 41 785

Total current liabilities 1 697 621 1 807 142

Total liabilities 3 035 920 3 184 343

TOTAL EQUITY AND LIABILITIES 8 434 345 8 379 828

SEPARATE STATEMENT OF PROFIT AND LOSSFor the year ended 31 December 2008 (in thousands of SKK)

5

NoteYear ended

31 December2008


2007

Revenues 19 9 200 758 8 639 012

Changes in inventories of finished products and work in progress 64 864 178 289

Own work capitalized 20 257 500 266 220

Interest income 24 11 295 3 291

Interest expense 25 -98 015 -72 058

Other financial income (+)/expenses (-), net 26 -95 984 124 650

Profit before tax 498 004 1 207 875

Income tax expense 27 -101 216 -194 595

Profit for the year 396 788 1 013 280

Raw material and consumables used 21 -6 355 363 -5 512 040

Services -595 382 -586 100

Personnel expenses 22 -1 618 686 -1 642 777

Depreciation and amortization -247 687 -248 672

Other operating revenues (+)/expenses (-), net 23 -25 296 58 060

6

SEPARATE STATEMENT OF CHANGES IN EQUITYFor the year ended 31 December 2008


Share capital

Treasuryshares

Legal reserve

fundHedging Retained

earnings Total

Opening Balance at 1. 1. 2007 2 384 135 - 198 067 297 291 1 759 701 4 639 194

Dividends paid - - - - -238 412 -238 412


Treasury shares - -67 673 - - - -67 673



Net profit for the year - - - - 1 013 280 1 013 280

Closing Balance at 31. 12. 2007 2 384 135 -67 673 282 672 146 387 2 449 964 5 195 485

- - - - -119 205 -119 205

Dividends paid - - 101 328 - -101 328 -

Allocation of statutory profit - 67 673 - - - 67 673

Treasury shares - - - -175 699 - -175 699

Hedging derivatives - - - 33 383 - 33 383

Deferred tax on hedging derivatives - - - - 396 788 396 788

Net profit for the year 2 384 135 - 384 000 4 071 2 626 219 5 398 425

SEPARATE STATEMENT OF CASH FLOWSFor the year ended 31 December 2008 (in thousands of SKK)

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Year ended31 December

2008

Year ended31 December

2007

Operating activities

Profit before tax 498 004 1 207 875

Depreciation and amortization 247 689 248 672

Payables from employee benefits -410 11 881

Provisions for liabilities - 72

Changes in provisions, net 149 237 1 424

Loss from impairment of tangible fixed assets -14 015 -

Unrealised foreign exchange differences -77 379 -37 748

Interests, net 86 719 68 767

Financial derivatives 70 844 -3 948

Dividends received -114 186 -180 815

Profit from sale of tangible and intangible fixed assets -5 171 -3 258

Profit from sale of financial investments -350 -161

Write-off receivables 3 536 746

Other non-cash items 8 513 -5 609

Operating cash flows before movements in working capital 853 031 1 307 898

Changes in receivables 339 876 194 254

Changes in inventories 56 304 -236 453

Changes in payables -440 303 13 330

Cash generated from operations 808 908 1 279 029

Interest received 11 816 4 186

Interest paid -97 529 -63 276

Income tax paid -187 035 -220 015

Net cash from operating activities 536 160 999 924

Investing activities

Proceeds on disposal of tangible and intangible fixed assets 5 833 17 935

Proceeds on disposal of financial investments 3 138 20 816

Dividends received and other income 114 186 180 815

Acquisition of property, plant and equipment and intangible assets -320 451 -368 842

Acquisition of financial investments -540 808 -529 216

Net cash used in investing activity -738 102 -678 492

Financing activities

Change in loans and borrowings 400 626 -65 693

Change in obligations under finance lease -16 112 -13 743

Dividends paid -119 205 -238 412

Treasury shares sold 67 674 -

Net cash from (+)/used in (-) financing activity 332 983 -317 848

Net increase (+)/decrease (-) of cash and cash equivalents 131 041 3 584

Cash and cash equivalents at the beginning of the year (Note 12) 29 110 27 668

Exchange differences on conversion of cash and cash equivalents -2 948 -2 142

Cash and cash equivalents at the end of the year (Note 12) 157 203 29 110

8

NOTES TO THE SEPARATE FINANCIAL STATEMENTS


NOTES TO THE SEPARATE FINANCIAL STATEMENTSFor the year ended 31 December 2008 (in thousands of SKK)

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Documents

ANNUAL REPOR T 2008 · 2020-04-07 · ADDRESS FROM THE CHAIRMAN OF THE BOARD OF DIRECTORS ŽELEZIARNE PODBREZ O VÁ Dear Shareholders. The results we achieved in 2008 are very good