ANNUAL REPORT 2020

Železiarne Podbrezová a.s. ANNUAL REPORT 2020 13 The year 2020 was complicated for global metallurgy that has long been struggling with low utilisation of its production capacities and uneven regional demand for its products. After three years of growth in global steel production, there was a slight decline last year (-0.2%). According to any analysis of the World Steel Association, this decline added to regional disparities, as steel production grew mainly in Asia (by 1.5%), by as much as 5.2% in China alone, and by 1.5% in Russia, while in developed economies, there was a significant decrease due to the pandemic. The production fell in the EU (11.8%), in Japan (16.2%) and in the USA (17.2%). As a result, China reinforced its dominant position last year, with a market share of over 57% of world steel production (an increase from 53%). In the tube production segment, there was a decline in demand by warehousers and end consumers starting from Q2 2020 due to the pandemic and the associated restrictions that decreased economic activity and demand for these products. This trend continued until the end of 2020 with signs of recovery in early 2021. Since the outbreak of the pandemic, the Company’s actual economic results began to differ significantly from the business and financial plan for 2020 and we had to respond flexibly to the evolving situation. In the first months of the pandemic, the Company’s production exceeded the planned volumes, but this was due to a short-term effect of our customers stocking up, as they often feared a complete lockdown and subsequent shutdown of logistics chains. After the initial demand, however, there was a slump in orders, especially in Q3 and Q4 2020, comparable to the 2008/2009 crisis. We had to respond by taking a large number of extraordinary measures, significantly reducing production shifts and reducing the number of employees, especially those who worked for a definite period of time and employees of retirement age. As a result, in addition to reduced demand, there was a significant reduction in the prices of our products in the seamless tube markets, which resulted in the Company’s operating loss. However, despite the extremely complicated situation on the markets and a significant decline in revenues, most of the subsidiaries in the ŽP GROUP reported positive financial results and maintained their market positions. The Company used subsidies from the Government of the Slovak Republic to maintain employment, i.e. First Aid and subsequently First Aid Plus, to partially compensate for the significant decreases in revenues at the existing fixed costs given its size and type of production. As a result, the Company maintained sufficient employment and retained key employees so the subsequent and relatively rapid increase in demand, and hence production in the Q1 2021, was problem-free and without significant limitations caused by staff shortages. In December 2020, the Company ended the programme of employing people frommarginalised groups, which started in 2018 in cooperation with the Ministry of Labour, Social Affairs and Family of the Slovak Republic. From a large number of trained and tested employees, we eventually offered contracts for an indefinite period to only seven of them, who underwent the adaptation process and proved to be reliable. Due to the decline in demand and the situation on the markets for steel products, the prices of several inputs, raw materials and alloy additions decreased during the year. The price of the most important raw material, scrap steel, first fell, but rose again at the end of the year to the level from the beginning of the year (the price curve was V-shaped). This did not correspond to the movement of prices of our products, which continuously decreased. As a result, Železiarne Podbrezová recorded a significant decrease in operating revenues in 2020 by more than EUR 47 million (-18%) compared to 2019. TheCompany’s operatingexpenses decreased by approximately EUR 37 million (-14%) compared to 2019, mainly due to lower prices of input raw materials. Personnel expenses decreased by EUR 8 million (-10%) due to a reduction in the number of employees and shifts. Consequently, the Company incurred a significant operating loss in 2020. The difference in the result of operations compared to 2019 was almost 11 million euro, and it could have been significantly greater without numerous measures taken by the Board of Directors. The overall result of Železiarne Podbrezová was positively affected by the profit from financing activities. Dividends received from subsidiaries linked to the Group’s results in 2019 reduced the total loss to EUR 3 million. At the end of 2020, the Company’s assets amounted to EUR 291 million and were covered by own funds at 71%. REPORT BY THE BOARD OF DIRECTORS ON BUSINESS ACTIVITIES, ASSETS AND FINANCIAL PERFORMANCE IN 2020 AND INFORMATION ON THE BUSINESS PLAN