ANNUAL REPORT 2020

Železiarne Podbrezová a.s. ANNUAL REPORT 2020 14 The business and financial plan for 2021 takes into account the market situation in late 2020 and early 2021, and information, trends and estimates regarding prices of input raw materials, expected volumes and estimated prices of our Company’s final products. However, in the first weeks of 2021, there was a dramatic increase in the prices of some input raw materials, especially scrap steel. The price of this raw material increased by more than 40% in a few weeks. However, this is not taken into account in the financial plan and it is currently very difficult to make a qualified estimate of how long raw material prices will be at such high price levels. One of the most important factors affecting the tube production industry is the price of crude oil and the volume of investment in its extraction and processing, as OCTGs are a major part of production. The past year was also been turbulent for this sector, with significant fluctuations in oil demand and consumption. They were caused by the decline in consumer demand due to lower economic activity during the pandemic and the complications of the largest oil producers when reaching a consensus on the redistribution of oil extraction. For these reasons, the Board of Directors carefully and constantly evaluates the situation on the markets and adjusts production and the related management areas accordingly. Despite the unstable and unpredictable situation, we believe that our management experience, sound financial situation, support by financing banks, loyal customers and our own sales and supply network will help the Company to overcome this crisis and maintain its position in the market and, consequently, its solid financial situation. BUSINESS ACTIVITIES PRODUCTION AND SALES Železiarne Podbrezová a.s. has its own sales network, which is managed on a geographical basis via our subsidiaries, PIPEX ITALIA S.p.A., ŽP Trade Bohemia, a.s., SLOVRUR Sp. z o. o., Pipex Deutschland GmbH and TRANSMESA. After three operationally successful years with several production records, the year 2020 will go down in history as a special one. In the second half of 2019, there was a significant decline in orders and subsequently in the market prices of our products, which resulted in lower utilisation of the Company’s production facilities. In the first months of 2020, orders began to increase slowly, and after the outbreak of the pandemic in Europe, the months of March, April and May were strong as our customers were stocking up. A significant decrease started in June and lasted throughout the summer and the volumes increased again in autumn 2020. The Company therefore began to reduce shifts in its facilities during the year. In 2020, we produced 279 949 tonnes of steel in total, which is 47 833 tonnes less than in the previous year, and a 7% decrease compared to the plan. In Q1 2020, the production of the steel plant was relatively high, at the 2019 level, with an average monthly volume of 27 thousand tonnes of steel blooms. Unfortunately, in Q2 and Q3 2020, the monthly production fell to 25 thousand tonnes and under 18 thousand tonnes, respectively. There was a decrease in the sale of steel blooms to external customers and in demand from downstream tube production plants, which had a negative impact on the fulfilment of the production plan. Of the total quantity produced, 216 322 tonnes of steel were used for own production of steel tubes and 63 627 tonnes were sold to external customers. In 2020, we again improved the development of the key operational indicator of the trial balance, but we also slightly increased production downtime compared to the previous year, mainly due to lower utilisation of production capacities and sub- optimal shift work. In 2020, the steel plant continuously cooperated with the subsidiaries ŽP VVC s.r.o. and ŽIAROMAT a.s. when introducing technological changes in the production process to improve the quality of REPORT BY THE BOARD OF DIRECTORS ON BUSINESS ACTIVITIES, ASSETS AND FINANCIAL PERFORMANCE IN 2020 AND INFORMATION ON THE BUSINESS PLAN