ANNUAL REPORT 2020

Železiarne Podbrezová a.s. ANNUAL REPORT 2020 15 products and reduce the wear and tear and repairs of production equipment. The changes involved the materials used in refractory ceramics and also modifications to the flow of steel. In 2020, the steel plant cast a new type of steel for the production of and heat exchanger tubes, which had previously been purchased externally. In 2020, the tube rolling mill produced 169 504 tonnes of tubes in total, 25 496 tonnes less than in the previous year and approx. 12% less than planned for 2020. Of the produced volume, 114 914 tonnes were for sale to external customers and 54 590 tonnes of rolled tubes were further processed by Železiarne Podbrezová. The lower volume of production of rolled tubes, caused by smaller orders, had a negative impact on production efficiency due to a higher number of reconfigurations and reduced shifts. As a result, we did not achieve the planned operating indicators comparable to 2019. We also made several important technological investments in the tube rolling mill in 2020. We installed and put into operation a new treatment line for processing tubes for internal consumption. It made the process of dividing, blowing and weighing tubes in automatic mode significantly simpler in terms of logistics. As a result, we save unproductive handling time and increase the surface quality of tubes intended for further processing. In December 2020, we upgraded the process of dividing tubes behind the rolling line. The original saws were replaced with tungsten carbide ones and the logistics of the product flow was modified. The tube drawing mill did not meet the plan in 2020 either, producing 41 861 tonnes of cold- drawn precision tubes, a decrease of 8 841 tonnes compared to 2019. In 2020, we sold 41 073 tonnes of precision drawn tubes to external customers, of which 1 112 tonnes were with a galvanised finish and 1 475 tonnes were divided and hydraulic tubes. Demand for precision drawn tubes was relatively stable considering the market situation. One of the most important investments in the tube drawing mill in 2020 was the construction of a new automated inspection grate. This workplace enables brushing of tube ends and weighing of tubes in an automatic cycle. Since November, we have been working on a new finishing line, directly connected to the straightening and dividing line. This line combines finishing processes in a fully automatic mode, from inspection through division, marking to weighing and packaging. Continually-cast blooms, seamless hot-rolled tubes and precision cold-drawn tubes accounted for over 99% of the total production of Železiarne Podbrezová a.s. in 2020. Other products with high added value – butt welding elbows and reducers comprised a supplementary product range. In 2020, we produced 2 412 tonnes and sold 2 296 tonnes of welded elbows and 73 tonnes of reducers to our customers. In 2020, recertification audit according to ISO 9001:2015 and supervision audit according to IATF 16949:2016 were performed as part of the quality management system at Železiarne Podbrezová a.s. The retained certificates show that the production processes are verified and in compliance with the requirements specified in the relevant standards. We also passed supervision audits for the environmental management system according to EN ISO 14001:2015 and the occupational safety management system according to ISO 45001:2018. Total revenues from the sale of products, merchandise and services to our customers in 2020 totalled EUR 196 414 thousand, of which 89% were exports. Compared to the previous year, revenues decreased by EUR 54 644 thousand (21.8%) due to a significant drop in the volume of sales of all products – drawn tubes, rolled tubes and steel blooms. However, lower revenues were also due to lower prices, especially of rolled tubes and steel blooms. The geographical structure of sales in 2020 remained similar to previous years. European Union countries remained our main markets in the following order: Germany, Poland, the Czech Republic, Italy, Slovakia, Hungary and Austria. There were no significant changes compared to previous years in the sectors in which our products were used. They are primarily used in the production of machinery and equipment (35-43%), energy industry (29-49%), hydraulic equipment, oil and gas transportation and the automotive industry. REPORT BY THE BOARD OF DIRECTORS ON BUSINESS ACTIVITIES, ASSETS AND FINANCIAL PERFORMANCE IN 2020 AND INFORMATION ON THE BUSINESS PLAN