ANNUAL REPORT 2020

Železiarne Podbrezová a.s. ANNUAL REPORT 2020 17 PURCHASE OF STRATEGIC RAW MATERIALS AND ENERGY The Company applies ISO standards in business relationships with suppliers of input raw materials and our regular good communication and payment discipline enabled us to maintain a high level of supply activities in terms of quality and delivery times. Q1 2020 saw relatively stable prices of scrap metal and alloy additions. However, after the outbreak of the pandemic in the second half of the year, the prices decreased mainly due to reduced demand from processors, as many production and processing companies operated in a limited mode. In late 2020, scrap prices returned to their original pre-crisis level. In Q2 2021, they soared by more than 40% in a few weeks and still remain exceptionally high. In 2020, we purchased raw materials totalling EUR 97 141 thousand, a decrease of EUR 28 065 thousand resulting from lower production volumes. Imports amounted to 24% of purchased inputs. The purchased raw materials mainly consisted of scrap steel, crude iron, cast iron, ferro-additives, refractory materials and important spare parts for production and service facilities. We traded with 857 business partners when purchasing raw materials in 2020. In 2020, we purchased a total of 229 609 tonnes of scrap steel, of which, as in the last year, 90% were supplies from our subsidiaries ŽP EKO QELET a.s. and KBZ s.r.o. In 2020, we purchased a total of 155 280 MWh of electricity, a 17% decrease compared to the previous year. Our small hydroelectric power plants and the co-generation unit produced 66 376 MWh of electricity, and generated 30% of our total annual consumption internally. In 2020, electricity prices increased by 14.6% compared to the previous year. We purchased 40 million m 3 of natural gas from Slovenský plynárenský priemysel, a.s. for our consumption, a 6% decrease compared to 2019. CAPITAL INVESTMENTS AND CARE FOR TECHNOLOGICAL EQUIPMENT The investment plan for 2020 relied on the approved medium-term investment plan, which aims to ensure the necessary technological renewal in the near future and to maintain the competitiveness of seamless tube production given the constant growth in labour costs and declining availability of skilled blue-collar workers. Therefore, during the third year of implementation of the medium-term investment plan, total investments amounted to EUR 13 442 thousand, which significantly exceeds the amount of standard annual depreciation charges. The most significant technological investment in 2020 was the upgrade of tube division at the rolling mill, including the bypass to streamline the intracompany production flow. We also purchased a new three-piece toothed bar for the rolling line. Significant investments included the relocation of the straightening and dividing line and preparation for its completion with a finishing line in the tube drawing mill, new compressed air production, a special straddle carrier for intracompany transport of tubes and new energy-saving lighting in production halls. Important construction investments included the complete replacement of skylights in production halls, completion of the reconstruction of the semi-finished product warehouse, complete reconstruction of the welding school and significant reconstruction of workshops at the secondary vocational school, SSŠ ŽP a.s. In 2020, the Company spent a total of EUR 32 266 thousand, a decrease of EUR 1 393 thousand compared to 2019, to ensure the reliable operation of the technical equipment and to repair and maintain structures and buildings. REPORT BY THE BOARD OF DIRECTORS ON BUSINESS ACTIVITIES, ASSETS AND FINANCIAL PERFORMANCE IN 2020 AND INFORMATION ON THE BUSINESS PLAN