ANNUAL REPORT 2020

Železiarne Podbrezová a.s. ANNUAL REPORT 2020 37 inputs significantly increase their prices, and this is quickly reflected in the prices of final producers across the EU We do not expect this situation to change in the coming months, as there is strong demand in many industries and they are struggling with similar problems, ie to obtain all the necessary resources for production and logistics. Continued growth in prices of final products across sectors can be expected, which will ultimately increase inflation. Only some kind of external shock could reverse the situation. In the tube industry, as in most industries, we have seen a significant increase in orders since the beginning of the year. On the other hand, input costs are growing significantly faster than the prices of our products, and this must be reflected in our final prices. We expect that the situation will stabilise in the second part of the year and we will be able to meet the requests of our long-term customers, like in the past. In order to be able to produce a sufficient volume, the Company was forced to increase production shifts and this resulted in the need to recruit new employees in Q1 2021. The business and financial plan of Železiarne Podbrezová a.s. for 2021 was negative, but given the current situation, we expect that the second half of 2021 will be more successful financially, we will exceed the planned revenues and achieve a positive overall economic result, also thanks to dividends paid in the ŽP GROUP. In 2021, the investment plan follows from the medium-term development plan and its amount of EUR 14.5 million significantly exceeds the Company’s annual depreciation charges. The most important technological investments will include a new finishing line in the tube drawing plant, and a relocation and modification of the straightening and dividing line, as well as another tube cutting system directly on the drawing bench. In the tube rolling mill, we plan to modernise the most important parts of the punching press. In 2021, we are also moving to a more environmentally friendly way of backup heat management: from heavy fuel oil to diesel. Like last year, we plan to spend a total of EUR 34 million on repairs and maintenance of technological facilities and buildings in 2021. In 2021, our subsidiary ŽP Výskumno-vývojové centrum will carry out 6 internal R&D projects for us, with planned expenses of EUR 824 thousand. The research aims to improve the quality of production, optimise the materials of metallurgical ceramics, optimise production processes and processing of waste and scrap materials from production. The Company will continue to implement multi-year R&D projects on tools, modelling, simulation of production processes and production data analytics, which can be applied by the Company to production. We keep improving the quality management system under ISO 9001:2015 and IATF 16949:2016. The Company will continue to develop and optimise the integrated management system that combines the environmental management system under ISO 14001:201 and the occupational health and safety management system under ISO 45001:2018. In 2021, the Board of Directors will continue the personnel, payroll and social policy programme for Company employees. This provides employees with guaranteed benefits over and above legal requirements, such as contributions to the 3rd pension pillar, affordable meals, 24-hour insurance outside working hours, retirement payment and severance pay exceeding the legal minimum. We have been preparing and educating new employees for almost 20 years at our Private United School (Súkromná spojená škola ŽP). In 2021, we will continue our cooperation with the subsidiary ŽP Informatika s.r.o., which operates and develops new information systems for the parent company and other companies in the ŽP GROUP as needed, by IT outsourcing. As regards the development of application software, the focus in 2021 will continue to be on the medium-term project of comprehensive change to the production information system to improve the planning, monitoring, and management of production and technical processes in the Company. In 2021, Železiarne Podbrezová a.s. will again fund its OPEX and CAPEX needs using the club credit facility with a limit of EUR 30 million, extended until July 2024, and other separate loans for short-term financing, which the Company draws according to REPORT BY THE BOARD OF DIRECTORS ON BUSINESS ACTIVITIES, ASSETS AND FINANCIAL PERFORMANCE IN 2020 AND INFORMATION ON THE BUSINESS PLAN