annual report 2011 - sij acroni d.o.o.sij.acroni.si/assets/magazine-files/ar-2011-acroni... ·...
TRANSCRIPT
An
nu
al R
epo
rt 2
011
1
železarnaže
Annual Report
2011
Acroni, d.o.o.
An
nu
al R
epo
rt 2
011
2
CONTENTS
The annual report
consists of business
and financial sections.
The business section
describes the
company’s operations
in 2011 and our plans
for 2012.
Annual Report 2011 Acroni, d.o.o.
ANNUAL REPORT CONTENTS:
1 INTRODUCTION ---------------------------------------------- 3
1.1 Operating highlights ---------------------------------------------------------- 4
1.2 Important achievements and events in 2011 ------------------------------- 5
1.3 About the company ----------------------------------------------------------- 6
1.4 Presentation of the SIJ group ------------------------------------------------ 9
1.5 Report from the managing director --------------------------------------- 13
2 BUSINESS REPORT ------------------------------------------ 15
2.1 Operations and management ----------------------------------------------- 16
2.2 System of internal control --------------------------------------------------- 17
2.3 External audit ----------------------------------------------------------------- 17
2.4 The company’s activity ------------------------------------------------------ 18
2.5 The company’s development strategy ------------------------------------- 18
2.6 Risk management ------------------------------------------------------------ 19
2.7 Analysis of performance and implementation of our strategy --------- 26
2.8 Business plans and goals for 2012 ------------------------------------------ 42
2.9 Research and development ------------------------------------------------- 43
2.10 Influence of controlling company ------------------------------------------ 45
2.11 Events following the end of the business year --------------------------- 45
3 SUSTAINABLE DEVELOPMENT ------------------------- 46
3.1 Relationship with employees ----------------------------------------------- 47
3.2 Development of employees ------------------------------------------------- 47
4 FINANCIAL REPORT ---------------------------------------- 61
4.1 Statement on the management’s responsibilities ------------------------ 62
4.2 Financial statements --------------------------------------------------------- 63
4.3 Notes to the financial statements ----------------------------------------- 66
5 AUDITORS REPORT -------------------------------------- 105
An
nu
al R
epo
rt 2
011
3
1 INTRODUCTION
Key Figures
Key data on our operations from 2008 to 2011
2008 2009 2010 2011
Sales in tonnes 321,012 221,263 283,103 302,058
Turnover in KEUR 463,688 225,986 368,118 437,252
Operating profit in KEUR 31,403 (25,828) 5,914 14,063
% in turnover in % 6.8 (11.4) 1.6 3.2
EBITDA in KEUR 44,952 (10,724) 24,078 32,500
Profit before tax in KEUR 26,195 (28,329) 1,609 8,118
Net profit in KEUR 20,811 (22,772) 1,474 6,853
% in turnover in % 4.5 (10.1) 0.4 1.6
Return on equity in % 12.1 (13.3) 0.9 4.3
Invoices for investments in KEUR 36,315 59,322 18,343 31,401
Payments for investments in KEUR 33,495 53,619 24,400 23,760
Current ratio 1.6 1.1 1.1 0.9
Quick ratio 1.1 0.7 0.7 0.6
Average number of employees in a year 1,554 1,518 1,462 1,344
Sales revenues per employee in KEUR 298.4 148.9 251.8 325.3
Sales per employee in tonnes 206.6 145.8 193.6 224.7
Diagram of sales revenues per employee and sales quantity per employee
298.4
148.8
251.7
325.3
206.5
145.7
193.6
224.7
2008 2009 2010 2011
Sales revenues per employee in KEUR Sales per employee in tonnes
1 INTRODUCTION
The business section
systematically presents our
operations in terms of
risks, human resources,
the external environment
and sustainable
development.
This section also presents
SIJ – Slovenian steel group,
to which Acroni, d.o.o.
Belongs.
An
nu
al R
epo
rt 2
011
4
1.1 OPERATING HIGHLIGHTS
2011 can be divided into two parts: the first half of the year, where we enjoyed favourable market conditions,
plenty of orders and a favourable price ratio, and the second half, when we had to deal with a shortage of
orders and falling prices. Despite this, 2011 was successfully completed. We sold EUR 437.3 million of our
products and generated a net profit of EUR 6.9 million; this is an improvement on 2010, when our net profit
was EUR 1.47 million.
In 2011 we continued to reduce the number of our employees,
and ended the year with 1,239 employees, in comparison to
1,394 in 2010. Despite this reduced number of employees, we
were able to produce 13,849 tonnes more than in 2010. The
end of 2011 was marked by the planned 22-day shut-down of
the Hot Rolling Mill, due to phase 1 completion of the New
Rolling Mill project. Phase 1 of the project was carried out in
accordance with the plan; the project will be completed after
the 32-day shut-down in December 2012.
In accordance with the company’s strategic orientation, we
have continued our investment activities with regard to the
increased production of steel quarto plates, particularly
stainless and special quality types. We have completed several
important investments for increasing the production of
stainless steel quarto plates (pickling bath nr. 3 with washing-
drying line, and furnace nr. 3 on the Wellman line). In addition we have completed an extremely important,
though not so large, investment in the dispatch warehouse in the halls of the former Wire Rolling Mill,
which has separated the locations for the dispatch of stainless and ordinary steel quarto plates. In the field
of information technology intensive preparations for the launch of a new business information system have
begun; this will be introduced in 2012.
The company co-founded the Jesenice Development Centre in July, which is partly funded by the European
Regional Development Fund. At the end of the year, 14 developers were repositioned to the Development
Centre.
Despite the very good first half of 2011, the decline in orders and prices in the second half warned us that we
are far from the pre-crisis levels in 2008 and 2007 with regard to profitability. In 2012 we will continue to
pay special attention to controlling costs and achieving an optimum sales structure, and in order to reach
the quantities defined in our strategy we will have to focus our operations even more on the markets
outside Europe.
The company lays great emphasis on training and education of our employees, in order to be even more
successful in achieving our strategic goals.
An
nu
al R
epo
rt 2
011
5
1.2 IMPORTANT ACHIEVEMENTS AND EVENTS IN 2011
January 2011
Introduction of pickling bath nr. 3 with a spiral drying line.
February 2011
Signing the contract for a non-current syndicated loan to fund the New Rolling Mill project to the
amount of EUR 33,500,000.
May 2011
Re-appointment of Slavko Kanalec as Managing Director of the company for the next four year term.
June 2011
Signing the company contract to establish the Jesenice Development Centre (Razvojni center Jesenic,
RCJ), with Acroni, d.o.o. having a 24.95% share.
Damage to the end-pusher furnace (collapsed furnace roof), which halted production in the Hot
Rolling Mill for eight days.
July 2011
Payment of the initial capital for the associated company RCJ and entry in the registry.
Reorganization of the Logistics Department – merging of central and all reverse logistics.
Malfunction of the new grinding machine, resulting in a 17-day halt in grinding slabs.
October 2011
Reorganization of the Technical Control and Research and Development Departments into a new
organizational unit: QDT (Quality, Development and Technology).
Commencement of bankruptcy proceedings against Alpos, d.d., who is the biggest debtor of Acroni,
d.o.o.
Publication of the tender for a new information system.
November 2011
Introduction of furnace nr. 3 on the Wellman line for heat processing in the Quarto Plate Processing
Plant.
50 years of the Research Department’s operation (1961–2011) in Acroni, d.o.o., and earlier within the
Jesenice Ironworks.
December 2011
Receipt of the environmental consent for the Javornik inert waste disposal site.
Successful conclusion of phase 1 of the New Rolling Mill project.
An
nu
al R
epo
rt 2
011
6
1.3 ABOUT THE COMPANY
1.3.1 Vision and Goals
Acroni is a technologically advanced company which manufactures flat steel products. It has a centuries-old
tradition, since this area has always been famous for its iron industry. Nowadays Acroni is distinguished by
its modern steel machinery and equipment that enables the production of top-quality steel. By remelting
scrap iron and adding alloy metals and slag forming additives, Acroni produces new quality products.
Acroni continues to be true to its vision of becoming the leading European manufacturer of stainless steel
quarto plates and products made from special steel and alloys. In 2010 it became the second biggest
stainless steel quarto plate manufacturer in the EU.
Recently we have been intensifying our market presence with our own service centres and strengthening
our external sales network.
MISSION
STRATEGIC GOAL
Become a reliable supplier of high
quality steel products and
satisfy customers' needs with quality after-sales service
Steel production is based on recycling
scrap iron
Securing sales and profit growth
Encouragement for employees to develop their
potential
Customers are indisputably our
greatest value
VISION
Become the leading European
manufacturer of stainless steel
quarto plates and products from
special steel and alloys
An
nu
al R
epo
rt 2
011
7
1.3.2 Basic Information About the Company
In 2011, the company generated EUR 437.3 million in sales revenues and a profit of EUR 6.9 million.
The company’s initial capital as of 31 December 2011 was EUR 83.5 million, whereas the total capital was EUR
163 million. On 31 December 2011 the total number of employees was 1,239.
1.3.2.1 Company profile
Company name: ACRONI, podjetje za proizvodnjo jekla in jeklenih izdelkov, d.o.o.
Address: Cesta Borisa Kidriča 44, 4270 Jesenice
Date of formation: 23 December 1992
Status: Limited liability company
Registered share capital: EUR 83,458,521
Ownership: SIJ – Slovenska industrija jekla, d.d., 100%
Acroni has the legal status of a limited liability company. Its sole founder and owner is the SIJ Group –
Slovenska industrija jekla, d.d. The supreme body of the company is the General Assembly. It is comprised of
two members of the Board of Directors of SIJ – Slovenska industrija jekla d.d., Tibor Šimonka, President of the
Board of Directors, and Viacheslav Korchagin, Member of the Board of Directors.
The company has two subsidiaries abroad – Acroni Italia and Acroni Deutschland, and the Acroni Sweden
affiliate, which are all 100% in its possession.
1.3.3 Location
Acroni is located in Jesenice in the north-western part of Slovenia, close to the Karavanke tunnel, which links
Slovenia and Austria beneath the Karavanke mountain range.
An
nu
al R
epo
rt 2
011
8
1.3.4 Short History of the Company
The natural conditions which have enabled the production of steel in the area of Jesenice for centuries were in
abundance in the past: ores of various iron content, wood for charcoal, and water power used to propel the
machinery. The oldest document providing evidence of the iron industry in this area is the Ortenburg Mining
Regulations, issued by Count Frederick of Ortenburg on 24 August 1381.
The mining and iron foundry industries in the upper
Gorenjska region were affected by occasional economic crises
and boosted by the consequences of new inventions, which
improved the quality of steel and lowered production costs.
Similarly, the iron foundry magnates flourished or failed: The
Bucellenies, the Cristallnigges and later the Zoises and the
Ruards, among others.
The furnace in Javornik with the Gold medal for ferromanganese
from the Vienna World Exhibition in 1873
(Source: Photo archive of the Upper Sava Museum in Jesenice)
The Carniolan Industrial Company, which was founded in the second half of the 19th century (18 September
1869), combined the vital parts of the former iron foundries, and asserted itself mostly with the discovery of
ferromanganese. However, it later encountered some problems and merged with the German company Vogel &
Noot. At the end of the 19th century new facilities were built as a result of joint investments: open-hearth steel
mill, heavy and light rolling lines, a wire rolling mill, a nailery and a forge.
The Carniolan Industrial Company led the ironworks industry in Jesenice until the end of World War II.
Jesenice Ironworks was renowned for the greatest production of quality steel in former Yugoslavia after World
War II. Since the 1960s its development has been rapid. The Blooming and Steckel Rolling Mill (1966), the Cold
Rolling Mill (1976) and finally also the Steel Mill (1987) were built. By implementing the procedures of
secondary metallurgy (steel processing outside the melting furnace with powder deoxidants, by injecting filled
wires into the melt and apply vacuum treatment) it became one of the world's leading steel manufacturers. New
technologies of hot and cold processing developed alongside the new technology of steel production.
In the 1990s, after Slovenia’s independence, Jesenice Ironworks lost its former traditional markets, and by
following new organizational, development and marketing plans the company focused on global markets, where
it faced strong international competition.
The current company, Acroni, was founded on 23 December 1992 during the reorganization of Jesenice
Ironworks, when it took over the manufacture of flat-rolled steel products. Acroni is a member of SIJ –
Slovenian Steel Group and is currently the largest steel manufacturer in Slovenia.
An
nu
al R
epo
rt 2
011
9
1.4 PRESENTATION OF THE SIJ GROUP
1.4.1 The Ownership Structure of SIJ – Slovenska industrija jekla, d. d.
Shareholder Number of
shares %
DILON d.o.o. 550,589 55.36%
Republic of Slovenia 248,655 25.00%
OAO Koks 167,762 16.87%
Other shareholders 19,693 1.98%
Treasury shares 7,917 0.80%
Total 994,616 100.00%
The individual shares of the biggest owners did not change substantially in 2011. Merkur, d.d. is no longer a
small shareholder, as it sold its shares to Dilon d.o.o.
1.4.2 The Ownership Structure of Dilon d.o.o.
DILON COOPERATIEF U.A. 100%
DILON D.O.O. 55.36%
SIJ – SLOVENSKA INDUSTRIJA JEKLA, D.D.
COMPANIES IN THE SIJ GROUP
An
nu
al R
epo
rt 2
011
10
1.4.3 Organizational and Ownership Structure of the SIJ Group
SIJ – Slovenian Steel Group has expanded in 2011, by the newly founded company SIJ Obdelava jekla, d.o.o.,
100% owned by SIJ – Slovenska industrija jekla, d.d.
An
nu
al R
epo
rt 2
011
11
1.4.4 The Market and Product Structure of the SIJ Group’s Sales
1.4.5 Mission, Vision and Values
The group's operations are subject to the implementation of its mission statement, visions for future
development and values, enabling us to achieve our agreed strategic and short-term goals.
EUR 765 million of consolidated income in 2011
MISSION
Preserve and develop the steel industry in
traditional Slovenian areas
VISION
Continual growth and development
International confirmation and increase in
competitiveness
Client satisfaction
Employee satisfaction
Environmental protection
VALUES
Businesslike behaviour
Group affiliation
Expertise
Economy
Credibility
Continual aspiration to growth
An
nu
al R
epo
rt 2
011
12
By implementing our agreed strategic goals we are becoming a specialized steel manufacturer of stainless steel
quarto plates and cold rolled steel plates, highly specialized and mechanically resistant high-alloy tool and
special steel, industrial knives for handling metal and plastic, and high-alloy welding materials.
We are continuing to build our own sales network, especially in those areas with sales potential for our
production programs.
1.4.6 The Advantages and Disadvantages of the SIJ Group
The business opportunities of the SIJ Group are closely linked to global economy trends and steel purchase and
sales market.
Therefore our internal ability to seize opportunities and keep our achieved advantages, and our engaged
activities to minimize threats and overcome our weaknesses are especially important.
ADVANTAGES
dispersed customers and suppliers
quick response
modern technologies
own sales network
DISADVANTAGES
higher production costs for conventional
types of steel
inability to influence price trends
OPPORTUNITIES
demand for specialized products
growing markets for our strategic programmes
THREATS
market trends and low economic growth
market globalisation
price disproportions of purchase and sales
An
nu
al R
epo
rt 2
011
13
1.5 REPORT FROM THE MANAGING DIRECTOR
For us in Acroni, 2011 was one month shorter than usual. Due to
the phase 1 implementation of our strategic project to change the
frame for rolling plates, we shut down production in the Hot
Rolling Mill for 22 days in December. This mill represents a
bottleneck in production, and this was the longest period it had
been shut down.
In comparison to 2010 we have increased production and sales,
coming near to the quantities of the pre-crisis level of 2008. At the
end of the year we employed 1,239 people, which is the lowest
number since the founding of Acroni.
Unlike many of our competitors, we did not respond to the
approaching crisis by laying off our employees. Instead we opted
for intensified sales, which generated enough orders to exploit the
full capacity of our key production lines. This prevented job losses and a consequent negative atmosphere for
our employees. Our wish is to create a safe and creative work environment in which we all can achieve excellent
work results. This will be absolutely necessary if we want to follow our ambitious development plans for the
future.
We were able to maintain our position as a leading supplier on the European market in the production of
stainless steel quarto plates. At the end of October a new, additional, furnace on the Wellman line started
operating. It has increased our capacity for slaking stainless steel quarto plates to an additional 100 tonnes per
day. This furnace has been built for the heat treatment of 2.5m wide plates. Besides producing this additional
quantity of stainless steel quarto plates, it also means that stainless steel plates no longer need slaking on the
Drever line. Now this line can be used solely to improve alloyed structural plates, which will substantially
increase the production and sales of these products.
Despite all this, our operations have not been trouble-free. The first half of the year, which was very successful
from a sales viewpoint, was followed by a much tougher second half as a prediction of the new economic crisis.
In addition, the roof of the end-pusher furnace collapsed, which forced us to halt production in the Hot Rolling
Mill for eight days, and during the summer months we encountered repeated and long-term damage to the new
grinding machine for cleaning slabs, which negatively influenced the slabs supply to the Hot Rolling Mill.
The new warehouse for dispatching structural steel plates was successfully incorporated into the sales process.
It was set up in record time on the premises of the former Wire Rolling Mill, and began operating at the end of
June.
An
nu
al R
epo
rt 2
011
14
We were able to achieve all our stated goals. Now the stainless and structural plates are stored separately, which
is much better for the quality and cleanliness of the plates, as well as for faster loading of trucks and railway
wagons. We can load and dispatch over 100 trucks daily without congestion.
With regard to organizational changes, we should point out the operational activities of the Maintenance Plant.
Before, maintenance was an integral part of individual plants. Now it is the largest plant in the company, with
251 employees. The number and qualification of the employees in this plant give it great potential.. In the
future, we intend to organise the Maintenance Plant as a profit-generating centre, which we hope will make us
even more effective.
At the end of 2011 we stopped the production and sale of cold formed profiles. This activity is no longer part of
the company's strategic orientation. In recent years we did not invest in its development and modernization,
and so we were no longer competitive on the market. Employees working in this department were relocated to
other parts of the company.
We co-founded the Jesenice Development Centre, and transferred our development department there. In this
way we will be able to make use of state aid for the operations of development departments. We are aware that
only better and more efficient development can keep us competitive on the global market.
Jesenice, 15 March 2012
Managing Director
Slavko Kanalec
An
nu
al R
epo
rt 2
011
15
2 BUSINESS REPORT
Our company ended 2011 with a net profit of EUR 6.9 million. We
followed our strategic orientation and increased production and sales of
stainless steel quarto plates, and concluded the investments to help us
achieve this strategic goal.
The company has an established system of monitoring and control of
important operating and financial risks, so we have always settled our
liabilities in due time and collected receivables.
The company’s debt is constantly monitored and we are taking measures
to achieve the desired debt level.
2 BUSINESS REPORT
The company ended 2011 in
profit and managed to
increase sales and production
despite fewer employees.
An
nu
al R
epo
rt 2
011
16
2.1 OPERATIONS AND MANAGEMENT
The company is represented by the Managing Director Slavko Kanalec, Graduate Engineer of Metallurgy, MBA.
2.1.1 Management
Besides the Managing Director, who represents the company, the following employees are in charge of
individual departments:
Anton Chernykh: Proxy;
Matija Kranjc: Executive Director for Economics, Finances, Accounting, Controlling and IT;
Blaž Jasnič: Assistant to the Managing Director for Hot Processing;
Mihec Hladnik: Asistant to the Managing Director for the Product Finalization Process;
Branko Polanc: Director of Maintenance Plant;
Andrejka Ilenič: Sales Director;
Monika Štojs, Marketing Director, in charge of marketing for the entire SIJ – Slovenian Steel Group;
Marjana Drolc: Purchasing Director, in charge of purchasing for the entire SIJ – Slovenian Steel Group;
Petra Filipič Špiler: Legal Officer;
Dr. Anton Jaklič: Director of Quality, Development and Technology;
Simon Štumpf: Production Logistics Manager;
Robert Prešern: Head of Investments;
Dušan Novkovič: Energy Consultant;
Mag. Peter Dular, MA: Manager for Human Resources Development and Corporate Safety.
2.1.2 The general assembly
The supreme body of the company is the General Assembly. The General Assembly makes all relevant decisions
in accordance with the provisions of the Companies Act. Besides the general provisions of the Companies Act,
the General Assembly, in accordance with the provisions of the Founding Act of Acroni, d.o.o., is responsible for
giving consent for planned investments whose value exceeds EUR 100,000, for signing credit or loan contracts
whose principal value exceeds EUR 2,000,000, and for making decisions about legal transactions connected
with using property and assets, as long as their value does not exceed EUR 50,000.
The interests of the only company partner in the General Assembly are represented by two members of the
Board of Directors of SIJ – Slovenska industrija jekla, d.d.: Tibor Šimonka, the President of the Board of
Directors, as the Chair of the General Assembly, and the Vice-President, Viacheslav Korchagin, as Member of
the Assembly.
An
nu
al R
epo
rt 2
011
17
2.2 SYSTEM OF INTERNAL CONTROL
The company has an established system of internal control in several areas to protect our assets from harm. In
finance there is a set system of payment confirmation, a systematic review of received insurance instruments,
systematic monitoring and control of receivables insured with the SID company, and in terms of purchasing we
have set up a quota system which is confirmed each month by the Finance Director. We also check if the issued
orders are in line with the confirmed quotas. An order cannot be issued without the written consent of the
finance director.
In 2011 a regular monthly inventory was introduced in the dispatch warehouse for steel quarto plates, and is
carried out on the basis of bar codes. This gives us a very clear overview of the status of finished products. In
2012 these regular monthly inventories will be implemented on a similar principle for the midphase supply.
The company manages the quality of its products and processes with the implemented quality management
system in accordance with the requirements of the ISO 9001 standard. For controlling use of energy-generating
products and other media we have established a system of complete energy consumption monitoring. At the
beginning of 2011 this system was independently audited in accordance with the EN 16001 standard and at the
end of the year we began to improve it, so it will be in accordance with the requirements of the ISO 50001
standard. In the field of environment, we are systematically meeting the requirements of the ISO 14001
standard. Occupational health and safety are systematically managed in accordance with the BS OHSAS 18001
standard.
2.3 EXTERNAL AUDIT
The company has been auditing its financial statements since 1993 and so far there have been no reservations
from any of the auditors. Our external auditor since 2005 has been Deloitte revizija, d.o.o..
An external audit of the management systems has been
carried out by the certification company TÜV SÜD
Management Service since 1995. Based on the positive
results of the combined external audit in 2011, the
company received the ISO 9001 certificate for quality
management systems for the sixth time, valid until 2014,
and permission for further use of the certificates ISO
14001 for the environmental management system and
OHSAS 18001 for the occupational health and safety
management system.
An
nu
al R
epo
rt 2
011
18
A new development in 2011 was a system upgrade in the field of energy supply. We are the first manufacturer in
Slovenia to receive the certificate according to the EN 16001 standard for the efficient use of energy. The
company's laboratory operations are audited by Slovenska akreditacija (Slovenian Accreditation). In 2011 it
audited and confirmed the accreditation of methods in the chemical and mechanical laboratories according to
the ISO 17025 standard, and accreditation of the inspection body according to the ISO 17020 standard.
With regard to product certificates and the supplier’s certification of capability the company is being audited by
the certification companies TÜV SÜD Industrie Service, Lloyd's Register, Germanischer Lloyd, Det Norske
Veritas, Bureau Veritas and Inštitut Građevinarstva Hrvatske (Civil Engineering Institute of Croatia) in Zagreb.
2.4 THE COMPANY’S ACTIVITY
Acroni is a manufacturer of flat rolled steel products, and its sales range includes steel quarto plates and hot
and cold rolled steel strips, produced from the following types of steel:
stainless;
electrical;
structural;
special.
The products manufactured by the company differ not only in their structure and processing technology, but
also in their purpose and type of use. They were designed by Slovenian experts with excellent specialist skills
and experience.
With the new investments Acroni upgrades its product range with niche products of higher added value. The
main focus is on the stainless steel quarto plates program, which positions us among the most important
European manufacturers.
2.5 THE COMPANY’S DEVELOPMENT STRATEGY
In the past the company purposely focused on the production of steel quarto plates. Most of our investments so
far have been aimed at increasing our capacity and improving the quality of the plates. These are also the main
goals of the New Rolling Mill project for rolling plates, started in 2010. Phase 2 of the project will be carried out
in December 2012. In addition to the already stated goals, the new machine will extend the maximum width of
plates from 2 to 2.5 m, which will enable us to enter a new market segment. This will be above all reflected in
different projects where we have been poorly represented because of the dimension limitations. Phase 1 of the
project was successfully completed on time in December 2011.
An
nu
al R
epo
rt 2
011
19
We are planning to gradually move the production of structural steel plates from Javornik to Koroška Bela. The
first step has been made by setting up a dispatch warehouse in the hall of the former Wire Rolling Mill. The
present location of the Quarto Plate Processing Plant will be gradually specialized for the production of
stainless steel plates, thus increasing the capacity of production aggregates and following market growth.
We are not planning any important investments in the production of hot and cold rolled steel strips in the
future. The company is gradually adapting its production range to increase the number of products with higher
added value, particularly focusing on the optimum use of our capacity.
We have a well-defined plan to increase the production of plates with higher added value. We are also
constantly striving to improve and manage all types of costs. Quality and the optimum service for customers are
the basis of our work.
2.6 RISK MANAGEMENT
The company's operations are exposed to different risks: credit risk, interest rate risk, foreign exchange risk,
solvency risk, price risk and so on. Although the company does not have an implemented risk management
policy, its risks are identified and regularly determined and managed.
The Finance Department handles financial risks in cooperation with the Sales and Purchasing Departments.
Other risks are managed by the departments responsible (Human Resources, Information Technology, Ecology,
etc.). Different risks are managed by different instruments and measures, as shown below.
An
nu
al R
epo
rt 2
011
20
2.6.1 Financial risks
2.6.1.1 Credit risk
The company regularly monitors its exposure to customers and limits the risk of customers’ non-payment by
the following activities: control of exposure to individual customers; sale of goods on condition of receipt of
appropriate collateral instruments (guarantees, letters of credit, advance payments, insurance with SID); the
receivables of each customer are checked at monthly meetings; and measures for collection of due receivables
are defined. Representatives from the Sales, Financeand Human Resources Departments take part in these
meetings.
Because of the insecure economic situation we estimate that credit risks are high, but with these stated
measures we successfully manage and lower the risks.
2.6.1.2 Interest rate risk
This risk arises mostly from the fact that the interest rate for the predominant part of current and non-current
financial liabilities is comprised of a variable (EURIBOR) and a fixed part, which represents the net interest
margin. The risk applies to the variable part of the interest rate.
The company monitors the changes in the variable part of the interest rate and acquires offers for interest
change, but we estimate that EURIBOR is at a very low level and this part of the interest rate will not rise in the
near future, mostly the consequence of the slow economic recovery.
Although the analysis of sensitivity shows a relatively big influence on the operating profit and loss, we do not
expext EURIBOR to rise in 2012 and assess this risk as low.
2.6.1.3 Foreign exchange risk
Part of the company's purchase of raw materials and sales is made in US dollars, but the predominant part of
sales and purchase is made in euros. Currently the value of purchased raw materials in dollars is approximately
three times higher than the sales value, which is why we introduced derivative financial instruments to manage
this risk in 2011. We also insured around 70% of nickel purchases in dollars, which represents the predominant
part of our purchases in this currency.
Since this strategy anticipates an increase in sales quantity, we will need to increase sales in non-European
markets, where operations are mostly carried out in US dollars. By increasing our sales in dollars we will achieve
a more balanced sales/purchase ratio, and there will be less need for insurance with derivative financial
instruments.
An
nu
al R
epo
rt 2
011
21
Due to an established systematic monitoring of purchases and sales in USD, and the use of derivative financial
instruments, this risk is assessed as moderate.
2.6.1.4 Liquidity risk
The company has an established system of cash flow planning and monitoring. The cash flow is planned three
times a month for several months ahead, and on a daily basis we carefully monitor actual inflows and outflows,
as well as deviations from the plan. To preserve liquidity we have secured enough revolving loans, and because
of our careful cash flow planning we would have enough time to find additional funds if our cash flow became
negative. We have been carefully monitoring the movement in receivables and liabilities, as well as adopting
and monitoring measures to deal with non-paying customers at regular monthly meetings.
We have secured long-term sources to finance major investments. If sources for new investments were not
secured, we would wait until they were.
Although liquidity risk is considered to be one of the biggest risks for Slovenian companies, we assess this risk
as moderate due to our established system of planning and monitoring.
2.6.2 Operating risks
2.6.2.1 Sales risks
2.6.2.1.1 Risks Associated with Cyclical Market Changes
Market changes and the supply/demand ratio have a strong effect on our sales opportunities, so we constantly
and carefully monitor trends on the steel and raw materials markets in different countries and industries. By
adapting to these changes we lower the sales risk.
In the current economic situation we assess this risk as relatively high.
2.6.2.1.2 Price risk
The prices of our products are subject to constant changes caused by the supply/demand ratio and the
fluctuations in raw material prices. This risk is controlled by constantly monitoring fluctuations in raw material
prices, by constantly calculating profitability, and by adjusting our prices to the current conditions. We lower
the risk by using additional payments for alloys in sale price formation. For certain products whose prices are
determined for months in advance, we use derivative financial instruments for forward purchases of nickel.
An
nu
al R
epo
rt 2
011
22
For products where no additional payments for alloys are made and no nickel is used, we try to achieve an
optimum level of steel scrap stock and thus follow products' sale prices as much as possible.
All of the above is why we assess this risk as moderate.
2.6.2.1.3 Quality risk
Poor product quality has a great impact on costs. On the one hand there are costs related to complaints made
by customers, while on the other hand there are costs related to internal rejects, where the poor quality of
certain products is discovered at the end of the technological process, after the processing cost has already been
incurred, which influences the operating profit/loss. We manage the risk of external complaints by improving
output control, where an ultrasound inspection is performed for most charges, thus eliminating low quality
plates, while the risk of internal complaints is managed by improved quality control during the processing and
with the assistance of professional teams who search for solutions to improve quality. This risk is assessed as
moderate.
2.6.2.2 Purchase risks
2.6.2.2.1 Risk of Raw Materials Availability
The availability of steel scrap depends on the global and local ratios between supply and demand, so we
constantly and carefully monitor trends on steel and steel scrap markets. We are especially focused on the
movements and demand in Turkey, Italy and Central Europe. The risk is being lowered by the diversification of
purchases, and cooperation with suppliers in SIJ – Slovenian Steel Group.
2.6.2.2.2 Price risk
Fluctuation of raw material prices is subject to constant changes on the global market. We additionally manage
this risk by constantly monitoring fluctuations in raw material prices and the actual demand for raw materials
according to the volume of orders and production capacity. We lower the risk by making purchases according
to formulas incorporated into sale prices in the form of additional payments for alloys.
Natural gas and electricity and extremely important expenses in our operations. The price of natural gas
increased substantially in 2011 and had an important influence on the company's operations. As most steel
manufacturers are confronted with the same problem, we expect to be able to incorporate the price increase of
natural gas into the prices of our final products.
For electricity we have signed a long-term contract at an agreed price.
This risk is assessed as important.
An
nu
al R
epo
rt 2
011
23
2.6.3 Other risks
2.6.3.1 Risk of Information System Malfunctions
The most important risks in the field of information technology are those of breakdown or malfunction in
hardware, the local area network, the communications and system software, and risks associated with
information system security.
We ensure that these risks are well managed by constantly monitoring them and immediately responding to
deviations. Moreover, we have signed maintenance contracts with our suppliers, who ensure the continued
operation of the system in the event of outages of any of its vital segments. Furthermore, the system itself is
designed in such a way that these risks are essentially reduced (duplications of the most vital parts of the
system, access to the Internet via two different providers, and the duplication of communication paths).
Special attention is given to monitoring the risks of unreliable and inadequate software. These risks will be
ultimately eliminated by the introduction of a new business information system. We are currently choosing
between two providers and plan to launch the new business information system in May 2012.
2.6.3.2 Human resources risk
The average age of emloyees in the company remained at the 2010 level; most of our employees are over 40
years old and 417 employees are over 50. In 2011 we continued to gradually reduce the number of employees (by
retirement and early retirement from the company) and established a full overview. We plan to compensate for
the vacancies by reorganising our existing staff and especially introducing a suitable scholarships policy.
In 2011 we set out plans for the development of our employees with solutions for personnel management, in
order to better manage human resources risks. These plans will be implemented in 2012 and 2013. We assess
that human resources risk will reduce to a very moderate level.
Although interest in study at technical faculties is in decline, there are still enough suitable candidates for
scholarships.
A shortage of certain metalwork professions on the market can be seen, but this has not affected us yet. As a
result of the economic crisis and the closing of companies, there are a sufficient number of good workers on the
market, which can satisfy the company's needs. This risk is assessed as low.
2.6.3.3 Risks Associated with Property Protection
Protection of the company's property is the responsibility of the Manager for Corporate Safety, who manages
the activities of the contracted security company. The contracted security company adopts measures to secure
An
nu
al R
epo
rt 2
011
24
all entrances into the company and its facilities in accordance with the adopted regulations on entry and exit of
people and vehicles on the company premises. The contracted security company also patrols the site and
facilities. Critical points on the premises are additionally controlled by surveillance cameras.
Individual security incidents are investigated by the manager, and if the investigation requires it, a detective
from a detective agency is contracted.
The poorer economic situation has increased the risks associated with property protection. We have responded
by changing the security company's activities and in this way are managing the risks. This risk is assessed as
moderate.
2.6.3.4 Risk of Environmental Legislation Changes
When considering potential risks in the field of environmental protection, a major concern is the changing
environmental legislation, which may result in a certain production activity (products, technological equipment
or machinery) being banned or shut down. This risk is managed by monitoring legislation and adjusting our
operations to the new legislation. We therefore assess this risk as moderate.
2.6.3.5 Risks Associated with Occupational Health and Safety
This risk is associated with work injuries, and includes the possibility of industrial accidents. The risk also
includes the possibility of a large fire. In order to reduce these risks, we have implemented a “minute for safety”
procedure with constant warnings of possible threats, and continuing education and training of employees, and
we have put up warning signs and purchased quality personal protective equipment. By adopting these
measures we can assess this risk as moderate.
2.6.3.6 Risks Associated with Property Damage
The company has insured its property against damage in case of fire, earthquake, explosion, lightning,
thunderstorm, hail, plane crash, and damage from protests and demonstrations. Our property is also insured
against the leakage of molten material and water from pipes, flooding by rain water and damage from heavy
snowfall. We have also insured all types of equipment (except computers and video devices) against being
indirectly struck by lightning.
Additionally, we have insured our machines and devices against mechanical damage which exceeds EUR 20,000,
while taking into account technical depreciation. We also have fully comprehensive insurance for vehicles that
are under seven years old.
An
nu
al R
epo
rt 2
011
25
2.6.3.7 Risks Associated with Industry
The main risk associated with the industry, and with relatively short-term effect, is linked to the difference
between real and visible consumption. These two types of consumption are separately monitored by specialized
associations of steel manufacturers. Real consumption means steel consumption by steel manufacturers for
their products. Visible consumption also includes the increase and reduction of supplies in warehouses. Despite
relatively stable real consumption there are great differences in the visible consumption – the consumption that
affects the product orders of steel manufacturers. These differences depend on the amount of supply and the
fluctuation of raw material prices of steel production. This means that there are higher numbers of orders from
customers in certain months, because they anticipate the rise in raw material prices and consequently in steel
prices, and in other months this demand can be greatly reduced, if there are plenty of supplies and raw material
prices are falling. We assess this risk as relatively high, because cyclical changes on the steel market are always
present.
Another risk is associated with the availability of raw materials. Despite the recession in the EU area in the
recent years, steel production around the world has been rising every year. Developing economies particularly
have marked a high level of development, whereas steel consumption in developed economies have declined
well below the level of 2007. The steel industry is a global industry, so developments on individual markets do
not influence the availability and price of raw materials. This is why there are times when, despite lower
production in the EU, the prices of raw materials rise and their availability is limited, because the demand for
raw materials stays high in other parts of the world. This risk poses no serious threat to us because of our size.
Other risks associated with the industry mostly have a long-term effect. This includes the risk of falling behind
in the development of new steel types, not being able to keep up with competitors’ development and
technology, and customers changing to substitutes.
An
nu
al R
epo
rt 2
011
26
2.7 ANALYSIS OF PERFORMANCE AND IMPLEMENTATION OF OUR STRATEGY
2.7.1 General Economic Trends in 2011
In 2011 global economic activity increased by 3.8% compared to 2010. Developed economies marked a 1.6%
growth, and developing economies had 6.2% average growth. In the last quarter of 2011 the crisis in the euro
area reached new dimensions, which caused a lower growth rate in the global economy and increased the risks.
In the third quarter economic activity was still strong – even better than expected for developed economies –
whereas in developing economies the growth was lower than expected.
The total size of global trade increased by 6.9%.
In 2012 global economic activity is expected to rise at a lower growth rate, but it will not decline. The activity in
developed countries in 2012 and 2013 is expected to increase at an average growth rate of 1.5%. Compared to the
severity of the recession in 2009 this will not be enough for a major turnaround, taking the very high
unemployment into account. The euro area faces a mild recession in 2012. The growth in developing economies
is expected to be 5.7%, which is substantially lower than in 2010 and 2011.
Raw material prices mostly decreased in 2011 as a result of smaller global consumption. However, oil prices have
increased in the last months, mostly as an answer to the string of events in the supply chain and major
geopolitical risks.
2.7.1.1 Market Trends in Steel (or Other) Markets
In 2011, global steel production hit a new record – 1.527 billion tonnes of raw steel were produced. Compared to
2010 this represents a 6.8% growth. In the EU 177.4 million tonnes of raw steel were produced, which is a 2.8%
increase compared to 2010. The EU share in global steel production decreased by 0.5% – from 12.1 to 11.6%.
Capacity utilization was highest in the beginning of the year – it reached its peak in February with 83.3%, then it
declined to 71.7% in December.
The following sectors had the strongest growth in the EU in 2011: machine building (10.4%), the car industry
(10.8%) and pipe manufacture (9.9%). The expected growth rates for 2012 are far lower, with the highest growth
rate of 1.5% predicted for machine building. Negative growth is predicted for shipbuilding (–3.6%) and pipe
manufacture (–1.9%).
Real steel consumption in the EU in 2011 was 6.6% higher than in 2010. The growth in the first quarter was
13.8%, 7.8% in the second, 6.4% in the third and negative (–0.6%) in the fourth quarter. Real steel consumption
growth in 2012 is expected to be negative, and growth is not expected to increase before the fourth quarter.
An
nu
al R
epo
rt 2
011
27
Visible steel consumption growth (influenced by changes in supply) was 7.2% in 2011 and is expected to be –2%
in 2012 with recovery in the second half of the year.
2.7.2 Analysis of Business Performance
The company ended 2011 with EUR 6.9 million net profit, which is substantially more than in 2010, when net
profit was EUR 1.47 million. Net sales revenues in 2011 amounted to EUR 437.3 million, which is a 19% increase
compared to 2010, when we generated EUR 368.1 million in sales revenues.
In the first two quarters, and partly in the third quarter of the year, we witnessed the continuation of the
positive trend of 2010, so we had no problems with orders. Two major incidents (the collapsed roof of the end-
pusher furnace in June, and the damaged grinding machine in August) prevented us from producing and selling
even more products, especially stainless steel quarto plates.
We continued to follow our strategic orientation
in 2011, of which the main focus is the production
and sale of stainless steel quarto plates and special
steel quarto plates. We sold 68,916 tonnes of
stainless steel quarto plates (8.9% more than in
2010), and also increased our sale of special steel
plates by 20.7% compared to the previous year.
The majority of investments in 2011 were
implemented to increase the production of
stainless steel quarto plates, which represents a
good starting-point for 2012.
Careful liquidity monitoring was one of the most important tasks of the Finance Department in 2011. Due to
careful cash flow planning and efficient collection of receivables, we had no problems with guaranteeing
liquidity assets.
In 2011 we produced and sold more products than in the previous year, although we finished 2011 with 11.1%
fewer employees than we had at the end of 2010. The number of employees was reduced by regular or early
retirements, or by so-called soft measures. Sales per employee rose from 193.6 tonnes in 2010 to 224.7 tonnes in
2011, which means we are increasing our productivity.
The gross added value per employee also increased – from EUR 41,192 in 2010 to EUR 50,709 in 2011.
An
nu
al R
epo
rt 2
011
28
2.7.2.1 Analysis of Marketing and Sales
2.7.2.1.1 Sales Quantity and Value
In 2011 the company had enough orders to fill all
of its production capacity. The market situation
in the first six months was very positive,
actually better than expected. However, in the
second half of the year the market recession
deepened each month; but despite that we
managed to use our full capacity, except in
December when production was hindered due
to the planned implementation of our
investment.
For these reasons we only achieved 90% of
the production quantity set in our business
plan. However, we substantially improved the
sales quantity compared to 2010, by 7%. Our
sales value increased by 18% in 2011 compared
to 2010.
Also in comparison to 2010, there was a great
change in the geographical structure of sales.
Whereas in the previous year one third of the
quantity had been sold on the domestic
market, this share fell substantially in 2011, to less than a quarter. On the other hand, the sales share in the EU
market grew by five percentage points in total – by two percentage points in Germany and three in other EU
24% 20% 21% 25%25% 24%
36%31% 27%
33%
30% 28%
30%35%
39%
34%
35% 35%
10% 14%13%
8%
10%13%
2006 2007 2008 2009 2010 2011
Sales quantity shareStainless Electrical Structural Special
60%
62%57%
57%
60%58%
20%
15%16%
21 %
18 %
17%13%
14%18%
15%
15 %
16%7%
9% 9%
7%
7%
9%
2006 2007 2008 2009 2010 2011
Sales value share
Stainless Electrical Structural Special
An
nu
al R
epo
rt 2
011
29
countries. Meanwhile, the sales share in Italy remained unchanged. The sales share in non-EU countries grew
by four percentage points and remained unchanged in other countries worldwide.
2.7.2.1.2 Sales by Programs
With regard to the stainless steel program the company
continues its strategy of increasing sales of stainless steel quarto
plates, which represents almost 60% of Acroni's total sales value.
In 2011 our plans were not completely fulfilled despite sales
opportunities, because the business plan was only 86% realized
due to the limitations in production.
The greatest advantage of stainless steel products is excellent
resistance to corrosion, which, however, has its own characteristics and limitations. Acroni's stainless steel
quarto plates are used across the world in the petrochemical industry, in electric power plants, in the paper
industry, in shipbuilding, in the nuclear industry and elsewhere. This puts Acroni in position as one of the most
important European manufacturers.
The sales of electrical steel remained at the same level as in
previous years, because our capacity is fully utilised. Our
business plan was 95% fulfilled. Finished and semi-finished
non-oriented electrical steel is produced in the form of strips
and plates, which can be insulated or non-insulated. We are
now focusing on the development of products with high added
value, and our competitive edge is close cooperation with users
of our electrical steel plates in the technical field.
In 2011 the sales structure changed so that the sale of special steel increased its share, and now represents
almost 13% of our total sales quantity. Acroni is expanding its production of wear resistant and high-strength
steels, mostly used in the production of construction machinery and mining equipment. We planned an even
higher growth in this segment, but did not fully achieve it, as the business plan was only 70% fulfilled.
The sales of structural steel is limited by capacity at the moment.
In 2011 we successfully introduced continuous production and
supply of uncut steel quarto plates, that in certain dimensions and
with no special requirements offer our customers the purchase of
quality, reasonably priced products. The sales of structural steels
reached the level set in the business plan.
An
nu
al R
epo
rt 2
011
30
2.7.2.2 Analysis of Comprehensive Income
In 2011 we sold 302,058 tonnes of products, which is 6.7% more than in 2010, when we sold 283,103 tonnes. Our
revenues amounted to EUR 437.3 million, a 19% increase compared to 2010, when our revenues were EUR 368.1
million. This higher income is partly a consequence of bigger quantities and partly of higher average prices. The
average price in 2011 was 10.6% higher than in 2010.
After generating EUR 1.47 million net profit in 2010, the company's operations in 2011 were even more successful
and net profit amounted to EUR 6.9 million.
The financial ratios related to the comprehensive income were higher in 2011 than in 2010, particularly because
of higher profit.
The net cash flow (EBITDA), showing our ability to implement investments and meet our financial liabilities,
increased by 35% in 2011, compared to 2010. Although the average interest rate for borrowings in 2011 was 5.11%,
which is 20% more than in 2010 when the interest rate was 4.23%, the company had no difficulty in paying
interest on these loans. The interest coverage ratio was also favourable and shows the ratio between net profit
and interest expenses. In 2011 it amounted to 2.44, compared to 1.16 in the previous year.
Labour costs in 2011 were 1.4% lower than in 2010, which is relatively small considering that the number of
employees at the end of 2011 was 11% fewer than at the end of 2010.
The average price in 2011 was 10.2% higher than in the previous year, and in terms of quantity we sold 6.7%
more products than in 2010.
The following diagram shows the important items of the comprehensive income for 2011:
An
nu
al R
epo
rt 2
011
31
2.7.2.3 Analysis of Financial Position
Although we generated 19% more net sales revenues, we managed to lower the working capital, which
amounted to 10% of net sales revenues in 2011, and 22% in 2010. All elements of the working capital were
lowered, both relative and absolute.
In 2011 we earmarked EUR 23.76 million for investments, which is less than in 2010, when we spent EUR 24.4
million. Still, we were able to reduce our net financial debt by 19% – from EUR 136.8 million at the end of 2010
to EUR 110.5 million at the end of 2011. This is above all a result of efficient supply management, successful
collection of receivables, and agreement with our suppliers on extending the payment deadlines. The company
ended 2011 with EUR 13.7 million in cash and cash equivalents, whereas 2010 ended with only EUR 1.4 million.
Our total assests increased by EUR 4.2 million compared to 2010, mostly because of investments. In 2011 new
investment purchases amounted to EUR 31.4 million.
The diagrams below show the structure of assets in the statement of financial position and the change of
individual items in the financial statement compared to 2010:
An
nu
al R
epo
rt 2
011
32
The diagrams below show the structure of liabilities in the statement of financial position and the change of
individual items in the financial statement compared to 2010:
163.195 4.400
53.258 43
71.016
110.993 1.038 403.943
Equity Provisions Non-current financial liabilities
Non-current operating liabilities
Current financial liabilities
Current operating liabilities
Other liabilities Total liabilities
Liabilities on 31 December 2011in KEUR
An
nu
al R
epo
rt 2
011
33
2.7.2.4 Business ratios
The company achieved better ratios in 2011 than in 2010. Ratios are divided into three groups: financial ratios,
liquidity ratios, and solvency ratios, creditworthiness and debt.
Financial Ratios
FINANCIAL RATIOS Unit 31 December 2010 31 December 2011
Operating profit (EBIT) EUR 5,913,822 14,062,573
EBITDA EUR 24,078,299 32,500,013
EBITDA margin % 6.5 7.4
Net cash flow (net profit/loss + depreciation) EUR 19,638,090 25,290,186
Return on Sales (ROS) % 0.4 1.6
Return on Assets (ROA) % 0.4 1.7
Return on Equity (ROE) % 0.9 4.2
Added value per employee % 41,192 50,709
The financial ratios, which show the profitability of operations, are better than in 2010, and this is a result of
generating higher profit, both operating profit (EBIT) and net profit.
399.7366,853 -2,121 -24,700
-10610,625 15.982 -2,326 403.943
Total liabilities 2010
Equity Provisions Non-current financial liabilities
Non-current operating liabilities
Current financial liabilities
Current operating liabilities
Other liabilities
Total liabilities 2011
Change of liabilities in 2011KEUR
An
nu
al R
epo
rt 2
011
34
Liquidity Ratios
LIQUIDITY RATIOS Unit 31 December 2010 31 December 2011
Current ratio Ratio 1,057.000 0.859
Quick ratio Ratio 0.667 0.557
The liquidity ratios, showing our ability to meet our current liabilities, were lower than in 2010, but that does
not mean that Acroni's ability to meet its current liabilities was in any way smaller than in 2010. The main
reasons for the lower values of the current ratio are: lower supply value, which is partly due to lower raw
material prices in the second half of 2011; transfer of part of receivables from current to non-current (this affects
receivables from companies in the process of compulsory administration or bankruptcy); and transfer of two
complete loans for working capital from non-current to current. The loans are due for payment by the end of
October 2012, but we predict we will be able to extend them, as we have done several times before. Had there
been no such events, the current and quick ratio would be at the same level as in 2010.
Solvency Ratios, Creditworthiness and Debt
SOLVENCY RATIOS, CREDITWORTHINESS AND DEBTS Unit 31 December 2010 31 December 2011
Capital coverage of non-current assets ratio 0.674 0.662
Interest coverage ratio ratio 1.163 2.442
Net debt rate in EBITDA ratio 5.687 3.401
Capitalization rate ratio 0.390 0.404
Debt level ratio 0.345 0.308
Net debt EUR 136,819,530 110,520,024
These ratios are also good. The lower ratio value for capital coverage of non-current assets is a result of higher
investments in 2011. The interest coverage ratio was better than in 2010 despite higher interest rates, a
consequence of a higher EBIT value.
We made great progress with regard to the ratios of net debt/EBITDA and of debt level, as both ratios were
lower than in 2010. Net debt in particular was substantially reduced, due to the efficient collection of receivables
and longer payment deadlines.
For the company as a whole these ratios are favourable and provide security for suppliers and banks.
An
nu
al R
epo
rt 2
011
35
2.7.2.5 Operations of Subsidiaries
Subsidiaries
Acroni, d.o.o. has two subsidiaries:
Acroni Italia
Acroni Deutschland.
Acroni is 100% owner of both. The companies operate as Acroni's agents.
Acroni Italia s.r.l., Via del San Michele 334, Gorizia, generated EUR 5,860,078 sales revenues in 2011, with net
profits amounting to EUR 711,168. The capital value of the company on the date of the financial statement was
EUR 1,463,103. The parent company's sales generated 16.5% of total sales through Acroni Italia s.r.l. in 2011.
Through this company we have sold products to the value of EUR 72,436,853. The company employs six people
and is run by its Director, Bogdan Ravnik.
Acroni Deutschland GmbH, Paulsmühlenstrasse 42, Düsseldorf was able to generate EUR 714,000 sales revenues
in 2011, generating a net profit of EUR 91,096. The capital value of the company is EUR 412,165. Acroni d.o.o.
realized 18.8% of its total sales in 2011 through this company. The company employs five people and is run by its
Director, Sascha Kleijn.
Affiliate
Acroni Sweden, Branch office Filial, Jöns Lärares Gränd 2, Skanör, is run by its Director, Per Gustav
Hammarsten.
Associated Company
RCJ – Razvojni center Jesenice, družba za razvoj novih materialov in tehnologije d.o.o., C. Franceta Prešerna 61,
Jesenice, is a company founded in 2011 with a capital of EUR 1,200,000. This company is run by its director, Miha
Krisch. Acroni’s share in the company is 24.95%.
2.7.3 Investments and Production
2.7.3.1 Investments
2011 ended in the spirit of finalizing our key strategic investments of recent years. At the same time we have
continued to invest in strategically important equipment, which will enable us to significantly improve quantity
and quality.
An
nu
al R
epo
rt 2
011
36
We are continuing to successfully implement our development strategy. Our development is aimed at
increasing the production and market shares of niche products, stainless steel quarto plates and special steel.
In 2011, our assets were used for 17 projects. We
allocated funds to the amount of EUR 23.76 million for
these projects.
Most of our expenses in 2011 were designated for three
major strategic investments (Transport of Stainless
Steel Quarto Plates, New Rolling Mill and Pickling
Bath nr. 3). Our suppliers received EUR 15.90 million
or 71% of total investment funds for these three
projects in 2011.
The 2011 business plan predicted investment expenses in the amount of EUR 33.8 million (without VAT) for
investments in projects and in maintenance projects. The actual investments were mostly lower for
maintenance projects, and some planned payments were postponed until next year.
2.7.3.2 Production
Table: Production and Shipment of Finished Products
in tonnes 2010 2011
Production 286,016 299,865
Shipment 283,103 302,058
STEEL PLANT
In 2011 our Steel Mill produced 370,383 tonnes of
slabs, which is 15,948 tonnes more than in 2010, when
it cast 354,435 tonnes of slabs. We manufactured
88,675 tonnes of stainless steel slabs, which is 1,168
tonnes more than in the previous year. Despite this
increased production we fell 6.8% short of our
business plan. The main reasons for not achieving the
desired production were the incidents in July and
August 2011, when we were forced to dramatically
change the production plan due to the two-week shut-down of the grinding machine. The yield of the Steel Mill
rose by 0.7% in 2011 compared to 2010. There were 141 incidents in 2011 (all unusual, for instance: mechanical
An
nu
al R
epo
rt 2
011
37
damage, fire, environmental pollution, work injuries, “near miss” events and similar), which is a poorer result
than in 2010. However, we were more successful in occupational safety, because the total of 18 work-related
accidents represents a 21.7% decrease in comparison to the previous year.
The main events that marked 2011 in the Steel Mill were:
We set up the fourth location on the VOD machine and purchased a new machine for injecting wire, in
order to increase the production of stainless steels.
In April a new system of electrode cooling began operation in the electric arc furnace.
Two new heating points for drying ladles began operations. Their results have already proved the
importance of the project.
Additionally, a new shotcreting (projecting a substance onto a surface) machine for the electric arc furnace
was put into operation, called the Terminator. This lowered the consumption of the substance used for
shotcreting the furnace and improved the endurance of its lining.
Due to the phase 1 implementation of investment in the new rolling mill in the Hot Rolling Mill we halted
the operation of the Steel Mill for 18 days in December. During that time we successfully carried out general
repairs and maintenance on all aggregates.
Unreliable operation of the grinding machine marked the first half of the year, but this was successfully
improved in the second half.
2011 was also marked by the retirement of several employees, so we were able to continue the
reorganization of our human resources, and, despite fewer employees, managed to keep a high production
level and even exceed the 2010 quantities.
HOT ROLLING MILL
In 2011 the Hot Rolling Mill processed 340,739 tonnes
of hot rolled products, which is almost 8,127 tonnes
more than in 2010, when production was 332,612
tonnes. However, we were still 6.7% behind our
business plan. The year was marked by two long
shut-downs. The first happened in June, when the
collapsed roof of the heating furnace halted
production for eight days. The second was in
December for the planned 22-day shut-down to
implement phase 1 of the investment in the new
rolling mill. Because we had plenty of orders, the mill
then operated over the whole Christmas and New Year period for the first time.
An
nu
al R
epo
rt 2
011
38
Important events in 2011 for the Hot Rolling Mill were:
We continued the reorganization processes for optimizing technological routes, which means we ultimately
closed down the slab grinding section and at the same time dismantled the second grinding machine,
Centro maskin 1. This gave us extra space for storing slabs.
In June there was an unexpected shut-down of the end-pusher furnace, due to a collapsed roof in the
passage between the equalizing and heating zones (approximately eight days).
In December (3 December –25 December 2011) phase 1 of the investment in the new rolling mill was
successfully carried out. During that time we changed the input and output guides and rolling tables,
carried out construction work, and changed a large proportion of the automated machines and electrical
equipment.
Compared to 2010 we achieved good results in occupational health and safety, as the number of work-
related injuries decreased by 45%.
COLD PROCESSING PLANT
The key program in cold processing is electrical steel which, with 85,536 tonnes in 2011, represents 90% of our
total production.
In 2011 we produced 95,588 tonnes of finished products, which is almost the same as in 2010, when we produced
96,742 tonnes. However, with regard to the electrical program in 2011, more high quality steel with improved
electromagnetic characteristics was produced in thinner dimensions.
Despite more demanding quality-technological
production in 2011, we kept the specific consumption
and yield at the 2010 level, mostly as a consequence of
optimizing the capacities of aggregates, higher speed
on the decarburization and recrystallization line
(CRNO line), better technological discipline, and
continuous in-service education and training in the
following fields: quality, technology, reduction of
congestion, and causes of internal and external
complaints.
In 2011 we completed tests for changing the current pickling process and prepared a project of non-acidic
cleaning. This will solve the difficult question of guaranteeing ecological parameters while making the necessary
investments in the outdated acid regeneration process.
An
nu
al R
epo
rt 2
011
39
QUARTO PLATE PROCESSING PLANT
In 2011 we produced 147,655 tonnes of quarto plates, divided into 67,440 tonnes of stainless steel quarto plates,
62,551 tonnes of ordinary steel quarto plates and 17,674 tonnes of special steel. The increase in production
compared to the previous year was 9.9%. The growth in the stainless steel products program was 5%. The total
yield is at the planned level and better than in 2010. A step forward was also made in the field of energy
consumption; the available funds for processing were used more efficiently.
The main events that marked 2011 in the Quarto Plate Processing Plant were:
Better flow of steel plates through the
production process by eliminating
bottlenecks and improving workers'
efficiency on all important machines.
More efficient energy consumption and
thus lower processing costs.
A substantial decline in the number of
work-related injuries.
The implementation of investments:
furnace nr. 3 in the Wellman line began operation, as well as pickling bath nr. 3 with the spiral drying
line and a new processing system for spiral water and used pickling liquid in the Pickling Plant. The
storage area for dispatch in hall C was greatly expanded, achieved by moving the NC 6 cutting machine
and grinding machine, and by opening new warehouses in the Hot Rolling Mill and Hall D. We also
increased the load capacity of the cooling machine in the Bellman furnace and of the loading cart on
the Wellman line.
We put the daily planning of work on the aggregates into action, but the final implementation of the
daily planning project will be carried out with the bar code project in the production.
Sustainable development will also be guaranteed in the future by developing new projects and finishing
the current ones, for example: the optimization of end production, the expansion of production
program 2.5m, the installation of furnace nr. 4 on the Wellman line, the optimization of pickling, the
introduction of bar codes into production and analysis of acid and solid parts content in the pickling
liquid.
An
nu
al R
epo
rt 2
011
40
2.7.4 Quality management system
Because the company systems maintain a correlation between standardized demands and operation processes,
from planning, management and implementation to continual operational improvement, and due to many
organizational, technological and other changes in the company in 2011, our activities in the field of quality
managament systems have been quite intensive. The most important and responsible tasks for all participants
in the system were to consider every change and its consequences before implementation; to carefully plan; to
give accurate information to all participants; to control the implementation of the changes; and to make sure
that all other affected system segments were adapted and adjusted at the same time. We are aware that there
can be no harmonious progress until all the elements of the system run smoothly. By introducing new machines
and implementing technological improvements we have expanded our knowledge, reorganized, changed work
requirements and improved other conditions to achieve high quality results. Measures to improve
communication, motivation and attitude towards work have been adopted. The system has been upgraded with
new information technology in several segments, which has provided a powerful tool for efficient monitoring,
analysis, report and prompt action. Identification systems and product traceability have also been improved,
and potential threats which could have had a negative impact on the quality fulfillment of orders have been
reduced.
The successful operation of the quality management system, which requires the cooperation of every single
employee, is evident in the satisfaction of our customers and other business partners, in the quality and
quantity of our final products, in our profitability, and of course in Acroni's profit and loss statement.
The system is regularly audited by independent institutions and
occasionally by customers. The assessment of our progress, ability to
achieve quality results, and efficiency in implementing and adjusting to
numerous changes, has been carried out by the established certification
company, TÜV SÜD Management Service. In 2011 we successfully
fulfilled conditions for the sixth certificate of the ISO 9001 standard for
quality management systems, which is valid until 2014. Moreover, we
were the first manufacturer in Slovenia to successfully upgrade the
system in the field of energy management. The company also obtained
the certificate of the EN 16001 standard for efficient use of energy. At the end of the year we commenced the
process of obtaining the certificate of ISO 50001. Accordance with requirements, and system progress, was also
shown for other implemented and certified management systems. The environmental management system as
per ISO 14001 standard, and the occupational health and safety management system as per OHSAS 18001
standard, are both valid until 2012 and are in the process of extension. Our chemical and mechanical
laboratories carry out their work with methods in accordance with the ISO 17025 standard, which was
An
nu
al R
epo
rt 2
011
41
accredited by Slovenian Accreditation. The same is valid for the inspection body, accredited per ISO 17020
standard.
By obtaining a valid quality management systems certificate according to the ISO 9001 standard, the company
meets one of the conditions for obtaining and keeping product certificates and our supplier’s certification of
capability. Compliance with requirements for obtaining these product certificates is examined by various
certification bodies. We have kept our position as a certified manufacturer of steel and steel products according
to the requirements of TÜV SÜD Industrie Service, Lloyd's Register, Germanischer Lloyd, Det Norske Veritas,
Bureau Veritas and Inštitut Građevinarstva Hrvatske (Civil Engineering Institute of Croatia) in Zagreb. Our
product certificates, awarded by the TÜV SÜD Industrie Service certification body on the basis of an assessment
of technical standards, are:
certificate for the production of materials according to the requirements of AD 2000-Merkblatt W0/TRD
100;
certificate for the production of materials, which fulfill the pressure requirements according to the Pressure
Equipment Directive 97/23/EC (PED);
certificate for the production and control of construction materials in accordance with the Construction
Products Directive (CPD) 89/106/EEC and 93/68/EEC;
certificate for the fulfilment of requirements according to the NORSOK M-650 standard.
In practice, the stated certificates and confirmations are one of the customer’s requirements or conditions for
business cooperation. Together with perfecting the requirements of the market, we are becoming more
demanding, self-critical and strict within our own system. Every weak point is immediately addressed, managed
within the team, and stabilized. We carefully control our sources, update equipment, increase demands and
expertise in the work place, and optimize technological and operating processes. Although we are reducing the
number of our employees, we are still able to achieve and exceed our goals for constantly higher quantities,
value and quality levels with better organization, equipment and expertise in the work place. The maturity and
An
nu
al R
epo
rt 2
011
42
vitality of the system are our great advantages on the path to progress. They help us to fulfil the conditions of
fast adjustment to numerous changes in all areas, which drive operations development. Moreover, they help us
keep our position as a leading, qualified, reliable and trustworthy supplier of steel and steel products.
2.8 BUSINESS PLANS AND GOALS FOR 2012
In 2012 we expect similar economic activity as in 2011, but due to a better sales structure we plan to achieve
better results. Compared to 2011 our income will be 16% higher, net profit after taxes 78% higher and cash flow
(EBITDA) 31% higher.
We will continue to follow our strategic orientation, while we plan to increase the sale of stainless and special
steel quarto plates.
We are planning for sales of 348,389 tonnes, as evident from the table below:
SALES OF FINISHED PRODUCTS (tonnes) 2010 2011 BP 2012
Quarto plates 130,956 145,934 192,065
Hot-rolled strips 45,737 26,540 16,936
Cold-rolled strips 97,164 94,971 101,416
Uncut steel quarto plates 2,387 22,916 22,184
Profiles 4,917 4,764 74
Slabs 1,941 6,934 15,713
TOTAL 283,103 302,058 348,389
As in 2011, a shut-down of the Hot Rolling Mill is planned for the end of 2012, for the phase 2 implementation of
investment in the new rolling mill. As production in the Hot Rolling Mill will be halted for the whole of
December, we need to generate enough midphase supply in the months beforehand to be able to achieve our
planned sales.
Further reduction in the number of employees is also planned for 2012, so we will end the year with 1,156
employees, compared to 1,239 employees at the end of 2011.
The growth of the steel market in 2012 is predicted to be 5.4%, which is less than in 2011, where growth
compared to the previous year was 6.5%. Machine building is predicted to increase by 1.5%, but growth is
expected to be negative in pipe manufacture and shipbuilding.
An
nu
al R
epo
rt 2
011
43
2.9 RESEARCH AND DEVELOPMENT
In 2011 we continued the rich tradition of development in the company. In
November 2011 we celebrated the 50th anniversary of the Research and
Development Department in the former Jesenice Ironworks. This celebration
was marked by a special event, where the Managing Director gave speech.
Because we want to strengthen the development of new products and
technologies in the future, Acroni co-founded the Jesenice Development
Centre for new materials and technologies (RCJ). The development centre’s
operation is partly funded by resources from the European Regional
Development Fund. There, engineers will have state-of-the-art research
equipment at their disposal, which will help them to follow the trends in the
development of new types of steel and production technologies. Part of
Acroni's development activities will now be carried out at RCJ.
The need for more efficient control over technology influenced the reorganization of the company. The
Departments of Technical Control and Research and Development were merged into a new department, called
Quality, Development and Technology. The new department consists of Development, Quality Control and
Research and Testing, and all the laboratories are joined.
2.9.1 Development of New Products
Stainless Steel
We have developed a new high-speed stainless steel, ACRONI 4305, whose
distinctive feature is excellent machinability. The first feedback on the new
product from our customers is very promising and calls for increased
production of this type of steel in the coming year.
In the field of refractory ferritic steel a new type, 22ACRONIFOIL, was
developed, to be used for light foils.
Special Steel
Customer need influenced the development of a wear resistant steel in the
NICRODUR family, which can endure harsher bending conditions.
We are also developing a new generation of protective sheathed steel plates,
PROTAC 500 and PROTAC 550.
An
nu
al R
epo
rt 2
011
44
In 2011 we began developing a corrosion resistant tool steel for the spraying of plastics for quarto plates, with
which we hope to expand our tool steel product family. We also successfully produced ACRONI T85 steel. At
the same time we have become a regular supplier of slabs from tool steel of the same group, for the most
prominent tool steel manufacturers.
In the boiler steel plates segment a product family of alloyed boiler steel plates, SA 387, has been developed to
be used at high temperatures. Within the framework of this standard we have developed the following types of
steel: Gr5, Gr9, Gr11 and Gr12 for normalized and tempered conditions. At the same time we have started
developing Gr91 steel.
Electrical Steel Plates
The development of 0.2 mm thick non-oriented electrical steel plates (NO20) is successfully under way. The
electrical characteristics we have achieved are in accordance with the standard for electrical steel plates NO20.
Thin non-oriented electrical steel plates are made for use at high frequency (from 400 Hz to 1 kHz), where they
ensure lower eddy loss, thus optimizing the use of electrical machinery.
2.9.2 Development of Technologies
A large part of our development activities has been focused on optimizing the technology for the manufacture
of stainless steel in the Steel Mill, ensuring an excellent quality in the finished products. By using elements of
machine studies and statistical analysis we have determined a system of key production parameters and their
optimum areas, ensuring high quality finished products.
We are also developing new technology for cleaning the
surface of stainless steel plates. A prototype was
successfully constructed. The new technology will enable a
procedure that will be significantly safer for the
environment. This development is partly funded by
resources of the European Regional Development Fund.
Prototype for the development of new technology for cleaning the surface of plates
2.9.3 Development of IT Support
Acroni's IT support development in the coming years will be made in two directions: a new business
information system (ERP) will be implemented, and some existing solutions not covered by ERP will be
An
nu
al R
epo
rt 2
011
45
improved and further developed (systems for the process management of production, laboratories and testing,
electronic scales, a system for measuring radioactivity etc).
The basis of the business information system will be the new ERP system, which will be first introduced in the
middle of 2012 and is planned to be completed by the middle of 2013. The project is currently in the final
negotiation phase. We are searching for an integrated, complete solution, covering all key business processes
(production monitoring and planning in connection with processing systems, quality control, purchase, sales,
maintenance), as well as support processes in the company (human resources, accounting, finance, control).
Along with this we will carry out the optimization of operating processes. The transaction part of the system
will be upgraded by analytical solutions and a customer management system (CRM). After transfer to
production we will continue to further develop this system and add new functions according to our needs.
Certain of the solutions we have found so far will be used together with the new ERP system and will be
intergrated into it as much as logically possible. We will continue to develop these systems and improve their
functionality and useful life by implementing new technologies. Also planned for 2012 are the implementation
of the fourth production management system (MES) in the Cold Processing Plant, and the MES system in the
Quarto Plate Processing Plant will be supplemented with bar code technology to identify semiproducts,
products and working operations, which will in turn substantially improve the system’s reliability.
2.10 INFLUENCE OF CONTROLLING COMPANY
The controlling company SIJ – Slovenska industrija jekla, d.d., and the companies of the SIJ Group have
concluded a management agreement: A Contract on the Regulation of Relationships and Single Management in
SIJ – Slovenian Steel Group. Acroni, d.o.o., as its subsidiary, declares that in 2011 no legal transactions were
conducted resulting in any disadvantage to Acroni due to the influence of the controlling company SIJ –
Slovenska industrija jekla, d.d.
2.11 EVENTS FOLLOWING THE END OF THE BUSINESS YEAR
In January the production of profiles was discontinued (cancellation of the profiles department in the Hot
Rolling Mill).
In January we produced and sold a record quantity of stainless steel quarto plates (8,400 tonnes).
There were no other events after the reporting date that could influence the company’s financial
statements.
An
nu
al R
epo
rt 2
011
46
3 SUSTAINABLE DEVELOPMENT
Acroni's production is based on steel scrap, which makes us the largest
recycling company in the region. We are not planning any technological
changes in the future, so secondary raw materials will remain our basic
input raw material.
Great attention is paid to continual process improvements and thus lower
use of energy. We are one of the first companies in the region to obtain a
certificate for the efficient use of energy. Concerning energy use, we
constantly monitor and lower our greenhouse gas emissions.
We are aware of our position in the fragile local environment and of the
environmental burden which is the consequence of a century-long iron
forging tradition in this area. For all products accompanying our core
operation, we are continually searching for possibilities to use them in
other processes. The problem of slag disposal has been solved. All cooling
circuits are closed. However there is a big challenge ahead of us, with
regard to the use of waste heat.
The most important factor for the company's success is its people. As well
as traditional scholarships for future co-workers, all our employees are
involved in formal and informal education. At the same time our aim is to
actively guarantee safety at work and safety of their health.
3 SUSTAINABLE
DEVELOPMENT
The company's sustainable
development is associated
with the sustainable
occupational and personal
development of our
employees, the sustainable
development of our customers
and suppliers, and with the
sustainable development of
the natural and social
environment.
We are aware of the
consequences of non-
development, so we invest
knowledge, time and assests to
guarantee true sustainable
development of all factors.
An
nu
al R
epo
rt 2
011
47
3.1 RELATIONSHIP WITH EMPLOYEES
We know that success does not depend only on large financial contributions and expensive investments, but
human resources development is also important for the sustainable development of the company. For this
purpose we have devised a strategy for employee development, set our goals and begun their implementation.
We want to ensure our employees have good social security and high job security, which is why we have
substantially changed our employment strategy. Working conditions are being systematically improved and
new ways for motivating employees are being sought. Competence systems are being introduced, which will
provide for the personal and professional development of our employees, target management, advancement in
their careers and success in the organization.
The goals of training are not only short-term and specific, such as learning the new skills of a particular
education program, but they also support the long-term general goals of Acroni for the successful
implementation of change, more efficient operations and a constructive attitude towards people. Lifelong
learning, continuous additional education and training are becoming inevitable, since both development and
the necessary knowledge are changing at high speed. Unfortunately, having rich experience is not enough. It
has to be complemented by innovations, new knowledge and professional gains.
3.2 DEVELOPMENT OF EMPLOYEES
3.2.1 Employee trends
Throughout the whole business year we have followed our goal of an optimum number of employees, which is
why we have been gradually reducing their number. 187 employees were terminated, and we employed 32 new
workers to ensure undisturbed operation. We started 2011 with 1,239 employees, and reduced that number by
155 compared to 2010. The average gross wage per employee was EUR 1,547.10.
Human Resources Dynamics
HUMAN RESOURCES 2010 2011
Average number of employees 1,462 1,344
Total number as of 31 December 1,394 1,239
Concluded employment relationships 39 32
Terminated employment relationships 138 187
An
nu
al R
epo
rt 2
011
48
3.2.2 Employee structure
The age structure is presented in the diagram below.
The next diagram shows the educational structure of employees in 2011 compared to the previous year.
An
nu
al R
epo
rt 2
011
49
3.2.3 Utilization of Working Hours and Sick Leave
In 2011 the level of sick leave was slightly lower than in 2010. Absence due to work-related injuries increased a
little; however, there were 66 injuries at work in 2011, whereas 18 more were noted in 2010. The utilization of
annual paid leave was somewhat improved, connected to better planning of holidays, as well as longer
production shut-down due to investments. As in previous years, we will continue to focus on keeping our
employees healthy and lowering the number of work-related injuries, which employees can best prevent
themselves, mostly by observing the rules of health and safety at work and by using protective equipment.
HOURS (in %) 2010 2011
Gross total HOURS 100 100
Effective hours 80.34 79.73
Absence 19.66 20.27
Annual (paid) leave 11.97 12.31
Total sick leave 5.58 5.42
Other absence 2.11 2.54
3.2.4 Disabled people
At the end of 2011 we employed 83 workers with limited work ability, reduced by 47 compared to the same
period in 2010. This large reduction in the number of employees with disability status is a result of relocating 20
workers to the SUZ company for the disabled, and of retirements. In 2011 nine workers obtained a disability
status.
The required number of disabled people to fulfill the quota was 74 workers on the last day of 2011, but on that
day we actually employed 83 workers with limited work ability, nine more than the quota. 82 workers fall in the
3rd category of disability and one female worker in the 2nd category.
In finding solutions for the disabled it is of key importance to cooperate well with the environment where the
individuals are employed, and with the regional professionals for occupational health and safety. Only together
can we define and identify individual activities and check the possibilities for optimum relocation in accordance
with work restrictions. This enables us to keep up the level of quality work and the employee's efficiency.
3.2.5 Voluntary pension insurance
In December 2011 ten years had passed since Acroni and its employees entered the voluntary pension insurance
scheme. During this period 1,555 employees were included in the voluntary pension insurance.
An
nu
al R
epo
rt 2
011
50
The company paid more than EUR 6.3 million for voluntary pension insurance to the benefit of its employees, of
which EUR 847,052 alone was paid in 2011. In this way we aim to guarantee additional pensions for our
employees, as we are aware that pensions from obligatory insurance will gradually decrease.
In addition to the company’s payments for voluntary pension insurance, in 2011 our employees paid an extra
EUR 64,481 from their net income, and slightly more than EUR 499,000 in the whole period so far.
On 31 December 2011 1,055 workers were included in the voluntary pension insurance scheme. In the first
quarter of 2012 16 insured people will begin to receive their annuity. 153 former employees decided on a one-off
payout. 264 active workers decided on early cancellation and asked that their saved funds are transferred to
their account in the first quarter of 2012; they will not use them for additional pensions.
3.2.6 Awards and Motivation
Based on the common ground of the payment policy we have introduced a regular yearly promotion of our
employees in their posts.
We have set up a system of measurable criteria for production workers, which enables the increase/decrease of
their salaries by -5 to +20%, depending on the criteria met.
The wages of employees with individual contracts are calculated with a 50% fixed portion and a 50% variable
portion. The variable part depends on the profit generated, and the desired level is set individually each month.
The Managing Director meets with all employees several times per year and presents our operating results and
future plans. In the middle of 2011 he presented our
operations and plans for the second half of the year, as
well as the company's development strategy until 2019.
He also presented the analysis of internal
communication. The second meeting with employees
was in November, where the human resources
development strategy was presented next to the results
and the plan for 2012.
The Managing Director met the heads of the work shifts
in September 2011. They discussed topical subjects, and the main purpose of the meeting was to share
information about the working atmosphere amongst the production employees.
He met the industrial engineers and sector heads twice, and they presented their midyear and annual results
and plans for future work and development.
Employees are additionally motivated and rewarded through the system of idea management, where each
employee has the opportunity to suggest and implement improvements in the company.
An
nu
al R
epo
rt 2
011
51
At the end of the year we organized a New Year celebration, where the best innovators received awards for their
work. The employees chose the “top” workers for the second year in a row.
3.2.7 Innovation achievements
Acroni encourages innovative ideas in business and work processes in order to give added value to our
products, services and employees. The idea management system (IMS) is focused on actively encouraging and
motivating employees to contribute as much as possible to the success of the company.
The potential economic benefit arising from innovations was
EUR 2.5 million in 2011, and the real economic benefit was
EUR 690,979, which amounts to EUR 1,114 per innovation. The
real innovation profit per employee is EUR 557. We paid out
EUR 26,981 for innovation awards, which is 3.9% of the real
innovation profit.
In the local environment and at the state level we are known as
an innovative company, and we regularly receive awards for our innovations. In June we received five Silver and
one Gold award from the Gorenjska Chamber of Commerce and Industry. The Development of Martensite
Stainless Steel 410 Project received a Gold award and was put forward to the national competition. At the
national competition (where 243 innovations were nominated and 777 innovators took part) this project
received a Silver award. We also took part in the Slovenian Innovation Forum, where our employees presented
two innovations. The Development of Martensite Stainless Steel 410 project was nominated to a shortlist.
3.2.8 Education and Training
An
nu
al R
epo
rt 2
011
52
Gaining a competitive advantage in the fast-moving international environment demands highly educated and
qualified employees. This is why we devote more and more funds to the education and training of our
employees. We strive to have appropriately qualified, expert, creative, motivated, gifted employees who are
prepared to take on new challenges, because this is the only way we can be successful in the most demanding
global markets. In 2011 we spent EUR 317,727 on different forms of education and training.
3.2.8.1 In-service Training
We are improving our educational structure with study benefits offered to employees for in-service training.
Our employees study mostly at technical schools for the following professions: machine mechanic,
mechatronics engineer operator, metal structure maker, mechanical technician, electrical technician,
mechanical engineer and mechatronics engineer, graduate mechanical engineer and graduate metallurgy
engineer. In 2011 we granted study benefits for in-service training to 17 employees, of whom 15 finished their
education and two did not. Currently there are 134 employees involved in the education process at different
levels (from vocational school to doctorate).
3.2.8.2 Company scholarships
We have 40 scholarship-holders altogether. We grant most scholarships to mechatronics engineer operators,
mechanical technicians and electrical technicians, while in undergraduate study most scholarship holders come
from the Faculty of Natural Sciences and Engineering, the Faculty of Mechanical Engineering, the Faculty of
Electrical Engineering and the Faculty of Chemistry and Chemical Technology. They are enrolled in higher
education specialized programmes and university programmes.
In the school year 2011/2012 we called for applications for five new scholarships. We granted eight. These
scholarships are co-funded by the Regional Development Agency of Gorenjska – BSC Kranj. BSC also co-funds
scholarships for 14 previous scholarship holders to the amount of 50% of the scholarship. In 2011 our company
employed seven scholarship holders.
3.2.8.3 Functional education
We place great emphasis on the constant accumulation of new
knowledge at various seminars and workshops (organized inside or
outside the company), discussions, conferences and courses. In 2011
21 employees finished the forklift truck course, 5 employees
completed a crane usage course, 8 employees attended certification
for welders, 41 employees did a first aid course, 4 attended a course
An
nu
al R
epo
rt 2
011
53
on safe work with oxygen, and 3 took a course on ultrasound control level 2. In total 108 employees took a
course.
25 workers from the steel raw materials department were involved in professional education, 7 employees
finished pedagogical/andragogical training for mentors, and 2 finished the General Managers program at Bled
business school. Seminars, discussions, conferences and workshops outside the company were attended by 78
employees, while seminars within the company were attended by 276 employees.
3.2.8.4 Human resources management
Providing the educational opportunities, training and in-depth knowledge that employees need at their work
place is the right way to secure greater productivity of the company and higher satisfaction of employees. Our
company pays attention to the development of our employees, who are our biggest capital. In this year we again
organized workshops, carried out by Vernar consulting, d.o.o., named “Communication, business interview
management, techniques of efficient presentation and public appearance”. Participants at these workshops
gained useful knowledge on effective written and oral communication, which they can immediately use in their
jobs, thus improving relationships at all communication levels. Workshops were organized for 31 employees.
Management and communication training, carried out in cooperation with GKTI (Gustav Käser Training
International), was organized for 12 participants from middle and top management. Its main goal was to
strengthen management and communication skills and team work skills.
Time is a very valuable commodity and requires active management. A modern system for the control of
working hours is very easy to use. Combined with good work organization and incentive awards, the working
hours records can generate great savings for the company and at the same time improve human resources
management. For this reason we started keeping records in December 2011 on working hours for individual
aggregates or lines in the Steel Mill. The Working Hours Control project enables us to follow our goal of the
optimum utilization of working hours in production, distribution of the burden of “crews” in the working
process, identification of employees qualified for work on several aggregates, and reduction of problems in
achieving desired quality. In 2012 this type of record keeping will be gradually implemented in all our facilities.
3.2.8.5 Internal education
In 2011, 46 workers passed a test at their work place, 34 completed an internal off-the-ground-lift controller
course, 31 an advanced course on Excel and seven on Excel-VBA (Visual Basic for Applications). 35 workers from
the Steel Mill finished metallurgy school, 12 controllers completed training on work with spectrometers, and 202
employees attended different internal lectures. 367 workers participated in internal education in 2011. In the
first half of 2011 we organized a metallurgy course for the electric arc furnace and secondary metallurgy, where
41 participants broadened their knowledge. The aim of this education was to provide basic knowledge on the
An
nu
al R
epo
rt 2
011
54
metallurgical processes in steel production, from the preparation of input raw materials to the beginning of
casting.
3.2.8.6 Responsibility to employees
The aim of our human resources development strategy, set in 2011, is honesty and justice for our employees. The
first step in this direction was to change our employment strategy, so that we generally enter into contracts of
unlimited duration. In this way we provide our employees with job security and higher social security, and we
believe this shows that we are a good, responsible employer.
Good communication within the company is the foundation of successful operations, but we have seen that
there are faults and numerous possibilities for improvement in current communication within the company. So
we have decided to focus more actively on improving
communication within the company and making our
working environment even more stimulating. The first
step was taken together with the advertising agency
Pristop to analyze our current communication within
Acroni. Following this research into our internal
communication, we aim to improve it by publishing a
newsletter, called Acroni 24. In this newsletter one can
find events, activities and topical articles, while employees can actively participate by their contributions,
comments and questions.
Despite the difficult economic situation we want to give our employees the chance to attend cultural and sports
activities.
An
nu
al R
epo
rt 2
011
55
3.2.9 Occupational Health and Safety
3.2.9.1 Employee training
Because our production processes are so specific, we put great emphasis on the health and safety of our
employees. All employees are regularly trained in health and safety at work and in the safe handling of
chemicals.
At the end of 2011 a new law on occupational health and safety came into force. We organized a special training
course on the requirements of the new law for all management and team leaders.
3.2.9.2 Work-related injuries
The table below shows the number of injuries at work and lost days because of them in 2010 and 2011
Area
2010 2011
Number of injuries
Lost days F2 G1 Number of
injuries Lost days F2 G1
Steel Mill 24 655 55.9 1.53 18 610 46.3 1.57
HRM 9 575 28.0 1.79 5 383 22.7 1.74
CPP 7 492 17.9 1.26 8 315 24.8 0.98
Maintenance 9 171 62.0 1.18 16 511 37.1 1.19
QPPP 25 800 64.7 2.07 11 545 34.1 1.69
Departments 4 72 8.0 0.14 8 81 14.5 0.15
Total 78 2,785 33.4 1.19 66 2,445 29.5 1.09
F2 – frequency is an internationally agreed factor which measures the number of injuries that occur per million production hours. F2 is
to a certain extent also the rate for measuring the risk of certain production operations, etc.
G1 – severity is an internationally agreed factor indicating the number of non-productive working days due to absence from work.
The table shows that the total number of injuries was reduced by 15%. In fact both factors were reduced: F2 –
frequency and G1 – severity. The F2 factor was lower than in 2010 in all facilities, except CPP and departments,
where it is higher. The G1 factor was lower than in 2010 in the Hot Rolling Mill, Cold Processing Plant and
Quarto Plate Processing Plant, and in all other facilities it was higher.
3.2.9.3 Standards
Since 2005 Acroni has held the certificate for occupational health and safety BS OHSAS 18001. The system of
health and safety is a tool that helps the company to recognize, monitor and gradually improve all aspects of
health and safety at work. Just as with all other business systems, occupational health and safety is based largely
An
nu
al R
epo
rt 2
011
56
on the cooperation and active involvement of every employee. Dangers at work are usually well known when
concerned with physical factors (physical, mechanical, chemical dangers, etc.), whereas psychological pressures
(stress, depression, etc.) are generally overlooked.
3.2.9.4 Occupational Health and Safety of Our Employees
Employees are one of the most important production factors in every company, so it is extremely important
how one feels physically and mentally during work activities. Work itself can have a positive or negative effect
on an individual's health. If people are exposed to highly harmful factors at work, like chemical vapours,
radiation, the danger of physical injuries, mundane activities and stress, there is a high chance that their health
will be affected, either immediately or in the future. On the other hand, if people enjoy what they do and see
their work as a fulfilment of their mission, without being exposed to highly harmful factors, their health stays
good or even improves. Introducing an occupational health and safety management system can be an important
step in the right direction. This results in a lower number of injuries at work, which is evident from the table
under Work-Related Injuries (3.2.9.2).
3.2.10 Relationship with Business Partners
3.2.10.1 Relationship With Customers and Users of Our Products
Customer relationship management is one of the most important
business factors for Acroni. The company manufactures products for
known customers. Knowing their special needs enables us to provide
a more efficient sales service, to adjust to market trends faster, and to
increase their satisfaction while retaining their loyalty. Acroni’s
customers greatly appreciate the quality and prices of our products,
as well as fast delivery and a high level of service throughout the
sales process. Adapting our products to customers' needs ensures the
desired product characteristics, such as quality, useful life, minimum
impact on the environment, optimum costs of maintenance and
repairs. We regularly meet our customers. In 2011 we conducted a
satisfaction analysis and presented the company at three fairs – the
Made in Steel Fair in Italy, the CWIEME Fair in Germany and the
Stainless Steel World Fair in the Netherlands. In May we organized
our second marketing conference for our agents and service centres.
An
nu
al R
epo
rt 2
011
57
3.2.10.2 Relationship with Suppliers
Strategic raw materials accounted for 64.4% of total expenses in 2011. The situation in the steel market greatly
influenced the availability of raw materials and price fluctuations. From the first quarter of 2011 onward we
witnessed a negative price trend in most raw materials. The lack of raw materials could not be noticed on the
market generally; however, pressures on the price threatened the production of some smaller raw material
producers, who by the end of the year needed to reduce or adjust their production to the market situation due
to disproportional expenses. This means that our focus on long-term cooperation with suppliers, known for
their reliable supply and global competitiveness in a demanding market situation, turned out to be the right
choice.
In the second half of the year we could fulfill some short-term needs with spot purchases at attractive prices. A
stable supply, flexibility and keeping stock at a minimum was achieved by cooperation with strategic suppliers.
Minimizing supply and maintaining the liabilities/receivables ratio remains the company's orientation, where
the achieved goals are the result of closer cooperation with strategic suppliers.
According to our long-term goals we have maintained a high percentage of supplies on the domestic market
regarding scrap steel, despite a stronger presence of customers from Turkey in the port of Koper and other
nearby ports. We are still working on expanding our range of approved suppliers which have own warehouses.
3.2.11 Relationship With the Environment in Which We Operate
3.2.11.1 Relationship With the Natural Environment
We are aware that taking care of a safe and healthy living environment is a fundamental condition for
developing our activities at the local level. Environmental protection is one of the basic rights, obligations and
responsibilities of all employees and is treated as an integral part of the company’s management policy.
Our operations are guided by increasing requirements of standards and stricter environmental legislation, both
domestic and European. The company successfully follows trends which determine terms and conditions of
conduct. This means that we also pay special attention to the continuous reduction of emissions into the
environment, to waste water, and to the reduction of air pollution, noise and waste.
We have integrated environmental protection into all planning processes and decisions, making it a significant
element of the company’s management. Therefore we:
regularly monitor and assess the effects of our operations on the environment;
modernize technological processes by implementing new projects with the aim of minimizing the impact
on the environment;
An
nu
al R
epo
rt 2
011
58
educate and train our employees;
use materials that are less burdensome for the environment;
cooperate with the interested internal and external public;
invest in healthy and safe working conditions;
create an organized and motivational working environment; and
recycle waste.
Compliance with environmental protection criteria is a key component of every business operation, which next
to quality and price has the most decisive impact on competitiveness. We have therefore been pursuing the
trend of reducing our consumption of natural resources (consumption of electricity and drinking water, use of
natural materials).
In 2011 the company obtained environmental consent for the operation of the inert waste disposal site. By
obtaining this permit we formalised the legal status of the disposal site. Despite the permit we are a socially
responsible company and therefore do not seek solutions in waste disposal, but in its processing.
The trend of reducing the amount of waste that ends up at the municipal landfill has also continued in 2011, and
has contributed to lowering the amount of communal waste by 42%.
3.2.11.2 Relationship With the Social Environment
We are connected to the social environment in several
ways. The difficult economic situation has forced us to
economize in this area, but we have kept our key
connections with society. In 2011 we continued to sponsor
Jesenice Hockey Club, one of the most important sport
clubs in Slovenia.
We enabled students at high schools and different faculties
to do their obligatory practical training in our company,
which is necessary to successfully finish their studies or the
study year. They were also given an opportunity to work for
us during the summer holidays.
An
nu
al R
epo
rt 2
011
59
In June 2011 we organized an open day which gave our employees' families and former coworkers (pensioners) a
chance to get to know our company and production.
3.2.12 Communication with the Environment
3.2.12.1 Communication with Owners
We have established a system of communication with the owners. We communicate through e-mail and
publish a calendar of reports and reporting periods at the beginning of the year. A new idea, introduced at the
end of 2011, is regular weekly video conferences, where the companies of SIJ – Slovenian Steel Group report on
topical subjects to SIJ's Board of Directors.
Important investments, loans higher than EUR 2 million, and property pledging are decided by the General
Assembly at the proposal of the Managing Director.
3.2.12.2 Communication with Banks
Since Acroni, d.o.o. is a big company, it cooperates with several banks, both domestic and foreign.
Communication with them is run by the Finance Departments of SIJ and Acroni, which provide all the
necessary data to the banks.
3.2.12.3 Communication with Customers
The company knows that customer satisfaction is based on quality communication. This is why we regularly
update our websites, where customers get basic information on our products and events. Besides everyday
communication by phone and e-mail we also try to regularly visit our customers.
Our brochures were reworked in 2011 and we presented ourselves at three fairs. In 2011, we conducted a survey
of our customers regarding their satisfaction, on the basis of which an analysis of satisfaction was made and
necessary new measures were adopted.
We are constantly available for any questions that might arise and do our best to answer them the same or, at
the latest, the next working day.
An
nu
al R
epo
rt 2
011
60
3.2.12.4 Communication with Employees
To keep our employees well informed and thus guarantee a
quick response to different business events we use various
tools for internal communication: noticeboards, info
points, an intranet, meetings, events and informal
gatherings. All employees receive a monthly corporate
internal newsletter, entitled SIJ. This publication includes
information on important events in the whole SIJ –
Slovenian Steel Group. Last year we launched the internal
newspaper Acroni 24, which is issued once a month in four pages and provides short and concise information
on current activities in the company.
3.2.12.5 Communication with Media
The media is one of the most important information sources for the key public, i.e. employees, customers,
owners/investors, suppliers, local community, country, etc. Therefore they are an important factor in building
trust and a good reputation and achieving recognition for the company. For a responsive, creative and long-
term relationship with the media different tools are used: press conferences, PR information, informative
material, posts on our websites, events and (in)formal gatherings. Planned and systematic use of these tools as
well as analysis of news in the media ensures a two-way information flow, used to strengthen efficient and
responsible communication with the media, and consequently informing our key public about the results, plans
and other important activities of the company. Communication with the media is run by the public relations
department, organized in the controlling company SIJ – Slovenska industrija jekla d.d.
An
nu
al R
epo
rt 2
011
61
4 FINANCIAL REPORT
4 FINANCIAL REPORT
The financial report includes: a
statement on the management's
responsibility, financial statements,
and notes to the financial
statements.
An
nu
al R
epo
rt 2
011
62
4.1 STATEMENT ON THE MANAGEMENT’S RESPONSIBILITIES
The management is responsible for drawing up financial statements for each individual financial year according
to the International Financial Reporting Standards (IFRS) adopted by the European Union and the Companies
Act, so that they give a true and fair view of Acroni's financial position.
The management legitimately expects the company to have enough resources in the foreseeable future to
enable it to continue its operations. The financial statements are therefore based on the premise that the
company will continue its operations without a set time limit.
The responsibility of the management in drawing up the financial statements includes the following:
Properly selected and consistently applied accounting policies;
Reasonable and rational assessments and estimates;
The financial statements have been compiled in accordance with the IFRS adopted by the European Union.
Any significant deviations are disclosed and explained in the report.
The management is responsible for keeping corresponding records, which give a clear and accurate picture of
the company’s financial position at any given time, and for making sure that the financial statements of the
company are in accordance with the IFRS, adopted by the European Union. The management is also responsible
for protecting the company's assets, as well as discovering and preventing abuses and other irregularities.
The management declares that the financial statements have been compiled in accordance with the IFRS,
without reservations about their application.
The management approved the financial statements on 15 March 2012.
Managing Director
Slavko Kanalec
An
nu
al R
epo
rt 2
011
63
4.2 FINANCIAL STATEMENTS
4.2.1 Statement of Financial Position
Note 31 December
2011 31 December
2010
ASSETS
Non-current assets 246,628,099 231,898,269
Intangible assets 4.3.7.1 693,875 968,972
Property, plant and equipment 4.3.7.2 235,399,683 223,114,207
Investment property 4.3.7.3 77,756 79,788
Investments in subsidiaries 4.3.7.4 499,800 499,800
Investments in associates 4.3.7.5 299,400 -
Other assets 4.3.7.6 3,936,930 249,571
Deferred tax assets 4.3.7.7 5,720,655 6,985,931
Current assets 157,314,562 167,838,145
Inventories 4.3.7.8 55,273,136 61,845,526
Loans issued 4.3.7.9 - 105,000
Operating receivables 4.3.7.10 87,717,790 103,428,637
Cash and cash equivalents 4.3.7.11 13,753,967 1,424,889
Other assets 4.3.7.12 569,669 1,034,093
Total assets 403,942,661 399,736,414
EQUITY AND LIABILITIES
Equity 4.3.7.13 163,195,055 156,342,310
Share capital 83,458,521 83,458,521
Capital surplus 10,130,994 10,130,994
Revenue reserves 3,600,747 3,600,747
Retained earnings 66,004,793 59,152,048
Non-current liabilities 57,700,184 84,627,288
Retirement benefit obligations 4.3.7.14 3,715,747 3,902,491
Other provisions 4.3.7.15 671,680 2,618,111
Deferred revenues 4.3.7.16 12,411 -
Borrowings 4.3.7.17 47,696,870 69,716,075
Other financial liabilities 4.3.7.18 5,560,747 8,242,037
Operating liabilities 4.3.7.19 42,729 148,574
Current liabilities 183,047,422 158,766,816
Borrowings 4.3.7.20 67,660,109 56,841,540
Other financial liabilities 4.3.7.21 3,356,264 3,549,767
Operating liabilities 4.3.7.22 110,992,597 95,010,677
Other liabilities 4.3.7.23 1,038,452 3,364,832
Total equity and liabilities 403,942,661 399,736,414
The notes to the financial statements are an integral part of the financial statements and should be read in
conjunction with them.
An
nu
al R
epo
rt 2
011
64
4.2.2 Statement of Comprehensive Income
Note 2011 2010
Revenues 4.3.7.24 437,251,777 368,118,120
Cost of sales 4.3.7.25 (377,225,356) (327,824,709)
Gross profit 60,026,421 40,293,411
Distribution costs 4.3.7.25 (19,669,407) (11,159,138)
General and administrative expenses 4.3.7.25 (30,540,347) (29,288,682)
Other operating income 4.3.7.26 6,082,041 7,014,019
Other operating expenses 4.3.7.27 (1,836,135) (945,788)
Operating profit 14,062,573 5,913,822
Finance income 4.3.7.28 189,237 967,516
Finance expenses 4.3.7.29 (6,133,789) (5,272,658)
Finance costs - net (5,944,552) (4,305,142)
Profit before tax 8,118,021 1,608,680
Deferred tax 4.3.7.30 (1,265,276) (135,067)
Net profit for the year 6,852,745 1,473,613
Comprehensive income 6,852,745 1,473,613
The notes to the financial statements are an integral part of the financial statements and should be read in
conjunction with them.
4.2.3 Statement of Changes in Equity
4.2.3.1 Statement of Changes in Equity in 2011
Share capital
Capital surplus
Revenue reserves
Retained earnings
Total
Balance on 31 December 2010 83,458,521 10,130,994 3,600,747 59,152,048 156,342,310
Net profit for the year - - - 6,852,745 6,852,745
Changes in comprehensive income - - - 6,852,745 6,852,745
Balance on 31 December 2011 83,458,521 10,130,994 3,600,747 66,004,793 163,195,055
The notes to the financial statements are an integral part of the financial statements and should be read in
conjunction with them.
An
nu
al R
epo
rt 2
011
65
4.2.3.2 Statement of Changes in Equity in 2010
Share capital
Capital surplus
Revenue reserves
Retained earnings
Total
Balance on 31 December 2009 83,458,521 10,130,994 3,600,747 62,678,435 159,868,697
Dividend payout - - - (5,000,000) (5,000,000)
Transactions with owners - - - (5,000,000) (5,000,000)
Net profit for the year - - - 1,473,613 1,473,613
Changes in comprehensive income - - - 1,473,613 1,473,613
Balance on 31 December 2010 83,458,521 10,130,994 3,600,747 59,152,048 156,342,310
The notes to the financial statements are an integral part of the financial statements and should be read in
conjunction with them.
4.2.4 Cash flow statement
NOTE 2011 2010
Cash flow from operating activities
Profit before tax 8,118,021 1,608,679
Adjusted for:
Amortization of intangible assets and depreciation of property, plant and equipment
4.3.7.25 18,439,469 18,166,506
Interest income 4.3.7.28 (101,337) (879,179)
Interest expenses 4.3.7.29 5,758,033 5,084,268
Profit/loss from sales of financial assets 4.3.7.29, 4.3.7.28 157,709 (59,350)
Impairment of assets 4.3.7.27 660,677 205,793
Reversal of allowances and provisions 4.3.7.26, 4.3.7.27 (2,921,702) (1,253,594)
Other adjustments 4.3.7.26, 4.3.7.27 1,632,340 (2,051,033)
Operating cash flow before working capital changes 31,743,210 20,822,090
Changes in working capital
Change in operating receivables 8,948,570 (38,366,941)
Change in inventories 5,925,546 (19,374,517)
Change in operating liabilities 10,385,224 43,508,261
Change in taxes other than income tax (27,442) 90,818
Payments for diposal of provisions (18,701) -
Receipts from government grant 246,644 578,700
Payments for retirement benefit obligations (1,336,712) (632,563)
Income tax receipts - 1,924,717
Changes in working capital
24,123,129 (12,271,525)
Net cash flow from operating activities 55,866,339 8,550,565
Cash flow from investment activities
Receipts from investments in subsidiaries - 4,082
Payments for investments in associates 4.3.7.5 (299,400) -
An
nu
al R
epo
rt 2
011
66
NOTE 2011 2010
Payments for property, plant and equipment (23,759,971) (24,400,394)
Receipts from property, plant and equipment
113,358 7,902,739
Payments for intangible assets 4.3.7.1.1 (8,224) (402,079)
Receipts from loans issued 4.3.7.6 105,000 -
Received interests 87,746 880,963
Received dividends 4.3.7.26 600,000 1,328,123
Payments/receipts from other assets (157,709) 933,470
Net cash flow from investment activities (23,319,200) (13,753,096)
Cash flow in financing activities
Receipts of borrowings 4.3.7.17.1, 4.3.7.20.1 52,887,623 64,395,306
Payments of borrowings 4.3.7.17.1, 4.3.7.20.1 (64,129,867) (46,911,670)
Change in approved bank account overdrafts 4.3.7.20.1 (1,733) (6,500,184)
Payments of finance lease 4.3.7.21.1 (3,011,744) (3,945,360)
Interest paid (5,962,340) (5,013,662)
Net cash flow from financing activities (20,218,061) 2,024,430
Increase/decrease of cash and cash equivalents
12,329,078 (3,178,101)
Cash and cash equivalents 1.1. 4.3.7.11 1,424,889 4,602,990
Increase/decrease 12,329,078 (3,178,101)
Cash and cash equivalents 31 December 4.3.7.11 13,753,967 1,424,889
The notes to the financial statements are an integral part of the financial statements and should be read in
conjunction with them.
4.3 NOTES TO THE FINANCIAL STATEMENTS
4.3.1 Reporting company
Acroni (hereinafter: company) is a company registered in Slovenia. The registered address of the company is
Cesta Borisa Kidriča 44, Jesenice. The financial statements for the year ending on 31 December 2011 are given
below.
The company does not compile consolidated financial statements, since they are compiled by the controlling
company. Consolidated financial statements for a selected group of subsidiaries are compiled by the company
SIJ – Slovenska industrija jekla, d.d. The consolidated annual report for SIJ – Slovenian Steel Group is available
at the headquarters of the company SIJ – Slovenska industrija jekla, d.d., Gerbičeva ulica 98, 1000 Ljubljana.
Consolidated financial statements for a wider group of subsidiaries are compiled by DILON Cooperatief U.A.
The consolidated annual report for DILON Cooperatief group is available at the headquarters of DILON
Cooperatief U.A., Amsteldijk 166, 1079LH Amsterdam, the Netherlands.
An
nu
al R
epo
rt 2
011
67
4.3.2 Basis of Preparation
The company’s financial statements for 2011 have been prepared in accordance with the IFRS as adopted by the
European Union. The standards have been applied directly in disclosures and valuation of items. The only
exception was the valuation of items for which the standards allow several methods of valuation.
The financial statements in the report are expressed in euros (EUR), without cents. Due to the rounding off of
value amounts, there may be insignificant deviations to the sums given in tables.
In the selection of accounting principles and their application, as well as in the preparation of these financial
statements, the management considered the following three requirements: financial statements are
comprehensible, if users can understand them without difficulty; the information is adequate, if they help users
make economic decisions; and the information is fundamental, if its exclusion or false presentation could
influence users' economic decisions.
The financial statements have been prepared in compliance with the IFRS, adopted by the International
Accounting Standards Board (hereinafter: IASB), and with the interpretations issued by the International
Financial Reporting Interpretations Committee (hereinafter: IFRIC), as adopted by the European Union (EU),
namely:
a) Currently applicable standards and interpretations
The following amendments to the existing standards issued by the IASB and adopted by the EU currently apply:
Amendments to IAS 24 “Related Party Disclosures” – Simplification of requests for disclosure for companies
related to the government and interpretation of the definition of the related party, adopted by the EU on 19
July 2010 (applies to annual periods beginning on or after 1 January 2011).
Amendments to IAS 32 “Financial Instruments: Presentation” – Classification of Rights Issues, adopted by
the EU on 23 December 2009 (applies to annual periods beginning on or after 1 February 2010).
Amendments to IFRS 1 “First-Time Adoption of International Financial Reporting Standards” – Restricted
exceptions of comparative disclosures according to IFRS 7 for users who apply IFRS for the first time,
adopted by the EU on 30 June 2010 (applies to annual periods beginning on or after 1 July 2010).
Amendments to different standards and interpretations “Improvements to IFRSs (2010)”, arising from the
annual project of improving IFRS, published on 6 May 2010 (IFRS 1, IFRS 3, IFRS 7, IAS 1, IAS 27, IAS 34,
IFRIC 13), mainly with the purpose of dealing with non-conformities and definitions of texts, adopted by
the EU on 18 February 2011 (most amendments need to be applied to annual periods beginning on or after 1
July 2010 or on 1 January 2011, depending on the standard/interpretation).
Amendments to IFRIC 14 “IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements
and their Interaction” – Advanced payments of requests for minimum funding, adopted by the EU on 19
July 2010 (applies to annual periods beginning on or after 1 January 2011).
An
nu
al R
epo
rt 2
011
68
IFRIC 19 “Extinguishing Financial Liabilities with Equity Instruments”, adopted by the EU on 23 July 2010
(applies to annual periods beginning on or after 1 July 2010).
The adoption of amendments to the existing standards did not in any way affect the accounting policies of the
company.
b) Standards and interpretations issued by IASB and adopted by the EU, but not yet effective:
On the date of the adoption of these financial statements the following standards, amendments and
interpretations, adopted by the EU, were issued, but not yet effective:
Amendments to IFRS 7 “Financial Instruments: Disclosures” – Transfers of Financial Assets, adopted by the
EU on 22 November 2011 (applies to annual periods beginning on or after 1 July 2011).
The Company decided not to apply these standards, amendments and interpretations before their entry into
force. The Company projects that the adoption of these standards, amendments and interpretations will not
have a significant effect on the financial statement at their first application.
c) Standards and interpretations issued by IASB, but not yet adopted by the EU
Currently there is no significant difference between the IFRS adopted by the EU and the regulations adopted by
IASB, with the exception of the following standards, amendments to the existing standards and interpretations,
which had not yet been approved for use on 15 March 2011:
IFRS 9 “Financial Instruments” (applies to annual periods beginning on or after 1 January 2015).
IFRS 10 “Consolidated Financial Statements” (applies to annual periods beginning on or after 1 January
2013).
IFRS 11 “Joint Arrangement” (applies to annual periods beginning on or after 1 January 2013).
IFRS 12 “Disclosure of Interests in Other Entities” (applies to annual periods beginning on or after 1 January
2013).
IFRS 13 “Fair Value Measurement” (applies to annual periods beginning on or after 1 January 2013).
IAS 27 (amended in 2011) “Consolidated and Separate Financial Statements” (applies to annual periods
beginning on or after 1 January 2013).
IAS 28 (amended in 2011) “Investments in Associates” (applies to annual periods beginning on or after 1
January 2013).
Amendments to IFRS 1 “First-Time Adoption of International Financial Reporting Standards" – Severe
Hyperinflation and Removal of Fixed Dates for First-time Adopters (applies to annual periods beginning on
or after 1 July 2011).
Amendments to IFRS 7 “Financial Instruments: Disclosures” – Offsetting Financial Assets and Financial
Liabilities (applies to annual periods beginning on or after 1 January 2013).
An
nu
al R
epo
rt 2
011
69
Amendments to IFRS 9 “Financial Instruments” and IFRS 7 “Financial Instruments: Disclosures” –
Mandatory Effective Date of IFRS 9 and Transition Disclosures.
Amendments to IAS 1 “Presentation of Financial Statements” – Presentation of Items of Other
Comprehensive Income (applies to annual periods beginning on or after 1 July 2012).
Amendments to IAS 12 “Income Taxes” – Deferred Tax: Recovery of Underlying Assets (applies to annual
periods beginning on or after 1 January 2012).
Amendments to IAS 19 “Employee Benefits” – Improved Accounting for Post-Employment Benefits (applies
to annual periods beginning on or after 1 January 2013).
Amendments to IAS 32 “Financial Instruments: Presentation” – Offsetting Financial Assets and Financial
Liabilities (applies to annual periods beginning on or after 1 January 2014).
IFRIC 20 “Stripping Costs in the Production Phase of a Surface Mine” (applies to annual periods beginning
on or after 1 January 2013).
The Company projects that the adoption of these standards, amendments to the existing standards and
interpretations will not have a significant effect on the financial statement at their first application. At the same
time the accounting of hedging instrument in connection with the portfolio of financial assets and liabilities,
the principles of which the EU has not yet adopted, is still unregulated. The Company assesses that the use of
accounting of hedging instrument in connection with financial assets and liabilities in accordance with the
requirements of IAS 39: "Financial Instruments: Recognition and Measurement” would not have a significant
influence on the financial statements, if it was used on the date of the statement of financial position.
4.3.3 Basis of Measurement
The financial statements have been prepared on the basis of historical cost, except for the following assets and
liabilities, measured at their fair value:
derivative financial instruments,
financial assets at fair value through profit or loss,
financial assets available for sale.
4.3.4 Functional and Presentation Currency
The financial statements in this report are presented in euro (EUR) without cents; the euro is also the
company's functional currency.
An
nu
al R
epo
rt 2
011
70
4.3.5 Application of Estimates and Judgments
The preparation of financial statements requires the management to make estimates, judgments and
assumptions that influence the disclosed amounts of assets and liabilities and the disclosed contingent assets
and liabilities on the day of the preparation of the financial statements, as well as the disclosed amounts of
income and expenses in the period covered.
Estimates and assumptions are included in the following judgments at least:
estimate of the useful life of assets subject to depreciation;
impairment test of assets;
estimate of the fair value of financial assets available for sale;
estimate of the fair value of financial assets measured at fair value through profit or loss;
estimate of the fair value of derivative financial instruments;
estimate of the net realizable value of inventories;
estimate of the recoverable value of receivables;
estimate of the necessary provisions.
Since estimates are subject to subjective judgements and a level of uncertainty, the subsequent actual results
can differ from those estimated. Estimates are reviewed on an ongoing basis. Amendments to the accounting
estimates are recognized during the period in which the estimates were revised, if the amendment only applies
to this period, or during the period of the amendment and future periods, if the amendment applies to future
periods.
4.3.6 Significant accounting policies
4.3.6.1 Foreign currency conversion
Transactions in foreign currencies are translated into the functional currency at the exchange rate on the date
of the transaction. Monetary assets and liabilities denominated in foreign currency at the end of the period
covered are translated into the functional currency at the then valid exchange rate. Positive or negative
exchange rate differences are the differences between the amortized cost in functional currency at the
beginning of the period, adjusted by the amount of effective interest rate and the payments during the period,
and the amortized cost in foreign currency, calculated at the exchange rate at the end of the period. Non-
monetary assets and liabilities, denominated in foreign currency and measured at fair value, are translated to
the functional currency at the exchange rate on the date when the fair value is set. Exchange rate differences are
recognized in the income statement.
An
nu
al R
epo
rt 2
011
71
4.3.6.2 Intangible assets
An intangible asset is measured initially at cost. The cost also includes imported or non-refundable purchased
receivables less business or other discounts, and all costs directly associated with the preparation of the asset
for the intended use.
Amortization is calculated on a straight-line basis over the estimated useful life of each individual part
(component) of the intangible asset. Amortization is accounted at cost when the asset becomes available for
use.
The estimated useful life of individual intangible assets is 3–10 years.
Intangible assets with indefinite useful life are not depreciated, they are impaired.
Amortization methods, useful life and other group asset values are reviewed at the end of every business year
and adjusted if necessary.
Subsequent costs connected to intangible assets are capitalized only if they increase the future economic
benefits arising from the assets to which the costs relate. All other costs are recognized in the profit or loss
statement as expenses as soon as they incur.
4.3.6.3 Property, Plant and Equipment
Tangible assets (property, plant and equipment) are carried at cost less the accumulated depreciation and
impairment losses, except for land and other assets that are not depreciated, which are shown at their cost,
reduced by all relative impairments. The purchase value includes costs that can be directly attributed to the
acquisition of each individual item of property, plant or equipment. Parts of property, plant and equipment
with different useful lives are accounted as separate items of property, plant and equipment. Borrowing costs,
directly attributed to the purchase, construction or production of a qualifying asset, i.e. to the availability of an
asset for use, are recognized as part of the initial cost of such asset. The cost model is used for any subsequent
measuring of property, plant and equipment.
Depreciation is calculated on a straight-line basis over the estimated useful life of each individual part
(component) of the tangible asset and the residual value. Land and certain other assets are not depreciated.
Depreciation is accounted when an asset becomes available for use. Unfinished construction is not depreciated.
The estimated useful life of individual property, plant and equipment is:
property 10–50 years
production equipment 1.5–25 years
computer equipment 4 years
motor vehicles 4–6 years
An
nu
al R
epo
rt 2
011
72
other equipment 3.5–10 years
Depreciation methods, useful life and other group asset values are reviewed at the end of every business year
and adjusted if necessary.
The costs of replacing items of property, plant and equipment are assigned to the carrying amount of this item,
if it is probable that the future economic benefits embodied with this asset will flow to the company and the
cost of the item can be measured reliably. All other costs (for example maintenance costs) are recognized in the
profit or loss statement as expenses as soon as they incur.
Costs incurred in connection with property, plant and equipment increase their carrying amount when they
increase their future economic benefits in comparison to the originally assessed ones.
4.3.6.4 Investment property
For recognition of investment property the cost model is applied. Subsequent to its recognition, it is recognised
at cost less accumulated depreciation and accumulated impairment losses.
Depreciation method and rates are treated the same as in the case of property, plant and equipment.
4.3.6.5 Investments in Subsidiaries
Investments in subsidiaries are accounted at cost. The company recognizes revenues from financial investments
in the amount arising from the distribution of the accumulated profit after the date of the acquired financial
investment.
4.3.6.6 Investments in Associates
Investments in associates are accounted at cost. Associates are those companies in which the company has 20%
to 50% of voting rights, and in which it has a significant influence on the operations, but which it does not
control.
4.3.6.7 Financial instruments
Financial instruments include the following items:
non-derivative financial assets,
non-derivative financial liabilities,
derivative financial instruments.
An
nu
al R
epo
rt 2
011
73
Financial instruments are carreid at fair value. Fair value is the amount for which an asset can be sold or the
liability can be exchanged between two well-informed and willing parties in an arm’s length business
transaction.
For determining the fair value of financial instruments the following hierarchy levels of determining fair value
are considered:
the first level includes quoted prices (unadjusted) on active markets for the same assets or liabilities,
the second level, in addition to the quoted prices at the first level, includes the input data which are
directly (i.e. as prices) or indirectly (i.e. as derivatives from prices) perceived as assets or liabilities,
the third level includes input data for assets or liabilities which is not based on the perceived market data.
Quoted prices are used as a basis for determining the fair value of financial instruments. If a financial
instrument is not quoted on the organized market or the market is deemed non-active, input data at the second
or third level are used to assess the fair value of the financial instrument.
4.3.6.7.1 Non-derivative financial assets
Non-derivative financial assets include cash and cash equivalents, loans and receivables, and investments. The
recognition of financial asset is eliminated when contractual rights of the cash flows from the asset expire, or
when the rights of contractual cash flows are transferred from a financial asset on the basis of a business
transaction in which all risks and benefits of ownership of the financial asset are transferred.
Financial Assets at Fair Value Through Profit or Loss
A financial asset is classified at fair value through profit or loss if it is meant for trading or is determined as such
after the initial recognition. Financial assets are determined at fair value through profit or loss under the
condition that such assets are manageable, and that the sale or purchase of these assets can be decided on the
basis of fair value. After the initial recognition the pertained costs of the business transaction are recognized in
profit or loss upon their occurrence. Financial assets at fair value through profit or loss are measured at fair
value, whereas the amount of change in the fair value is recognized in the profit or loss statement. The trading
value of a group of equal financial assets is determined by using the method of moving average prices.
Available-for-sale Financial Assets
Available-for-sale financial assets are those non-derivative financial assets designated as available for sale or not
included in the category of loans and receivables, or financial assets at fair value through profit or loss.
They are recognized at fair value if the fair value can be determined and profit or loss after the evaluation is
recognized directly in the comprehensive income or equity. However, losses due to impairment, and profit and
losses from the translation of exchange rate differences are excluded here. The recognition at fair value is
An
nu
al R
epo
rt 2
011
74
applied until the recognition of the financial asset is reversed. In reversing an investment, the accumulated
profits and losses shown in the comprehensive income are transferred to profit or loss.
If fair value cannot be reliably measured, because the wide range of estimates of reasonable fair values is
important, and the probability of different estimates is hard to assess, the company measures the financial asset
at cost.
Loans and Receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not
listed on the active market. They are included in current assets, except for maturities exceeding 12 months after
the date of the statement of financial position. In such cases they are classified as non-current assets. Loans and
receivables are disclosed in the statement of financial position under operating, financial and other receivables
measured at amortized cost using the method of effective interest rate.
Cash and Cash Equivalents
Cash and cash equivalents comprise cash in hand, bank deposits up to three months, and other current and
highly liquid investments with original maturity of three months or less. They are recognized at cost. Overdrafts
on bank accounts are included under current financial liabilities.
4.3.6.7.2 Non-derivative financial liabilities
The company initially recognizes issued debt securities on the day they are settled (paid). All other financial
liabilities are initially recognized on the trade date on which the company becomes a contracting party in
relation to the instrument. The company derecognizes a financial liability when the contractual obligations are
fulfilled, annulled or expired.
Financial liabilities include operating, financial and other liabilities. Financial liabilities are initially reported at
fair value, increased by costs directly attributable to the business transaction. Subsequent to the initial
recognition these financial liabilities are measured at amortized cost using the effective interest rate method.
Financial liabilities are part of non-current liabilities, except for liabilities or parts of liabilities with a maturity
shorter than 12 months after the date of the statement of financial position. This type of liability is disclosed as
part of current liabilities.
4.3.6.7.3 Derivative financial instruments
Derivative financial instruments are initially recognized at fair value; costs related to a business transaction are
recognized in profit or loss when they appear. After the initial recognition the derivative financial instruments
are measured at fair value.
An
nu
al R
epo
rt 2
011
75
4.3.6.8 Inventories
Inventories are measured at the lower of cost or net realizable value. The cost value consists of the purchase
value, which consists of the purchase price, import duties and direct purchase costs. The purchase price is
reduced by any discounts given. The direct purchase costs are transport costs, costs of loading, reloading and
unloading, costs of monitoring goods, and other costs attributable to directly purchased merchandise, materials
or services. Purchase discounts are those that are stated on the invoice, or which are given later and refer to
individual purchases. The value of finished and unfinished products refers to all production costs, which
include the costs of manufacturing materials, labour costs, depreciation, services and other production costs.
The inventories of materials and merchandise are valued at actual prices, while the inventories of finished and
unfinished products are valued using the standard cost method with deviations to actual production prices. The
use of inventories is stated at weighted average prices.
The net realizable value is estimated on the basis of the selling price in the ordinary course of business, less the
estimated costs of completion and estimated selling costs. Write-offs of damaged, expired and useless
inventories are regularly performed during the year on individual items.
4.3.6.9 Impairment of Assets
4.3.6.9.1 Financial assets
A financial asset is considered to be impaired if objective evidence exists which indicates that one or more
events have caused a decrease in the estimated future cash flows from this asset, which can be reliably
measured.
Objective evidence of the impairment of financial assets can include: debtor's non-fulfilment or violation;
restructuring of the amount owed to the company if the company agrees; signs that the debtor will declare
bankruptcy; disappearance of the active market for the instrument at hand.
Impairment of Receivables and Loans Issued
The company assesses evidence regarding the impairment of receivables separately or collectively. All important
receivables are measured separately for the purpose of special impairment. If it is assessed that the carrying
amount of the receivables exceeds the fair value, i.e. the recoverable value, receivables are considered to be
impaired.
Receivables that are not individually significant are collectively assessed for impairment by grouping together
receivablest with similar risk characteristics. The company creates groups on the basis of the maturity of
receivables. In the evaluation of total impairment we use past trends in the probability of non-fulfilment, the
reimbursement period, and the amount of incurred loss, which is revised for the management’s evaluation as to
An
nu
al R
epo
rt 2
011
76
whether the actual losses due to current economic and credit conditions could be higher or lower than the
losses foreseen in past trends.
The company assesses the evidence of impairment for each important loan individually.
An impairment loss related to a financial asset measured at amortized cost is calculated as the difference
between its carrying amount and the expected future cash flows, discounted at an originally effective interest
rate. The loss is recognized in the profit or loss statement.
Impairment of Available-for-sale Financial Assets
Impairment loss of available-for-sale investment securities is recognized so that the potential accumulated loss,
previously recognized in the comprehensive income of the period and included in the fair value reserve, is
transferred into profit or loss. Any subsequent increase in the fair value of an impaired available-for-sale equity
security is recognized in the comprehensive income for the period or in the fair value reserve.
4.3.6.9.2 Non-financial assets
At each reporting date, the company review the carrying value of its important non-financial assets to
determine whether there is an indication of impairments. If any such indication exists, the asset’s recoverable
value is estimated.
The recoverable value of an asset or cash-generating unit is the greater of their value in use or fair value, less
cost to sell. While assessing value in use estimated future cash flows are discounted to their present value, using
a pre-tax discount rate that reflects current market assessments of the time value of cash and the risks specific
to the asset. In order to test the impairment, the assets which cannot be tested individually are joined into the
smallest possible group of assets, which create cash flows from further use and which are largely independent of
the inflow of other assets or groups of assets (cash-generating unit).
The impairment of an asset or cash-generating unit is recognized if their carrying amount exceeds their
recoverable value. The impairment is stated in the profit or loss statement.
The company evaluates the impairment losses of previous periods at the end of the reporting period and thus
determines whether the loss was reduced or even eliminated. An impairment loss is reversed if there has been a
change in the estimates used to determine the asset's recoverable value. An impairment loss is reversed only to
such extent that the asset’s carrying amount does not exceed the carrying amount that would have been
determined after deducting the depreciation write-off, if no impairment loss had been recognized for the asset
in previous years.
At least once a year, namely on the date of the drawing up of the financial statements, the company evaluates
the evidence on the impairment of inventories. The impairment of inventories is assessed for each individual
type of inventory. Individual types of inventories are allocated to groups of inventories with similar
An
nu
al R
epo
rt 2
011
77
characteristics on the basis of the time component of changes in inventories. The estimate of impairment for
each individual group includes an expert assessment of the possibility of further use or sale.
4.3.6.10 Equity
The equity of the company is its liability to its owners, which falls due if the company discontinues its
operations, in which the capital volume is adjusted according to the currently attainable price of total assets. It
is defined by the amounts invested by the owners, and the amounts that appeared during operation and belong
to the owners. It is decreased by the loss from operations and payments to owners, and increased by the profit
generated in the period.
4.3.6.10.1 Capital surplus
Capital surplus consist of the amounts which the company acquires from payments exceeding the lowest face
value of shares that exceed the carrying amount upon the disposal of previously acquired own shares; the
amounts on the basis of simplified decrease of share capital; and the amounts on the basis of reversal of general
revaluation adjustment.
General revaluation adjustments for capital on 31 December 2002 included (according to the then applicable
Slovenian Accounting Standards) a revalorization of the share capital before 2002. The adjustment due to the
transition to the new Slovenian Accounting Standards was transferred to capital surplus. This amount can only
be used for the increase of share capital.
4.3.6.10.2 Legal and Other Reserves
Legal and other reserves are amounts of retained profit from previous years, which are mostly used to
compensate for potential future losses. On their occurrence they are recognized by the body responsible for the
preparation of the Annual Report, or by the decision of the said body.
4.3.6.10.3 Dividends
Until approved at the General Assembly of partners, the planned dividends are treated as retained earnings.
4.3.6.11 Provisions
Provisions are recognized if the company has a legal or indirect obligation as a result of a past event, which can
be reliably measured, and if it is probable that settling the obligation will require an outflow of resources
enabling economic benefits.
An
nu
al R
epo
rt 2
011
78
4.3.6.12 Retirement benefit obligations
In accordance with legislation, the Collective Agreement and internal regulations, the company is obliged to
make payments arising from loyalty bonuses and severance pay upon retirement for which non-current
provisions are formed. There are no other retirement benefits.
The provisions are formed in the amount of estimated future payments for loyalty bonuses and severance pay,
discounted at the end of the business year. The calculation is made for individual employee and includes the
costs of severance pay upon retirement and the costs of all expected loyalty bonuses until retirement. The
calculation is prepared by an actuary, selected at group level, on the basis of a projected unit.
4.3.6.13 Non-current deferred revenues
Non-current deferred revenues are deferred revenues expected to cover the estimated expenses during a period
exceeding one year.
4.3.6.14 Revenues
Sales revenues are recognized at fair value of received repayments or receivables in this matter, decreased by
repayments, discounts, rebates for further sales and quantity discounts. Revenues are recognized when the
buyer assumes all significant risks and benefits connected to the asset’s ownership, and it is certain that
compensation and related costs will be repaid or there is a possibility of returning products, and when the
company ceases to make decisions about sold products.
Finance income comprises income from interest, from the disposal of financial assets available for sale, positive
exchange rate differences resulting from financing and investing, and profit from hedging instruments,
recognized in the profit or loss statement.
4.3.6.15 Expenses
Expenses are recognized if a decrease in economic benefits during the reporting period is associated with a
decrease in assets or an increase in debts, and if this decrease can be measured reliably. Operating expenses are
recognized when the costs are no longer held in inventories, finished and unfinished products, or when goods
are sold. The costs that cannot be held in inventories of finished and unfinished products are recognized as
operating expenses when they appear.
Finance expenses include borrowing costs (if not capitalised), exchange rate losses resulting from financing and
investing, changes in the fair value of financial assets at fair value through profit or loss, losses from the value
An
nu
al R
epo
rt 2
011
79
impairment of financial assets, and losses from hedging instruments, recognized in the profit or loss statement.
Borrowing costs are recognized in the profit or loss statement using the effective interest rate method.
4.3.6.16 Taxation
Taxes comprise current income tax liabilities and deferred tax. Current income tax is recognized in the profit or
loss statement except to the extent that refers to business combinations or items shown directly in the
comprehensive income.
Current income tax liabilities are based on the taxable profit for the business year. Taxable profit differs from
net profit, reported in the profit or loss statement, because it excludes the items of income or expenses that are
taxable or deductible in other years, as well as items that are never taxable or deductible. The company’s
current income tax liability is calculated using tax rates applicable on the reporting date.
Deferred tax is shown in total by applying the method of obligations after the statement of financial position for
temporary differences, arising from tax values of assets and liabilities and their carrying amounts in financial
statements. Deferred income tax is calculated by using tax rates (and laws), applicable on the date of the
statement of financial position, which are expected to be used when the deferred tax asset is realized or
recovered.
A deferred tax assets are recognized if taxable profit is likely in th future, to which the deferred tax assets will be
charged.
A deferred tax assets are recognized for all taxable temporary differences, unless they come from initial goodwill
recognition or the initial recognition of an asset or liability in a business transaction which is not a business
combination, and which does not affect the accounting or taxable profits (tax loss) during the transaction.
4.3.6.17 Cash flow statement
The cash flow statement shows changes in the balance of cash and cash equivalents for the business year
concerned. The cash flow statement is compiled according to the indirect method.
4.3.6.18 Segment reporting
In the Annual Report, the company does not disclose operations by segments. Segment reporting in the Annual
Report is required for companies whose debt or equity securities are publicly traded, and companies that are in
the process of issuing equity or debt securities on a public securities market.
An
nu
al R
epo
rt 2
011
80
4.3.7 Notes to Individual Items in the Financial Statements
4.3.7.1 Intangible assets
4.3.7.1.1 Movement of Intangible Assets in 2011
Non-current property
rights Total
Cost on 31 December 2010 2,013,532 2,013,532
New additions 8,224 8,224
Cost on 31 December 2011 2,021,756 2,021,756
Accumulated amortization on 31 December 2010 (1,044,560) (1,044,560)
Amortization (283,321) (283,321)
Accumulated amortization on 31 December 2011 (1,327,881) (1,327,881)
Present value on 31 December 2010 968,972 968,972
Present value on 31 December 2011 693,875 693,875
Intangible assets increased as a result of new software and licence purchases.
The company has no pledged intangible assets nor did it disclose any unsettled obligations related to these
assets on 31 December 2011.
4.3.7.1.2 Movement of Intangible Assets in 2010
Non-current property
rights Total
Cost on 31 December 2009 1,644,987 1,644,987
New additions 402,079 402,079
Write-offs and disposals (33,534) (33,534)
Cost on 31 December 2010 2,013,532 2,013,532
Accumulated amortization on 31 December 2009 (803,203) (803,203)
Amortization (274,891) (274,891)
Write-offs and disposals 33,534 33,534
Accumulated amortization on 31 December 2010 (1,044,560) (1,044,560)
Present value on 31 December 2009 841,784 841,784
Present value on 31 December 2010 968,972 968,972
An
nu
al R
epo
rt 2
011
81
4.3.7.2 Property, Plant and Equipment
4.3.7.2.1 Movement of Property, Plant and Equipment in 2011
Land Buildings Equipment Other Assetst under
construction Total
Cost on 31 December 2010 16,053,502 157,634,132 460,075,010 3,533,909 9,420,554 646,717,107
New additions - - - - 30,451,864 30,451,864
Transfer from assets under construction
- 993,921 14,345,554 176,454 (15,515,929) -
Disposals - (24,835) (6,034,128) (141,725) - (6,200,688)
Cost on 31 December 2011 16,053,502 158,603,218 468,386,436 3,568,638 24,356,489 670,968,283
Accumulated depreciation on 31 December 2010
- (99,960,012) (320,724,950) (2,917,938) - (423,602,900)
Depreciation - (2,389,755) (15,575,363) (188,998) - (18,154,116)
Disposals - 24,835 6,030,898 132,683 - 6,188,416
Accumulated depreciation on 31 December 2011
- (102,324,932) (330,269,415) (2,974,253) - (435,568,600)
Present value on 31 December 2010 16,053,502 57,674,120 139,350,060 615,971 9,420,554 223,114,207
Present value on 31 December 2011 16,053,502 56,278,286 138,117,021 594,385 24,356,489 235,399,683
Major new acquisitions of property, plant and equipment are associated with the construction of horizontal
heating equipment in the Steel Mill, the new pickling bath nr. 3 and the installation of furnace nr. 3 on the
Wellman line in the Quarto Plate Processing Plant, as well as with the dispatch warehouse for quarto plates, set
up in the hall of the former Wire Rolling Mill. The increase of fixed assets in progress is foremost the result of
the new rolling mill for rolling plates in the Hot Rolling Mill.
The company capitalized EUR 202,527 of borrowing costs. The interest rate used for calculating the borrowing
costs is 5.49%.
Disposals of property, plant and equipment comprise sale and write-offs of property, plant and equipment. The
grinding machine in the Hot Rolling Mill has the highest selling value, whereas a set of rollers and repairs and
maintenance costs in the Hot Rolling Mill and Steel Mill have the highest value of the write-offs.
Property, plant and equipment with a present value of EUR 170,923,933 on 31 December 2011 are pledged as
insurance for loans payable.
On 31 December 2011 the company had EUR 11,451,293 of open liabilities for purchase of property, plant and
equipment, and EUR 25,532,989 of known liabilities on the basis of signed contracts. The present value of all
property, plant and equipment of the company under finance lease on 31 December 2011 was EUR 15,285,310.
The company reviewed the value of property, plant and equipment, and established that the carrying amount
does not exceed the recoverable amount.
An
nu
al R
epo
rt 2
011
82
4.3.7.2.2 Movement of Property, Plant and Equipment in 2010
Land Buildings Equipment Other Assetst under
construction Total
Cost on 31 December 2009 16,014,723 154,270,931 426,943,905 3,532,638 35,654,690 636,416,887
New additions - - - - 15,608,256 15,608,256
Transfer from assets under construction
5,418 3,912,058 37,818,102 106,815 (41,842,393) -
Disposals (370) (548,857) (4,686,996) (105,544) - (5,341,767)
Other changes 33,731 - - - - 33,731
Cost on 31 December 2010 16,053,502 157,634,132 460,075,011 3,533,909 9,420,553 646,717,107
Accumulated depreciation on 31 December 2009
- (98,210,522) (309,921,047) (2,823,087) - (410,954,656)
Depreciation - (2,293,945) (15,398,439) (197,201) - (17,889,586)
Disposals - 544,455 4,594,537 102,350 - 5,241,341
Accumulated depreciation on 31 December 2010
- (99,960,012) (320,724,949) (2,917,939) - (423,602,900)
Present value on 31 December 2009 16,014,723 56,060,409 117,022,858 709,551 35,654,690 225,462,231
Present value on 31 December 2010 16,053,502 57,674,120 139,350,062 615,970 9,420,553 223,114,207
4.3.7.3 Investment property
4.3.7.3.1 Movement of Investment Property in 2011
Buildings Total
Cost on 31 December 2010 315,021 315,021
Cost on 31 December 2011 315,021 315,021
Accumulated depreciation on 31 December 2010 (235,233) (235,233)
Depreciation (2,032) (2,032)
Accumulated depreciation on 31 December 2011 (237,265) (237,265)
Present value on 31 December 2010 79,788 79,788
Present value on 31 December 2011 77,756 77,756
Investment properties are the Lubricant Storage Facility (covering in total 255 m2), the Input Storage Facility
(covering in total 737 m2) and the Narrow-gauge Truck Workshop (covering in total 852 m2).
Investment properties are stated by using the cost model. Their value is decreased by the depreciation cost,
which in 2011 presents the only expense. The company generated EUR 8,795 of income from rents in 2011.
On 31 December 2011 the company had neither unsettled liabilities related to investment property nor pledged
investment property.
An
nu
al R
epo
rt 2
011
83
The carrying amount of investment property does not exceed its realizable value.
4.3.7.3.2 Movement of Investment Property in 2010
Buildings Total
Cost on 31 December 2009 315,021 315,021
Cost on 31 December 2010 315,021 315,021
Accumulated depreciation on 31 December 2009 (233,203) (233,203)
Depreciation (2,030) (2,030)
Accumulated depreciation on 31 December 2010 (235,233) (235,233)
Present value on 31 December 2009 81,819 81,819
Present value on 31 December 2010 79,788 79,788
4.3.7.4 Investments in Subsidiaries
4.3.7.4.1 Review of Investments in Subsidiaries
Company’s
activity % of
participation
Company’s assets/liabilities on
31 December 2011
Value of company’s
equity on 31 December 2011
Revenues in 2011
Profit in 2011
ACRONI Italia Trade 100% EUR 2,684,757 EUR 1,463,103 EUR 5,860,078 EUR 711,168
ACRONI Deutschland
Trade 100% EUR 634,983 EUR 412,165 EUR 714,000 EUR 91,096
Registered offices:
Acroni Italia s.r.l., Via del San Michele 334, Gorizia
Acroni Deutchland Handelsgesellschaft mbH, Paulsmühlenstrasse 42, Düsseldorf
The companies are not audited. They operate as agents and according to local legislation do not need to be
audited.
4.3.7.4.2 State of Investments in Subsidiaries
31 December 2011 31 December 2010
Acroni Deutschland 77,000 77,000
Acroni Italia 422,800 422,800
Investments in Subsidiaries 499,800 499,800
An
nu
al R
epo
rt 2
011
84
4.3.7.5 Investment in Associates
Company’s
activity % of
participation
Company’s assets/liabilities on
31 December 2011
Value of company’s
equity on 31 December 2011
Revenues in 2011
Profit or loss in 2011
Jesenice Development Centre (RCJ)
Development 24.95% EUR 3,375,147 EUR 1,207,455 EUR 73,434 EUR 7,455
In 2011 the company contributed share capital for the Jesenice Development Centre, which develops new
materials and raw materials. The value of the investment is EUR 299,400.
Registered office: Cesta Franceta Prešerna 61, 4270 Jesenice
The company does not need to be audited.
4.3.7.6 Other non-current assets
31 December 2011 31 December 2010
Emission coupons 42,117 144,681
Operating receivables 5,912,492 104,890
Allowance for operating receivables (2,017,679) -
Other non-current assets 3,936,930 249,571
Non-current operating receivables consist of scholarship receivables, the non-current part of receivables from
the disposal of assets, the non-current divided costs of gaining credit and the non-current part of receivables
from customers. These increased due to transfer from current operating receivables, which will be repaid in the
next 13 years on the basis of decisions regarding the confirmed compulsory settlement. Correspondingly, the
allowance was also transferred from current to non-current receivables.
The carrying amount of non-current operating receivables does not exceed their realizable value.
4.3.7.6.1 Movement of Allowance for Non-Current Operating Receivables
2011
Balance on 1.1. -
Changes with influence on profit or loss (909,435)
Changes without influence on profit or loss (1,108,244)
Balance on 31 December (2,017,679)
An
nu
al R
epo
rt 2
011
85
4.3.7.7 Deferred tax assets
Deferred tax assets are calculated on the basis of temporary tax differences by applying a 20% tax rate.
4.3.7.7.1 Movement of Deferred Tax Assets in 2011
31 December 2010 Changes in the profit or loss
statement 31 December 2011
Deductible temporary differences 1,987,300 (576,874) 1,410,425
Provisions for environmental rehabilitation 156,045 (156,045) -
Inventories 72,223 (5,484) 66,739
Operating receivables 708,549 (302,375) 406,174
Retirement benefit obligations 696,841 (37,348) 659,493
Property, plant and equipment 353,641 (75,622) 278,019
Unused tax losses 4,767,468 (469,237) 4,298,231
Other 231,163 (219,164) 11,999
Deferred tax assets 6,985,931 (1,265,276) 5,720,655
‘Other’ represents the unused relief for investments in equipment and intangible assets, and the relief for
investments in research and development. The total tax loss on 31 December 2011 amounted to EUR 21,491,156.
4.3.7.7.2 Movement of Deferred Tax Assets in 2010
31 December 2009 Changes in the profit or loss
statement 31 December 2010
Deductible temporary differences 2,272,487 (285,187) 1,987,300
Provisions for environmental rehabilitation 449,020 (292,975) 156,045
Inventories 80,370 (8,147) 72,223
Operating receivables 792,421 (83,872) 708,549
Retirement benefit obligations 688,950 7,891 696,841
Property, plant and equipment 261,725 91,916 353,641
Unused tax losses 4,767,468 - 4,767,468
Other 81,043 150,120 231,163
Deferred tax assets 7,120,998 (135,067) 6,985,931
4.3.7.8 Inventories
31 December 2011 31 December 2010
Raw materials 22,901,519 24,774,351
Work- in-progress 20,548,946 18,524,734
Finished products 13,485,090 20,202,550
Allowance for inventories (1,662,419) (1,656,109)
Inventories 55,273,136 61,845,526
An
nu
al R
epo
rt 2
011
86
On 31 December 2011 the company checked the value of the inventories of finished products and determined
that the net realizable value for inventories was lower than the production value, which is why the inventories
were impaired in 2011 by EUR 660,677.
The company has pledged inventories in the amount of EUR 10,000,000 as a guarantee for loans payable.
4.3.7.8.1 Movement of Allowances for Inventories
2011 2010
Balance on 1.1. 1,656,109 1,475,123
Changes with influence on profit or loss 12,324 203,597
Changes without influence on profit or loss (6,015) (22,611)
Balance on 31 December 1,662,418 1,656,109
4.3.7.9 Current loans issued
4.3.7.9.1 Movement of Current Loans Issued
31 December 2010 Repayments 31 December 2011
Loans issued to companies of SIJ – Slovenian Steel Group 105,000 (105,000) -
Current loans issued 105,000 (105,000) -
4.3.7.10 Current operating receivables
31 December 2011 31 December 2010
Operating receivables from customers 78,015,516 96,868,908
- due from companies in SIJ – Slovenian Steel Group 9,745,927 9,277,639
- due from other customers 68,269,589 87,591,269
Allowances for operating receivables from customers (703,573) (3,748,942)
- due from companies in SIJ – Slovenian Steel Group - (52,525)
- due from other customers (703,573) (3,696,417)
Interest receivables 13,717 281
- due from companies in SIJ – Slovenian Steel Group - 251
- due from others 13,717 30
VAT receivables 3,398,248 3,919,110
Issued advance payments and cautions 5,706,975 4,750,818
Other operating receivables 1,286,907 1,638,462
Current operating receivables 87,717,790 103,428,637
An
nu
al R
epo
rt 2
011
87
On 31 December 2011 the company's current operating receivables amounted to EUR 5,019,047, the basic
currencies being USD and GBP.
4.3.7.10.1 Movement of Allowances for Receivables
2011 2010
Balance on 1.1. 3,748,942 3,680,674
Changes with influence on profit or loss ( 118,619) 152,823
Changes without influence on profit or loss (2,926,750) (84,555)
Balance on 31 December 703,573 3,748,942
Most of the receivables which were written off arose after the compulsory winding-up procedures ended. The
receivables are secured with the Slovenian Export Corporation (Slovenska izvozna družba – PKZ) and various
banks by letters of credit and bank guarantees. We insured domestic and foreign receivables in the amount of
EUR 57,895,087, which represents a 75.5% net value of all receivables regarding issued invoices on 31 December
2011. The company defines its allowance for uninsured receivables. For borrowings the receivables in the value
of EUR 31,004,310 were given for insurance. The carrying amount of receivables does not exceed their realizable
value.
4.3.7.11 Cash and Cash Equivalents
31 December 2011 31 December 2010
Cash in national currency 12,691,656 1,424,885
Cash in foreign currency 1,062,311 4
Cash and cash equivalents 13,753,967 1,424,889
4.3.7.11.1 Cash in National Currency
31 December 2011 31 December 2010
Issued deposits 12,330,826 467,760
Cash and cash equivalents in national currency 360,830 957,125
- cash in hand 1,154 601
- cash on the accounts 359,676 956,524
Cash in national currency 12,691,656 1,424,885
The average interest rate of the issued deposits is 2.12%. The issued deposits are not secured.
An
nu
al R
epo
rt 2
011
88
4.3.7.12 Other current assets
31 December 2011 31 December 2010
Accrued revenues 128,828 1,000,000
Deferred expenses 440,841 34,093
Other current assets 569,669 1,034,093
4.3.7.13 Equity
The sole founder and 100% owner of the business share is the company SIJ– Slovenska industrija jekla, d.d.
Capital reserves are formed from two sources. The company acquired a portion in the amount of EUR 6,992,869
from the paid capital surplus (point 3 of Article 64 of Companies Act) and a portion in the amount of EUR
3,138,125 based on the reversal of the general revaluation adjustment for equity (point 6 of Article 64 of
Companies Act).
4.3.7.13.1 Distributable profit
31 December 2011 31 December 2010
Retained earnings 59,152,048 57,678,435
Net profit for the year 6,852,745 1,473,613
Distributable profit 66,004,793 59,152,048
4.3.7.13.2 Table of Movement of Distributable Profit
2011 2010
Distributable profit on 1.1. 59,152,048 62,678,435
Dividend payout - (5,000,000)
Net profit for the year 6,852,745 1,473,613
Distributable profit on 31 December 66,004,793 59,152,048
The management proposes that the distributable profit, stated on 31 December 2011, remains undistributed.
4.3.7.14 Retirement benefit obligations
4.3.7.14.1 Table of Movement for Retirement Benefit Obligation in 2011
31 December 2010 Reversal 31 December 2011
Provisions for severance pay 3,054,378 (153,651) 2,900,727
Provisions for loyalty bonuses 848,113 (33,093) 815,020
Retirement benefit obligations 3,902,491 (186,744) 3,715,747
An
nu
al R
epo
rt 2
011
89
Provisions were formed for the estimated payments of loyalty bonuses and severance pay as the consequence of
long-term employment on the date of the statement of financial position, discounted to the present value. The
estimated liability was formed for expected payments.
Actuarial calculation has been made on the basis of the actuarial model and assumptions, derived from the
table of death rate, staff fluctuation, growth of wages in the Republic of Slovenia, and the yield curve, which
represents the relationship between market yields of government bonds in the euro area and the time
remaining to maturity. The observed discounted rate is between 0.068% and 3.110%, depending on maturity.
Provisions for severance pays and loyalty bonuses are calculated by an authorized actuary. The change in
provisions had a direct effect on the income statement.
4.3.7.14.2 Table of Movement for Retirement Benefit Obligation in 2010
31 December 2009 Reversal 31 December 2010
Provisions for severance pay 3,132,347 (77,969) 3,054,378
Provisions for loyalty bonuses 813,725 - 848,113
Retirement benefit obligations 3,946,072 (77,969) 3,902,491
4.3.7.15 Other provisions
4.3.7.15.1 Table of Movement of Other Provisions in 2011
31 December
2010 Establishment
Utility and reversal
31 December 2011
Provisions for environmental rehabilitation 2,618,111 107,366 (2,053,797) 671,680
Other provisions 2,618,111 107,366 (2,053,797) 671,680
In compliance with the IPPC directives the company formed two provisions for environmental rehabilitation –
one for the stabilization of the Sava river bank and one for the rehabilitation of the white slag disposal site at
Javornik. After obtaining environmental consent in 2011 the company reversed the provision for the
rehabilitation of white slag disposal site, as it was no longer necessary. The provision for stabilizing the Sava
river bank was released in accordance with the signing of the agreement for steel slag processing, which is a side
product of steel production and can be adequately processed for stabilizing the bank. The rehabilitation will be
carried out over the course of five years.
An
nu
al R
epo
rt 2
011
90
4.3.7.15.2 Table of Movement of Other Provisions in 2010
31 December
2010 Establishment
Utility and reversal
31 December 2011
Provisions for environmental rehabilitation 2,618,111 107,366 (2,053,797) 671,680
Other provisions 2,618,111 107,366 (2,053,797) 671,680
4.3.7.16 Non-current deferred revenues
4.3.7.16.1 Table of Movement of Non-Current Deferred Revenues in 2011
31 December
2010 Received Spent
31 December 2011
Received non-current deffered revenues for employees - 64,940 (59,890) 5,050
Non-current deferred revenues – assigned contributions - 75,503 (68,142) 7,361
Other deffered revenues - 307,696 (307,696) -
Non-current deferred revenues - 448,139 (435,728) 12,411
4.3.7.17 Non-current borrowings
31 December 2011 31 December 2010
Borrowings 47,696,870 69,716,075
Non-current borrowings 47,696,870 69,716,075
The interest rate is flexible and based on EURIBOR.
The company has EUR 48,381,364 of non-current borrowings insured by pledged real estate and movable
property (equipment).
The unused portion of granted non-current borrowings equals EUR 26,233,375.
The last payment is due in 2021.
4.3.7.17.1 Table of Movement of Non-Current Borrowings
2011 2010
Non-current borrowings on 1.1. 69,716,075 72,755,506
Borrowings 17,318,253 27,735,307
Repayments for borrowings - (12,263,013)
Transfer of approval costs to other non-current assets 32,013 -
Current portion of borrowings (39,369,471) (18,511,725)
Non-current borrowings on 31 December 47,696,870 69,716,075
An
nu
al R
epo
rt 2
011
91
4.3.7.18 Other non-current financial liabilities
31 December 2011 31 December 2010
Non-current liabilities arising from finance lease 5,560,747 8,242,037
Other non-current financial liabilities 5,560,747 8,242,037
4.3.7.18.1 Table of Movement of Other Non-current Financial Liabilities
2011 2010
Liabilities arising from finance lease on 1.1. 8,242,037 5,606,900
Liabilities arising from finance lease 108,249 7,709,616
Repayment of liabilities arising from finance lease (7,136) (892,550)
Transfer of approval costs to other non-current assets 23,131 -
Current portion of liabilities arising from finance lease (2,805,534) (4,181,929)
Non-current liabilities arising from finance lease on 31 December 5,560,747 8,242,037
4.3.7.18.2 Minimum Payments of Liabilities Arising from Finance lease on 31 December 2011
Due for payment
in 1 year Due for payment in
1 to 5 years Total
Minimum lease payments 3,202,585 5,850,098 9,052,683
Present value of minimum lease payments 2,887,837 5,560,747 8,448,584
4.3.7.19 Non-current operating liabilities
31 December 2011 31 December 2010
Emission coupons 42,117 144,681
Other liabilities 612 3,893
Non-current operating liabilities 42,729 148,574
4.3.7.20 Current borrowings
31 December 2011 31 December 2010
Borrowings 67,660,109 56,839,807
Approved overdrafts on bank accounts 0 1,733
Current borrowings 67,660,109 56,841,540
An
nu
al R
epo
rt 2
011
92
The company has EUR 46,091,349 of current borrowings insured by assigning receivables and pledging real
estate and movable property (equipment).
The unused portion of the approved current overdraft and revolving credits is EUR 14,500,000.
4.3.7.20.1 Table of Movement of Current Borrowings
2011 2010
Current borrowings on 1.1. 56,841,540 42,958,658
Current portion of non-current borrowings 39,369,471 18,511,725
Borrowings 35,569,370 36,660,000
Repayments for borrowings (64,129,866) (34,648,657)
Transfer of approval costs to other non-current assets 11,327 -
Change in approved bank account overdrafts (1,733) (6,640,187)
Current borrowings on 31 December 67,660,109 56,841,540
4.3.7.21 Other current financial liabilities
31 December 2011 31 December 2010
Interest liabilities 468,427 470,359
Liabilities arising from finance lease 2,887,837 3,079,408
Other current financial liabilities 3,356,264 3,549,767
4.3.7.21.1 Table of Movement of Current Financial Liabilities Arising from Finance lease
2011 2010
Current liabilities arising from finance lease on 1.1. 3,079,408 1,950,290
Repayment of liabilities arising from finance lease (3,004,608) (3,052,811)
Transfer of approval costs to other non-current assets 7,503 -
Current portion of non-current liabilities arising from finance lease 2,805,534 4,181,929
Current liabilities arising from finance lease on 31 December 2,887,837 3,079,408
An
nu
al R
epo
rt 2
011
93
4.3.7.22 Current operating liabilities
31 December 2011 31 December 2010
Operating liabilities to suppliers 100,752,160 77,118,889
- due from companies in the Group 11,719,996 5,451,696
- due from other suppliers 89,032,164 71,667,193
Operating liabilities to employees 1,768,928 1,971,304
Received advance payments 641,624 772,552
Other operating liabilities 7,829,885 15,147,932
Current operating liabilities 110,992,597 95,010,677
The repayment of liabilities for customs and excise duty is insured by guarantee.
On 31 December 2011 the company's operating liabilities amounted to EUR 13,951,290, the basic currencies being
USD, GBP, SEK and JPY.
4.3.7.23 Other current liabilities
31 December 2011 31 December 2010
Current portion of non-current provision for environmental rehabilitation
202,928 1,269,975
Accrued expenses for supply of goods - 783,089
Accrued expenses for selling bonuses 254,708 126,830
Other accrued expenses 577,536 998,648
Deferred revenues 3,280 186,290
Other current liabilities 1,038,452 3,364,832
The company reversed the provision for the rehabilitation of white slag disposal site. The provision for
stabilizing the Sava river bank was released in accordance with the signing of the agreement for steel slag
processing, which is a side product of steel production and can be adequately processed for stabilizing the bank.
An
nu
al R
epo
rt 2
011
94
4.3.7.24 Revenues
4.3.7.24.1 Revenues by Geographical Markets
2011 2010
Revenues in Slovenia 68,221,316 68,435,808
Revenuesin foreign countries 369,030,461 299,682,312
- Germany 124,551,508 90,823,190
- Italy 74,263,032 71,494,054
- Austria 16,721,768 19,797,169
- Poland 23,546,793 19,638,231
- Other countries – Western and Central Europe 93,773,888 78,107,402
- Other countries – Eastern Europe 4,067,511 3,081,392
- Other countries 32,105,962 16,740,874
Revenues 437,251,777 368,118,120
4.3.7.25 Operating costs
2011 2010
Costs of goods, materials and services 366,001,812 322,400,029
Labour costs 35,653,398 36,143,938
- wages and salaries 25,232,237 25,422,687
- social security costs 5,127,766 5,060,966
- other labour costs 5,293,395 5,660,285
Depreciation costs 18,437,440 18,164,477
Other costs 3,309,888 1,259,969
Change in the value of inventories 4,032,572 (9,695,884)
Operating costs 427,435,110 368,272,529
4.3.7.25.1 Costs by Type in 2011
Cost of sales Distribution
costs
General and administrative
costs Total
Costs of goods, materials and services 333,192,373 18,310,499 14,498,940 366,001,812
Labour costs 21,669,878 1,344,085 12,639,435 35,653,398
- wages and salaries 15,807,759 1,048,114 8,376,364 25,232,237
- social security costs 2,621,529 164,964 2,341,273 5,127,766
- other labour costs 3,240,590 131,007 1,921,798 5,293,395
Depreciation costs 15,957,180 14,535 2,465,725 18,437,440
Other costs 2,373,353 288 936,247 3,309,888
Change in the value of inventories 4,032,572 - - 4,032,572
Operating expenses 377,225,356 19,669,407 30,540,347 427,435,110
The auditing costs for the 2011 annual report amounted to EUR 20,000.
An
nu
al R
epo
rt 2
011
95
4.3.7.25.2 Costs by Type in 2010
Cost of sales Distribution
costs
General and administrative
costs Total
Costs of goods, materials and services 298,929,184 9,993,829 13,477,016 322,400,029
Labour costs 22,990,558 1,147,937 12,005,443 36,143,938
- wages and salaries 16,461,358 884,449 8,076,880 25,422,687
- social security costs 2,690,071 139,226 2,231,669 5,060,966
- other labour costs 3,839,129 124,262 1,696,894 5,660,285
Depreciation costs 15,598,994 17,372 2,548,111 18,164,477
Other costs 1,857 - 1,258,112 1,259,969
Change in the value of inventories (9,695,884) - - (9,695,884)
Operating expenses 327,824,709 11,159,138 29,288,682 368,272,529
4.3.7.25.3 Average Number of Employees by Category According to Their Level of Education
2011 2010
Unfinished and finished primary school 115 133
Verified courses 179 204
2-year vocational school 115 135
3-year vocational school 341 368
4-year secondary school 394 419
Vocational higher education 74 76
Professional higher education 37 35
University higher education 72 78
Specialization, Master’s Degree 13 10
Ph.D 4 4
Total 1,344 1,462
4.3.7.26 Other operating income
2011 2010
Reversal of allowances 3,288,887 1,508,455
Revenues from application of received subsidies 435,727 844,279
Revenues from capitalized own products 82,652 -
Profit from sale of property, plant and equipment 101,086 133,306
Profit from selling emission coupons 23,429 473,860
Received compensations - 1,216,146
Dividends 600,000 1,328,123
Contractual penalties 1,401,046 1,191,400
Other operating revenues 149,214 318,450
Other operating income 6,082,041 7,014,019
The reversal of provisions includes the reversal of environmental provisions in the amount of EUR 3,102,143 and
utilization of retirement benefit obligations in the amount of EUR 186,744.
An
nu
al R
epo
rt 2
011
96
4.3.7.27 Other operating expenses
2011 2010
Allowances for receivables 790,155 152,822
Allowancesfor inventories 12,324 203,597
Impairment of inventory 660,677 205,793
Expenses for donations and sponsorships 300,000 311,530
Other operating expenses 72,979 72,046
Other operating expenses 1,836,135 945,788
4.3.7.28 Finance income
2011 2010
Interest income 101,337 879,179
Positive exchange rate differences from investing activities 79,014 28,987
Profit from sales or revaluations of financial investments - 59,350
Other finance income 8,886 -
Finance income 189,237 967,516
4.3.7.29 Finance expenses
2011 2010
Interest expense 5,758,033 5,084,267
Negative exchange rate differences from investing activities 103,179 64,453
Loss from sales or impairment of financial investments 157,709 -
Other finance expenses 114,868 123,938
Finance expenses 6,133,789 5,272,658
4.3.7.30 Taxes
2011 2010
Deferred tax (1,265,276) (135,067)
Taxes (1,265,276) (135,067)
An
nu
al R
epo
rt 2
011
97
2011 2010
Profit or loss before tax 8,118,021 1,608,680
Corporate income tax liability at tax rate of 20% 1,623,604 321,736
Tax effects:
- non-taxable income (120,000) (265,625)
- tax non-deductible expenses 198,422 233,228
- unused tax losses (436,750) (154,272)
Taxes 1,265,276 135,067
4.3.7.31 Contingent Assets and Liabilities
4.3.7.31.1 Contingent liabilities
Contingent liabilities of the company include issued securities and guarantees in the total amount of EUR
6,426,583. The company acts as a guarantor to other companies in regard to setlling their liabilities. Based on
the guarantees, issued by a bank, the company guarantees to the Ministry of the Environment and Spatial
Planning in Ljubljana that it will remove and destroy hazardous waste in the required time and according to the
Regulation (EC) on shipments of waste.
The company expects no outflows from the issued securities and guarantees.
4.3.7.31.2 Contingent assets
Contingent assets include received guarantees and bills for the elimination of errors in the warranty period in
the total amount of EUR 1,360,920. The company does not expect to turn this into cash.
4.3.8 Related parties
Related parties comprise the controlling company, subsidiaries, associated companies, other related parties and
the management of the company. Other related parties include the companies of the parent company’s Group,
the controlling companies of the parent company and companies included in their groups.
4.3.8.1 Related party transactions
31 December 2011 31 December 2010
Receivables 9,845,927 9,430,366
- subsidiaries 100,000 120,611
- other related parties 9,745,927 9,309,755
An
nu
al R
epo
rt 2
011
98
31 December 2011 31 December 2010
Liabilities 27,145,108 27,370,960
- subsidiaries 1,015,399 1,423,579
- parent company 20,510,021 13,771,274
- associates 15,397 -
- other related parties 5,619,688 12,176,107
2011 2010
Revenues 45,569,949 24,076,267
- subsidiaries 600,000 1,304,291
- other related parties 44,969,949 22,771,976
Expenses 27,138,856 42,865,868
- subsidiaries 2,470,356 1,984,730
- parent company 5,288,177 4,322,465
- associates 14,765 -
- other related parties 19,365,558 36,558,673
Revenues include revenues from sales of products and services, interests on loans issued, and received
dividends, while expenses include operating expenses and interests on borrowings. The high increase in
turnover in comparison to 2010 is the result of a higher business volume and the growth of the Group.
4.3.9 Total Amounts of Receipts by the Management and Other Employees
Total amount of receipts on the basis of the business management contract, received in the business year for
the performance of functions or tasks in the company by management members and other workers, employed
on contracts for which the tariff part of collective agreement does not apply.
2011 2010
Management 132,513 125,320
Individuals on service contracts 2,852,418 2,546,567
The receipts include gross salaries, paid reimbursements related to work in accordance with the regulation
(transport, food), and bonuses.
The company did not grant any loans, issue any guarantees nor make any advance payments to the
management of the company or the members of the General Assembly in 2011.
An
nu
al R
epo
rt 2
011
99
4.3.10 Financial Instruments and Risks
4.3.10.1 Credit risk
The largest exposure to credit risk on the reporting date arises from operating receivables and other operating
receivables, and among the latter, issued advance payments to suppliers for assets.
Structure of Outstanding Financial Assets
31 December 2011 Group 1 Group 2 Group 3 Total
Receivables from customers - 58,405,200 4,848,351 63,253,551
Other operating receivables 9,031 9,788,391 1,177,438 10,974,860
Deposits with up to 3-month maturity 12,330,826 - - 12,330,826
Total 12,339,857 68,193,591 6,025,789 86,559,237
31 December 2010 Group 1 Group 2 Group 3 Total
Receivables from customers - 68,938,056 5,568,800 74,506,856
Other operating receivables 577,961 7,047,817 23,000 7,648,778
Loans issued - 105,000 - 105,000
Deposits with up to 3-month maturity 467,760 - - 467,760
Total 1,045,721 76,090,873 5,591,800 82,728,394
Group 1: Exposure to companies with which we have had business contacts for more than one year and which
have never been late in meeting their obligations (i.e. business partner pays its liabilities within the due time).
Group 2: Exposure to companies with which we have had business contacts for more than one year and which
are sometimes late in meeting their obligations (business partner does not always settle its liabilities within the
due time).
Group 3: Exposure to companies with which we have had business contacts for a period shorter than one year.
The company has been reducing credit risk by insuring receivables with the Slovenian Export Corporation (SID)
in the form of bank guarantees and letters of credit.
Age Structure of Financial Assets Due but not Impaired
31 December 2011 Up to 3 months 3 months to 1
year Total
Receivables from customers 12,325,182 1,733,208 14,058,390
Other operating receivables - 100,000 100,000
Total 12,325,182 1,833,208 14,158,390
An
nu
al R
epo
rt 2
011
100
31 December 2010 Up to 3 months 3 months to 1
year 1 year to 5 years Total
Receivables from customers 10,858,876 3,725,343 4,028,891 18,613,110
Total 10,858,876 3,725,343 4,028,891 18,613,110
Movement of Allowance for Financial Assets
in 2011
Allowance on 31
December 2010
Formation of allowance
for year
Change of allowance
without effect on profit or
loss
Repayment of assets
subject to allowance
Allowance on 31
December 2011
Receivables from customers (3,748,942) (199,622) 555,510 2,689,480 (703,574)
Other operating receivables (1,741,944) (1,315,676) (180,179) 719,155 (2,518,644)
Total (5,490,886) (1,515,298) 375,331 3,408,635 (3,222,218)
in 2010
Allowance on 31
December 2009
Formation of allowance
for year
Change of allowance
without effect on profit or
loss
Repayment of assets
subject to allowance
Allowance on 31
December 2010
Receivables from customers (3,680,674) (204,458) 88,717 47,473 (3,748,942)
Other operating receivables (574,255) (2,011,129) 9,839 833,601 (1,741,944)
Total (4,254,929) (2,215,587) 98,556 881,074 (5,490,886)
4.3.10.2 Liquidity risk
The company is managing liquidity risk with appropriate planning of cash flow and current credit lines from
banks agreed in advance, which ensures that the company is capable of settling any overdue liabilities at any
time. For that purpose the company has bank limits in national banks in the amount of EUR 10,000,000 and an
approved revolving credit in the amount of EUR 4,500,000.
Liability Structure According to Due Date:
31 December 2011 Up to 3 months 3 months to 1
year 1 year to 5 years Over 5 years
Liabilities to suppliers 96,914,757 3,837,402 - -
Liabilities for borrowings 5,410,385 62,249,724 25,414,454 22,282,416
Liabilities for finance lease 768,713 2,119,124 5,560,747 -
Other operating and financial liabilities 6,544,384 5,000,000 612 -
Total 109,638,239 73,206,250 30,975,813 22,282,416
An
nu
al R
epo
rt 2
011
101
31 December 2010 Up to 3 months 3 months to 1
year 1 year to 5 years Over 5 years
Liabilities to suppliers 73,989,160 3,129,729 - -
Liabilities for borrowings 35,424,672 21,416,869 61,623,259 8,092,814
Liabilities for finance lease 742,306 2,337,102 8,059,564 182,474
Other operating and financial liabilities 15,349,712 5,107,292 3,893 -
Total 125,505,850 31,990,992 69,686,716 8,275,288
In 2011, exposure to foreign suppliers lowered as the proportion of liabilities to foreign suppliers decreased from
64.5% to 54.4% of the total liabilities to suppliers. The liabilities for borrowings and for finance lease are mostly
liabilities to domestic banks and companies.
Exposure to banks is assessed as moderate. The company fully complies with the conditions stated in loan
contracts in the section defining the disclosure of data, payment of interest and repaying the principal value. In
2011 the company did not fulfil part of its liability in one loan contract in the amount of EUR 2.1 million. The
assessment is based on a precedent from the year before, when a violation of obligation, higher than this year,
did not result in premature collection of assets. Given the reasons stated above on the date of the financial
statement the company does not state these non-current liabilities as current liabilities.
4.3.10.3 Foreign exchange risk
The change in parity of EUR/USD, EUR/GBP, EUR/JPY and EUR/SEK by 10% on the reporting date would result
in a change of profit or loss before tax by the amounts stated below. The analysis for 2010 was prepared in the
same manner.
Exchange Rate Change Risk:
2011 2010
Change in profit/loss before tax due to a 10% exchange rate decrease
(liabilities) (1,550,143) (1,337,271)
Change in profit/loss before tax due to a 10% exchange rate decrease
(receivables) 675,706 425,523
NET EFFECT (874,437) (911,748)
Change in profit/loss before tax due to a 10% exchange rate increase
(liabilities) 1,268,299 1,094,130
Change in profit/loss before tax due to a 10% exchange rate increase
(receivables) (552,851) (348,155)
NET EFFECT 715,448 745,975
An
nu
al R
epo
rt 2
011
102
The financial statements of the company are based on the medium exchange rate of Bank of Slovenia on 31
December 2011.
EUR/USD 1.2939
EUR/GBP 0.8353
EUR/JPY 100.2000
EUR/SEK 8.1900
Net exposure (receivables – liabilities) in foreign currencies, expressed in EUR, is:
USD (7,864,661)
GBP (965)
JPY (98)
SEK (4,208)
4.3.10.4 Interest rate risk
A change in interest rate by 100 or 200 percents on the reporting date would result in an increase (decrease) of
profit or loss by the amounts stated below. The analysis assumes that all other variables, in particular exchange
rates, remain unchanged. The analysis for 2010 was prepared in the same manner.
Interest Rate Change Risk:
2011 2010
Change in profit/loss before tax due to increase by 200 bp (2,698,950) (2,939,716)
Change in profit/loss before tax due to increase by 100 bp (1,349,475) (1,469,858)
Change in profit/loss before tax due to decrease by 100 bp 1,349,475 1,469,858
Change in profit/loss before tax due to decrease by 200 bp 2,698,950 2,939,716
4.3.10.5 Price risk
The company manages the price risk:
On the level of raw materials with additional payments for alloys. Sales prices are calculated on the basis of
basic prices and additional payments for alloys. The additional payment depends on the alloy price level
and parity of EUR/USD.
With regard to electricity, by a long-term contract with fixed prices valid until 2015.
The company is exposed to price risk in connection with natural gas and other energy sources.
An
nu
al R
epo
rt 2
011
103
Natural Gas Price Change Risk:
2011 2010
Change in profit/loss before tax due to a 10% increase (1,115,165) (1,336,965)
Change in profit/loss before tax due to a 10% decrease 1,115,165 1,336,965
Other Energy Sources Price Change Risk:
2011 2010
Change in profit/loss before tax due to a 10% increase (255,016) (275,758)
Change in profit/loss before tax due to a 10% decrease 255,016 275,758
4.3.10.6 Equity management
The company monitors the status of overdue receivables and liabilities on a daily basis, and prepares 3-month
plans twice a month with the aim of achieving optimal debt. Larger investments are financed by non-current
assets.
Analysis of the Sensitivity of Debt Change:
Year 2011 Debt increase by
10% Debt decrease by
10%
Level of debt on equity 76.2 83.8 68.5
Equity 163,195,055 163,195,055 163,195,055
Financial liabilities 124,273,990 136,701,389 111,846,591
4.3.10.7 Carrying Amounts and Fair Values of Financial Instruments
31 December 2011 31 December 2010
Type of financial instrument Carrying amount
Fair value Carrying amount
Fair value
Loans issued and deposits - - 105,000 105,000
Operating receivables 87,717,790 87,717,790 103,428,637 103,428,637
Monetary assets 13,753,967 13,753,967 1,424,889 1,424,889
Borrowings (115,356,979) (115,356,979) (126,557,615) (126,557,615)
Other financial liabilities (8,917,011) (8,917,011) (11,791,804) (11,791,804)
Operating liabilities (111,035,326) (111,035,326) (95,159,251) (95,159,251)
Total (133,837,559) (133,837,559) (128,550,144) (128,550,144)
An
nu
al R
epo
rt 2
011
104
4.3.10.8 Financial Assets Determined at Fair Value by Hierarchy
The company has no financial assets determined at fair value.
4.3.11 Events After the Reporting Date
In January the production of profiles was stopped (cancellation of the profiles department in the Hot
Rolling Mill).
In January we produced and sold record a quantity of stainless steel quarto plates (8,400 tonnes).
There were no other events after the reporting date that could influence the company’s financial
statements.
An
nu
al R
epo
rt 2
011
105
5 AUDITORS REPORT
5 AUDITORS
REPORT
Report of an independent
auditor on company's financial
statements.
