Flexibility. Sustainability. Transparency
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STABILITY Flexibility. Sustainability. Transparency. Annual Report of SIJ Group and SIJ d.d. 2019 1 TABLE OF CONTENTS SIJ GROUP IN BRIEF 3 SUSTAINABLE DEVELOPMENT 55 2019 at a Glance and our Perspective 2025 4 Statement on Non-financial Operations of SIJ d.d. and SIJ Group 56 Sustainable Development Strategy and Policies 57 2019 HIGHLIGHTS 8 Care for the Environment and Natural Resources 58 2019 Performance Summary 9 Ambitious Employee Policy 65 Significant Business Events and Achievements of SIJ Group in 2019 11 Socially Relevant Cooperation with Communities 71 Notable Events after the Reporting Period 14 Business Year from the Management Board’s Perspective 15 RISK MANAGEMENT 74 Report of the President of the Supervisory Board 18 A System for Assessing Risk and Identifying Opportunities 75 Overview of Typical Risks and Methods of Risk Management 76 ORGANISATION AND GOVERNANCE 21 Key Risks in 2019 81 About SIJ d.d. 22 Operating Results of SIJ d.d. 24 FINANCIAL REPORT OF THE SIJ GROUP 84 Corporate Governance and Supervision of SIJ d.d. 26 Independent Auditor's Report 85 SIJ d.d. and SIJ Group Corporate Governance System 29 Statement of the Management Board's Responsibility 88 Statement of Compliance with Corporate Governance Codes 34 Consolidated Financial Statements 89 Notes on the Consolidated Financial Statements 93 BUSINESS REPORT 35 Business Strategy 36 FINANCIAL REPORT OF SIJ d.d. 139 Impacts of the External Environment and Opportunities for SIJ Group 39 Independent Auditor's Report 140 Analysis of Business Activities 40 Statement of the Management Board's Responsibility 143 Investments 48 Financial Statements 144 Research, Development and Innovation 51 Notes on the Financial Statements 147 Marketing and Brand Management 53 2 Annual Report 2019 SIJ GROUP IN BRIEF Our STABILILTY is guaranteed by our FLEXIBILITY 3 Annual Report 2019 SIJ GROUP 2019 AT A GLANCE AND OUR PERSPECTIVE 2025 STABILITY THROUGH LEADING MARKET SHARES SIJ GROUP IN NUMBERS* FORETHOUGHT. We are steelworkers. We believe in endurance and resilience. The 400-year producer of stainless-steel quarto plates history of steelworking in the Mežica valley No. in the European Union 767.4 58.8 » and the 150-year history of steelworking in Revenues EBITDA Jesenice connects us to the global trends of (EUR mio.) (EUR mio.) producing increasingly durable steels and 1 creating solutions designed for a variety of modern uses. producer of tool steels No. in the European Union 37.6 477.6 We preserve our traditional steel core Investments Cast steel with respect, increasing our flexibility by (EUR mio.) (thousand t) understanding the needs of the contemporary world, as well as those 3 of the future. producer of industrial knives Top in the world 84.6 % 3,859 10 Share of export Employees Perspective 2025: Perspective 2025: * SIJ Group’s business plans for the year 2019 envisaged the sale of the Our advantage lies in the niche markets. Our financial position will be solid, SIJ Group Poultry Division. The process was finalised on 21 February » » We will grow our niche steel market profitability above the industry average. 2019. Therefore, the key operating figures present the operations of SIJ Group, excluding the Poultry Division. positions leading up to the year 2025. 4 Annual Report 2019 VISION MISSION With customer orientation, higher value added products and engaged To produce a wide range of steel and steel products by employees we will achieve sustainable growth and efficiency. meeting the needs of all involved stakeholders. Perspective 2025: VALUES » Our value lies in human capital. SIJ Group will be considered as one of the most desired We work in accordance with the values of business excellence: employers in Slovenia, giving it the ability ethics, professionalism, fairness and credibility. to attract the right talent. 2020 Historical milestone: celebrating 400 years of ironworking in the Mežica valley THE FUTURE IS BUILT ON OUR FIRM FOUNDATIONS FROM THE PAST 2015–2019 Strengthening of the market position – including through introduction of steel brands and the development, implementation, and strengthening of sustainable operating principles 2019 2007 SIJ Group’s Strategy 2025 confirmed. The Russian group KOKS, with 1993 Historical milestone: celebrating the 150-year its subsidiary Dilon, becomes Privatisation of Slovenian anniversary of the introduction of the the new majority owner 14th–20th century 1969 1991 Steel Group finalised industrial production of steel in Slovenia. Development of ironworks Merged company - Slovenian Steelworks Slovenian declaration of independence and ironworking plants on the (Jesenice, Ravne, Štore) and restructuring of territory of today’s Slovenia the Slovenian steel industry 1986 1992 2005 2007–2017 Shutdown of the last blast furnaces; since then, steel in Slovenia The largest steel companies Slovenian Steelworks A period of intensive investment in has been produced exclusively from steel scrap of the SIJ Group established: renamed SIJ – Slovenian modernising production, increasing production SIJ Acroni and SIJ Metal Ravne Steel Industry capacities and shifting the focus towards programmes with higher added value products for niche steel markets 5 Annual Report 2019 PRESENT FOUNDATIONS The pillars of our present-day STABILITY are founded on our PASTexperience 6 Annual Report 2019 400 1620 1774 Today YEARS OF the Mežica valley first ironworks, industrial steel production SIJ Metal Ravne Črna na Koroškem; Melchior Putz in the Mežica Valley STEELWORKING 1856 1620-2020 patent filed for the process of mass production of steel, Henry Bessemer WE ARE THE PROUD INHERITORS 1864 Today Siemens-Martin furnace constructed and patented SIJ Acroni OF THE IRONWORKING AND STEELWORKING TRADITION AT THE HEART OF EUROPE. SIJ Group connects companies which » developed in locations with an exceptional iron- and steelworking history. Even in the 150 1873 YEARS OF INDUSTRIAL Gold medal awarded at the Vienna World Exhibition for the ferromanganese production process at the blast furnace in Jesenice, given to the Technical early stages of development, this was a Director of the Carniolan Industrial Company, Lambert von Pantz place of globally renowned innovation, STEELWORKING 1869 1869-2019 establishment of the Carniolan Industrial Company and even in those times, quality products (Kranjska industrijska družba) were made here, then transported to many far-away lands. 1919 1766 establishment of the University of Ljubljana Faculty of Mechanical Studies established with a technical faculty; metallurgy lectures at as part of the Ljubljana Jesuit College the Department of Mining and Ironworking By constantly maintaining and expanding our technical experience, we enhance the stability of the companies and SIJ Group as a whole, as well as strengthen the broader economic environment of the communities in which we operate. 100 1810 – 1813 Today YEARS OF METALLURGY higher technical educational courses SIJ Group operates its own training centre and many offered at the Écoles centrales in Ljubljana; projects aimed at improving employee competencies, The first engineers educated in Slovenia which are integrated with secondary technical school STUDIES courses for metallurgy students, and engages in academic research collaboration projects with higher education 1919-2019 institutions and other research and educational organisations 7 Annual Report 2019 2019 HIGHLIGHTS STABILITY paves the way to our LEADING POSITION 8 Annual Report 2019 2019 PERFORMANCE SUMMARY WE UNDERSTAND THE NEEDS OF The 2019 key performance measures are proof that SIJ Poultry Division. As the errors for 2018 have been ad- ADVANCED TECHNOLOGICAL Group, now fully focused on metallurgy, has a solid finan- dressed on the entire SIJ Group level, the summary shows INDUSTRIES. WE PROVIDE THEM cial position. In line with the business plans and strategies, the corrected data for that year.1 in 2019 we successfully completed the sale of our SIJ Group WITH RESPONSIBILITY FOR THE FUTURE. SIJ Group Key Performance Figures » We have always strived for excellence. unit of measure 2017 2018 2019 We maintain our position as a market Physical ratios leader with our stainless steel quarto Cast steel production t 468,596 479,805 477,561 plates and tool steels. We are among the Production of finished products t 367,721 382,551 383,858 leading producers of special and high- Financial figures alloy tool steels. With our stable business Revenues 000 EUR 754,870 793,277 767,351 performance, we create the conditions Share of exports % 86.1 84.4 84.6 for developing new products and solutions EBITDAa 000 EUR 77,273 61,681 58,818 for use in technologically demanding EBITDA margin % 10.2 7.8 7.7 industries. Net profit 000 EUR 14,406 6,501 44,908 Net financial debt as at 31 Dec We maintain our position through Net financial debtb 000 EUR 330,537 317,318 180,545 knowledge, and plan our future with the Business combinationsc 000 EUR 82,035 82,036 0 responsibility to develop steels for new NFD/EBITDAd 3.2 3.6 3.1 applications. a EBITDA: operating profit or loss before depreciation and amortisation + impair- c Business combinations refer to purchases of shares of PP Group and Holding PMP ments and write-offs of value + elimination of impairments and write-offs of value, until 31 December see disclosure 4 for the calculation d NFD/EBITDA: NFD does not include business combinations b Net financial debt (NFD): non-current and current financial liabilities – cash and cash equivalents 1 As a result of corrections, the key performing figures for 2018 shown in the table differ from those reported in the 2018 annual report. An explanation for this is provided in the financial report – the disclosure Error Correction. 9 Annual Report 2019 FOCUS ON EXPORTS Revenues (in EUR million) and Share of Exports (in Percent) EBITDA (in EUR million) and EBITDA Margin (in Percent) 90 12% In 2019, SIJ Group generated an income of EUR 767.4 mil- 80 86.1% lion, of which 84.6 percent was realized on foreign markets.