The Effects of the Main Changes of the Control System in TINECK ELEZRNY, a.s.

Ing. Ji Cienciala, CSc. Chairman of BoD and CEO

Agenda Introduction of TINECK ELEZRNY, a. s. Objective of TINECK ELEZRNY, a. s. Methods Applied Results Achieved Conclusion
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History
T established by the Court of Habsburgs Railway Koice - Bohumn built Centralization of steelworks at Tinec Mining and Metallurgical Company 1st electrification of rolling mill 1871 1877 1906 1923 1938 1946 1983 1991 1996

1839

Biggest BF in Czechoslovakia World War II - confiscated BOF Nationalized Joint stock company Privatisation fully complete

Technological flows
finalization coke plant
ladle metallurgy

medium section billet CCM light section

peeling and grinding drawing and surface finish

RH

reversing mill

LF

BF

BOF

Ar IR-UT

blooming bloom mill CCM

wire rod mill

billet mill
Kladno

heat treatment

sinter plant

EAF

ingot teeming

strip mill
Bohumn

tube mill
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Ostrava-Vtkovice

production of chains

T Subsidiaries and Affiliate Companies

ENERGETIKA TINEC energy production

STROJRNY TINEC machinery

SLVRNY TINEC foundries

FERROMORAVIA steel drawing

VVT tube mill

Vesuvius R refractories

Refrasil refractories

etzrna chains

TSCHV Kladno rolling of SBQ

Products

rails wire rod SBQ bars

semis

rebars sections
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wide steel

Motto: Quality Through the Ages

Our Mission
Together for the generations to come

Our Vision:

Advanced industrial company based on steelmaking tradition

Strategic Objectives till 2011 Objectives for Years Projects within Key Areas:

Partnership

Technology

Staff

Management

Attitudes & Principles: Our Groundwork:

Client orientation Innovation Business spirit Flexibility Continuous improvement Teamwork Alliance thinking Consistency, observance Sharing knowledge and experience Communication Common responsibility Development of trust

staffs abilitiescompany and region linked tradition - since 1839trade mark

Objective of TINECK ELEZRNY, a. s.

To apply and develop the systemic approach to integrated management in the long term that is aimed at:
strengthening the competitive advantage increasing the value of the company attracting and recruiting young, powerful, and talented people

To achieve the highest quality of internal environment by realising the synergy of internal sources as:
corporate culture development of intelectual capital team work strategic management together with implementing of process and project management
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T Highlights
Indicator Steel production Sales of products Revenues Profit ROS ROCE Employees Steel per employee
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Unit kt kt mil. CZK mil. CZK % % people tons

2002 2364 2258 21272 309 1.79 5.22 6263 377

2003 2333 2190 21034 518 2.46 5.57 5777 404

2004 2427 2301 29275 2575 11.72 24.28 5599 434

2005 2248 2205 30827 2068 8.42 16.68 5519 407

2006 2517 2364 31675 2684 10.55 18.85 5417 465

Methods Applied

Strategic Goals and Fulfilment in Key Areas of Partnership, Technology, Staff, Management

Strategic Goals and Fulfilment

Customer-oriented company (partnership, just intime, innovation), optimal externalisation of nonproductive processes, more efficient management of subsidiaries External sources production chains acquisitions, new production capacities in T => leading to product portfolio diversification => resulting in strengthening the companys resistance to fluctuations in different market segments External sources (using various grants) utilization for Ts development to the largest possible extent

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Partnership

Strategic Goals and Fulfilment

Permanent process improvement exploitation of internal sources: productivity growth (new investments, innovation, downsizing), quality, ecology-friendly production Significant investments 2000-2005
2000 2003 2004 2005 2nd stage of wire rod mill modernization Modernization of continuous light section mill Exchange of the converter vessels, new ladle furnace Major overhaul of the blast furnace #4, exchange of the converter vessels

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Technology

Strategic Goals and Fulfilment

Significant Investments 2006
RH Vacuum Degassing Station #2

Technology

Dedusting of Sinter Plant #1 STC Annealing furnace #3 Reconstruction of the CCM #1 2 strands fi 525 mm

Significant Planned Investments 2007

Garret coiling machines Secondary de-dusting of the BOF Plant Desulfurization of the hot metal Bars finishing line
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Strategic Goals and Fulfilment

Well-educated, well-trained, well-motivated, purposeful, steadfast and resolved person = the driving force of progress, developing intellectual capital Recruitment of young perspective experts program of cooperation with all types of schools Compact program of staff training Improving working and living conditions, systematic decreasing accident rate level joining the IISIs Accident-Free Steel program

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Staff

Strategic Goals and Fulfilment

Setting Ts strategy and specifying tools for its implementation (strategic framework, project management) Crisis management in T in 1999 (savings of CZK 1.2 billion, companys consolidation appropriate preparation for the periods to come) Strategic Management (Business Plan, Financial Plan, BSC, Project Management, Key Production Programs etc.)

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Management

Results Achieved

In Key Areas of Partnership, Technology, Staff, Management

Customer-oriented Company
Corporate development Cooperation on quality Cooperation on investment activities

Partnership

Technology suppliers Siemens Autel SMS Meer Concast

Customers ESAB electrodes MUBEA springs DB wire Moravsk forges

Example: Cooperation with research institutions, universities, companies Vesuvius, Refrasil

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Measuring of Customer Satisfaction

The total index of employees satisfaction is calculated as a simple arithmetic average of particular indexes Is, Iv and Id Ic = 4.15 points and exceeded planned value 4.06 point 2006 evaluation is still in progress
2002 Index Satisfaction with service Index Satisfaction with product Index Satisfaction with deliveries Total Index The level of customer satisfation (%) Satisfaction with product (%)
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Partnership

2003 3.79 4.08 4.27 4.04 80.80 81.60

2004 3.77 4.15 3.83 3.92 78.40 83.00

2005 4.02 4.30 4.14 4.15 83.00 86.00

3.79 4.15 4.62 4.19 83.80 83.00

Trends of the Steel Grades Produced

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Technology

Change of the Product Portfolio (%)

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Technology

Air Pollution (t/year)

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Technology

Number of Accidents

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Staff

Results of Satisfaction Measuring

Indicator Total salary Company perspective 1999 -0.170 0.288 0.418 0.064 -0.214 0.421 2000 -0.266 0.373 0.408 0.014 -0.328 0.362 2002 -0.120 0.822 0.714 0.591 0.120 0.493 2004 -0.326 0.818 0.753 0.420 0.273 0.386 2006 0.065 0.815 0.761 0.653 0.707 0.512

Staff
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Knowlegde of companies objectives Confidence in the manager Perspective for employees Total satisfaction level

The total satisfaction level is measured with the Index of extensity which can reach the value from +1 up to 1.

Development of Parameters BSC Method

V P O
Start-up curve of new investments Claims Accident rate Ratio of skilled employees Labor turnover Material utilization Charge richness Production cost Stock level - charge

Management

S T F T V P R R R S T P O P S T M
Market share CR, EU, CEFTA Contentment of the customers Labor productivity Ratio of skilled employees Labor turnover Production of rolled material Total cost of hot pig iron Total cost of hot steel Pretax profit Pretax profit of subsidiaries Start-up curve of new investments Claims according to mills Accident rate Ratio of skilled employees Labor turnover Material utilization according to mills Production capacity utilization Production cost Stock level

T M

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Projects in Key Area Management

Completed projects, e.g.: Implementing of VDA 6.1 and ISO 14001 in T Migration SAP-R/2-R/3 Implementing of TPM in T Projects in progress, e.g.: Implementing of APS in T Implementing of Process Management 2nd stage Security of IS according ISO 27001

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Management

What are we expecting in the nearest future?

Outlook and Conclusion

Direction and Development Goals of T

Strengthening the cooperation and partnership with suppliers and customers Optimalization of orders, awareness of customers Regional activities road transport, development of the region Cooperation with essential surrounding investment incentives, financial sources from ECSF funds Cross factory & country research

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Partnership

Direction and Development Goals of T

Zero defects => Top quality (ability to reach it repeatedly) => obvious prerequisite 100 % availability of technology Innovation (anticipating and meeting customers requirements), investments (modernization of Blooming and Reversing Mill, annealing furnaces for bars and wires, STAKU lines #2, #3 etc.) Ecology-friendly production (dedusting of the BOF plant etc.) High productivity low costs, individual and team top performance, Hiring young experts, training, experience and knowledge sharing, innovative activities Accident free steel

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Staff

Technology

Direction and Development Goals of T

Optimizing of the activities within the T/MS Group, process management, sharing, standardization Product chains acquisitions, new investment Implementing of management systems compatible with our customers (IT, KAIZEN, TPS, ) Utilization of APS system

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Management

Conclusion
Boom in steel industry continues but
The technological requirements on steel products will increase The strong one can control their production capacities depending on demand The threat from East will grow The metallurgical basic industry will move to raw materials sources, gradually

Our way - dynamics, courage, creativity, development of manpower, responsibility for the region Sustaining our vision advanced industrial company based on steelmaking tradition

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