The Effects of the Main Changes of the Control System

in TŘINECKÉ ŽELEZÁRNY, a.s.

The Effects of the Main Changes of the Control System

in TŘINECKÉ ŽELEZÁRNY, a.s.

Ing. Jiří Cienciala, CSc.

Chairman of BoD and CEO

Ing. Jiří Cienciala, CSc.

Chairman of BoD and CEO

2

�Agenda

� Introduction of TŘINECKÉ ŽELEZÁRNY, a. s.

�Objective of TŘINECKÉ ŽELEZÁRNY, a. s.

�Methods Applied

�Results Achieved

�Conclusion

3

�History

1st electrification of rolling mill

1938

World War II - confiscated

1946

Nationalized

1983

BOF

1991

Joint stock company

Biggest BF in Czechoslovakia

1923

Centralization of steelworks at Třinec

1877

Railway Košice - Bohumín built

1871

Privatisation fully complete

1996

1906

Mining and Metallurgical Company1839

TŽ established by the Court of Habsburg‘s

4

�Technological flows

drawing andsurface finish

tube millOstrava-Vítkovice

productionof chains

Ar

LF

RH

IR-UT

peeling and grinding

heattreatment

coke plant

BF

sinter plant ingot teeming

BOF

EAF

bloomCCM

billet CCM

bloomingmill

reversingmill

medium section

light section

wire rod mill

billet millKladno

ladlemetallurgy

strip millBohumín

finalization

5

�TŽ Subsidiaries and Affiliate Companies

Řetězárnachains

Refrasilrefractories

Vesuvius ČRrefractories

ENERGETIKATŘINECenergy

production

SLÉVÁRNYTŘINECfoundries

STROJÍRNYTŘINECmachinery

FERROMORAVIAsteel drawing

TŽSCHVKladno

rolling of SBQ

VVTtube mill

6

�Products

sections

wire rod

rails

wide steel

semis

rebars

SBQ bars

7

�Motto: Quality Through the Ages

Strategic Objectives till 2011 • Objectives for YearsProjects within Key Areas:

Partnership ManagementStaffTechnology

Advanced industrial company based on steelmaking traditionOur Vision:

staff‘s abilities•company and region linkedtradition - since 1839•trade mark

Our Groundwork:

Client orientation • Innovation • Business spirit • FlexibilityContinuous improvement • Teamwork • Alliance thinking

Consistency, observance • Sharing knowledge and experienceCommunication • Common responsibility • Development of trust

Attitudes &Principles:

Our MissionTogether for the generations to come

8

�Objective of TŘINECKÉ ŽELEZÁRNY, 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

9

�TŽ Highlights

54175519559957776263peopleEmployees

18.8516.6824.285.575.22%ROCE

407

8.42

2068

30827

2205

2248

2005

434

11.72

2575

29275

2301

2427

2004

465

10.55

2684

31675

2364

2517

2006

404377tonsSteel per employee

2.461.79%ROS

518309mil. CZKProfit

2103421272mil. CZKRevenues

21902258ktSales of products

23332364ktSteel production

20032002UnitIndicator

Methods AppliedMethods Applied

Strategic Goals and Fulfilment

in Key Areas of Partnership, Technology, Staff, Management

Strategic Goals and Fulfilment

in Key Areas of Partnership, Technology, Staff, Management

11

�Strategic Goals and Fulfilment

� Customer-oriented company (partnership, just in-time, innovation), optimal externalisation of non-productive processes, more efficient management of subsidiaries

� External sources – production chains –acquisitions, new production capacities in TŽ => leading to product portfolio diversification => resulting in strengthening the company‘s resistance to fluctuations in different market segments

� External sources (using various grants) utilization for TŽ‘s development to the largest possible extent

P artner ship

12

�Strategic Goals and Fulfilment

� Permanent process improvement – exploitation of internal sources: productivity growth (new investments, innovation, downsizing), quality, ecology-friendly production

� Significant investments 2000-20052000 2nd stage of wire rod mill modernization2003 Modernization of continuous light section mill2004 Exchange of the converter vessels, new ladle

furnace2005 Major overhaul of the blast furnace #4,

exchange of the converter vessels

Technolog y

13

�Strategic Goals and Fulfilment

Technolog y

Reconstruction of the CCM #1 – 2 strands fi 525 mm

STC Annealing furnace #3

Dedusting of Sinter Plant #1

RH Vacuum Degassing Station #2

Significant Investments 2006

Significant Planned Investments 2007

Bars finishing line

Desulfurization of the hot metal

Secondary de-dusting of the BOF Plant

Garret coiling machines

14

�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 IISI‘s Accident-Free Steel program

S taff

15

�Strategic Goals and Fulfilment

� Setting TŽ‘s strategy and specifying tools for its implementation (strategic framework, project management)

� Crisis management in TŽ in 1999 (savings of CZK 1.2 billion, company‘s consolidation – appropriate preparation for the periods to come)

� Strategic Management (Business Plan, Financial Plan, BSC, Project Management, Key Production Programs etc.)

Manage m

ent

Results AchievedResults Achieved

In Key Areas

of Partnership, Technology, Staff, Management

In Key Areas

of Partnership, Technology, Staff, Management

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�Customer-oriented Company

TŽ

CustomersESAB – electrodesMUBEA –springs

ŽDB – wireMoravské forges

Technology suppliersSiemens

AutelSMS MeerConcast

Corporate developmentCooperation on quality

Cooperation on investment activities

Example:Cooperation with research

institutions, universities, companiesVesuvius, Refrasil

P artner ship

18

�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

86.00

83.00

4.15

4.14

4.30

4.02

2005

83.0081.6083.00Satisfaction with product (%)

78.4080.8083.80The level of customer satisfation (%)

3.924.044.19Total Index

3.834.274.62Index – Satisfaction with deliveries

4.154.084.15Index – Satisfaction with product

3.773.793.79Index – Satisfaction with service

200420032002P artner ship

19

�Trends of the Steel Grades Produced

Technolog y

20

�Change of the Product Portfolio (%)

Technolog y

21

�Air Pollution (t/year)

Technolog y

22

�Number of Accidents

S taff

23

�Results of Satisfaction Measuring

0.7070.2730.120-0.328-0.214Perspective

for employees

0.5120.3860.4930.3620.421Total satisfaction level

0.420

0.753

0.818

-0.326

2004

0.591

0.714

0.822

-0.120

2002

0.014

0.408

0.373

-0.266

2000

0.064

0.418

0.288

-0.170

1999

0.653Confidence

in the manager

0.761Knowlegde of companies objectives

0.815Company perspective

0.065Total salary

Indicator 2006S taff

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

24

�Development of Parameters – BSC Method

M

T

S

P

Production cost

Stock level

Material utilization according to mills

Production capacity utilization

Accident rate

Ratio of skilled employees

Labor turnover

Start-up curve of new investments

Claims according to mills

V

R

T

RF

R

M

T

S

P

Pretax profit

Pretax profit of subsidiaries

Production of rolled material

Total cost of hot pig iron

Total cost of hot steel

Labor productivity

Ratio of skilled employees

Labor turnover

Market share CR, EU, CEFTA

Contentment of the customers

T

O

P

M

T

S

P

Production cost

Stock level - charge

Material utilization

Charge richness

Accident rate

Ratio of skilled employees

Labor turnover

Start-up curve of new investments

Claims

V

OManage m

ent

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�Projects in Key Area Management

Manage m

ent

Completed projects, e.g.:

� Implementing of VDA 6.1 and ISO 14001 in TŽ

� Migration SAP-R/2-R/3

� Implementing of TPM in TŽ

Projects in progress, e.g.:

� Implementing of APS in TŽ

� Implementing of Process Management – 2nd stage

� Security of IS according ISO 27001

What are we expecting in the nearest future?What are we expecting in the nearest future?

Outlook and ConclusionOutlook and Conclusion

27

�Direction and Development Goals of TŽ

� 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

P artner ship

28

�Direction and Development Goals of TŽ

� 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

Technolog y

S taff

29

�Direction and Development Goals of TŽ

� Optimizing of the activities within the TŽ/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 systemManage m

ent

30

�Conclusion

� Boom in steel industry continues but …� The technological requirements on steel products will increase

� The strong one can control their production capacities dependingon 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