Personel policy - Training and education

In line with our ”Personnel Plan”, personnel policy in 1998 focussed on three basic areas: personnel policy itself, motivation and corporate culture. As part of our personnel policy, basic strategic aims were set for all three areas.
In 1998, as in previous years, there was a move to increase the percentage of production workers in proportion to other employees. We also set ourselves the goal of increasing our employees´ motivation using a quality motivation system with the aim of becoming a high quality company with a loyal workforce. In the field of corporate culture our aim was to improve communication within the company by using newly created channels of communication and introducing team work at all levels.
In order to reach our personnel policy goals, several projects were carried out during the year. These included the rationalisation both of the company´s activities and the size of the workforce and a project to eliminate activities not directly connected with our main production programme. The rationalisation project was carried out in the first and second quarters of 1998. In the fourth quarter of 1998 a personnel audit was implemented with the aim of identifying further surpluses in the workforce. The elimination of activities unconnected with the main production programme was supported by a project that was in part carried out in the third and fourth quarters of 1998. The rationalisation of the workforce carried out during 1998 resulted in a reduction of the proportion of administrative staff to workers to 22% compared with 31% in 1997. The total number of employees came to 693. The fluctuation rate grew by 9% on the previous year.
The aim of increasing both the motivation and quality of the workforce was promoted by many personnel activities. Full use was made of trial periods for new staff, company presentation, cooperation with schools, the advertising of job vacancies, careful selection of new staff and psychological and professional testing of our employees. In addition to standard training and education programmes, we focussed in particular on management training, in which we invested a total of 290 thousand CZK. In the fourth quarter of 1998 a comprehensive sociological survey was carried out with the aim of eliminating any communication problems between management and employees. The findings of the survey have been analysed and provide a valuable basis for further projects aimed at ensuring the quality of our workforce.

Stagnation in the Czech economy had a strong impact on demand on the domestic market. Revenue from domestic sales fell by 5% of total turnover. On the other hand, exports, in particular to the countries of the EU, increased.
On the domestic market our company concentrated on maintaining its dominant market share of sales of insulators to the regional energy companies and Czech Railways. On the foreign market we concentrate more on insulators for machinery.
Our company´s marketing activity is directed not only at Europe but also Australia, Asia, Africa and the Americas. We continue to concentrate on companies and multinationals which have a dominant role on particular markets.

ČSN EN ISO 9001 Certification

In January 1998 our company entered its third year of operating with a quality control system in accordance with the standards of ČSN EN ISO 9001 and, in addition, with a certificate awarded by TUV CERT. The audit carried out on 18.2.1998 and 22.21998 was also an extension audit. It marked the culmination of the nine-month implementation of the quality control system in the Merklín plant.
The audit confirmed the functioning and effectiveness of the quality control system in accordance with the standards of ČSN EN ISO 9001 in both plants and resulted in the awarding of a new certificate valid until 1999 for both the Louny and the Merklín plant. In preparation for both the audit and the extension audit two basic documents of our quality control system were revised for 1998 - ”Policy on Quality Control” and ”the Aims of Quality Control”. The functioning of the quality control system was assessed during 1998 by the management of the company using internal checks and at the end of the year its functioning and effectiveness were assessed on the basis of an integrated analysis extending to all twenty chapters.
In line with company strategy we set out a system for describing and defining procedures in quality control in accordance with ISO 9000 standards for the year 2000. This system is backed up by the reengineering project which is currently being started. A system for simplifying quality control documentation was also drawn up. We anticipate that the introduction of procedural descriptions will make the quality control system less administratively demanding and more accessible for all our employees. The process is set to culminate with the introduction of the TQM method and a move to the EFQM model.

Economics and finance

In 1998 our joint stock company had a turnover of 286 045 thousand CZK (a growth rate of 101.7%) and a net profit after tax of 1 349 thousand CZK (a growth rate of 24.7%). Turnover fell 28 404 thousand CZK short of our target figure while net profit fell 9 291 thousand CZK short.
The failure to attain our target figure for net profit was caused by stagnant turnover and the high level of our fixed costs. Due to the method of calculation prescribed by the Czech Accounting Standards our net profit was boosted by a 2 294 thousand CZK increase in the value of finished products.
The company was solvent throughout the year and had no overdue liabilities. Liquidity was maintained by restricting costs and through income from the sale of assets. The growth in the level of debt was partly due to our using the whole of our loan for the implementation of two investment projects - ”The expansion of very high tension insulator production” at the Merklín plant and ”The conversion of the heating system” at the Louny plant

Investments and repairs

Investments in 1998 totalled 62.6 million CZK, of which 23.9 million CZK was invested in the Louny plant and 38.7 million CZK in the Merklín plant. Of the money invested in the Merklín plant 12.28 million CZK were covered by our own resources while 26.49 million CZK were covered by an investment loan.
At the Louny plant the conversion of the heating system to gas was completed including the conversion of the technical heat machinery. During the year the old coal-fired boiler was taken out of service because it did not comply with the new stricter regulations on emissions into the atmosphere. By using a new modern heating system with gas infraradiators and local automatic boilers for individual buildings we will reduce heating costs thanks to the low level of heat loss and the sophisticated heat regulation that the new system offers. We obtained a grant from the PHARE fund for the project in 1998 and invested almost 20 million CZK in it. In addition to that project we also completed the construction of a new porter´s lodge and opened a second computerised construction area with the AutoCAD system. We continued to modernise the equipment in the production area for ceramic materials.
The most important investment project at the Merklín plant was the ”Expansion of the machine production of very high tension insulators”. Construction began in 1997 and the project has included an expansion of the preparation of materials, the installation of technical equipment for manual production of very high tension insulators and the installation of a new wagon-chamber furnace manufactured by the Eisenmann company. The investment totals 51.6 million CZK of which 33.4 million CZK was invested in 1998. Another very important investment in 1998 was the ongoing modernisation of the heating system at the plant. This investment project, which was started in 1995, will lead to reduced energy costs. Since the project began 12.9 million CZK has been invested in it, of which 4 million CZK was invested in 1998.
A total of 28 million CZK was expended on repairs and maintenance in 1998, of which 17.7 million CZK was spent at the Louny plant and 10.3 at Merklín. The share of expenditure on repairs carried out by external firms came to about 35%. At the Louny plant repairs on the roofs and skylights of the production halls came to 3.2 million CZK. The main item of expense is repairs to machines and production equipment ranging from everyday repairs and preventative inspections to general overhauls.
Among the most important items of expense at the Merklín plant were the general overhaul of the filter presses, repairs to the furnace wagons of the tunnel furnace and Bickley wagon-chamber furnace and a general overhaul of the Ritter 800 vertical vacuum press.

The Environment

Elektroporcelán Louny a.s. pays constant attention to dealing with environmental problems as can be seen from the amount of financial resources we have invested in that area. In 1998 we invested 24 million CZK while operating costs included 1.6 million CZK spent on ensuring that we met environmental requirements.
At the Louny plant the largest environmental project of 1998 was the completion of the conversion to gas heating throughout the site and the shutting down of the obsolescent fossil fuel boiler which was both unecological and uneconomical. That led to a reduction of year’s emissions into the atmosphere of about 210 tonnes of pollutants and to the elimination of the outdoor fuel store and a resulting reduction in dust levels in the area. At the Merklín plant the decentralisation and conversion to gas of the heating system also continued, and the process should be completed, together with the elimination of the old boiler, during 1999. The conversion to gas is not only an environmental measure but will also lead to financial savings on heating. Our constant care for the environment is also demonstrated by the ongoing measuring of all the newly installed gas-powered equipment in operation.
Our company also pays constant attention to waste recycling and the re-use of waste as a raw material. At present our company complies with all the required limits on the emission of pollutants into the atmosphere and the release of waste water.

Company structure

Company Bodies on 31. 12. 1998

On 11. 6. 1998 the General Meeting approved the new composition of the Company Bodies. The extraordinary General Meeting of 30.10.1998 confirmed their new composition.

On 20. 11. 1998 Ing.Jaroslav Turek resigned from his position as a member and Vice-Chairman of the Board.
On 26. 11. 1998 Ing. Milan Březovský was co-opted as a member of the Board and elected to the position of Vice-Chairman of the Board.

Profit and loss account (in thousands of CZK)

Balance Sheet (in thousands of CZK)

Auditor´s report to the shareholders of Elektroporcelán Louny a.s.

We have reviewed the information included in the 1998 annual report of Elektroporcelán Louny a.s. The scope of our review was limited to confirmation as to whether the information included in the annual report was consistent with the financial statements.

In our opinion, the financial statements present fairly, in all material respects, the assets, liabilities and equity of Elektroporcelán Louny a.s. as of 31st December 1998 and the results of its operations for the year then ended in accordance with the Act on Accounting and relevant legislation of the Czech Republic.”

Jablonec nad Nisou 19th May 1999
KPMG Česká republika Audit, spol. s r. o.
Licence number 71

Ondřej Duda
Licence number 12

A Report from the Supervisory Board of Joint Stock Company Elektroporcelán Louny for 1998

The Supervisory Board functioned in accordance with the company regulations of Elektroporcelán Louny a.s. and consisted of the following five members: Ing. Václav Beneš (Chairman of the Supervisory Board), Ing. Jaroslava Riedlová, Ing. Karel Galgonek, Eduard Škivra and Ing. Karel Tvrzník.
At its meetings the Supervisory Board examined the company´s finances, its commercial and manufacturing activity, its personnel policy and its assets.
One of the main duties of the Supervisory Board is to monitor the performance of the Board of Directors and the carrying out of the company´s commercial activities and to ascertain whether those activities are carried out in accordance with legal requirements and the regulations and directives of the General Meeting and whether the accounting records are kept accurately. To the knowledge of the Supervisory Board there is no reason to believe that either legal requirements or the regulations of Elektroporcelán Louny have been breached in any way. Moreover, the unqualified recommendation of the auditor that the annual statement of accounts be approved testifies to the fact that the company´s accounts and stated results comply with currently valid regulations and laws.
The Supervisory Board discussed the finances of Elektroporcelán Louny a.s. for 1998 and examined the annual statement of accounts and the auditor´s report on the verification of the accounting system, the annual statement of accounts and the proposal for the distribution of profit. The Supervisory Board recommends that the annual statement of accounts and the proposal for the distribution of profit be approved. The Supervisory Board recommends that of the total net profit for 1998 of 1,349,220.89 CZK, 67,461.04 CZK be allocated to the reserve fund and the remaining 1,281,759.85 CZK be left as undistributed profit.