Corporate Culture
BUSINESS PARTNERS
We will constantly focus our efforts on fair, high-quality and timely
satisfaction of our customers’ needs. We will develop relationships
based on mutual trust, cooperation and friendship. We will settle
our liabilities to suppliers, banks and contractors with the highest
degree of responsibility.
SHAREHOLDERS
We will work to ensure that the shareholders’ investment and
their confidence as to the correctness of the decision to invest are
rewarded with expected and suitable returns. We will take care of
the Company’s long-term vitality and profitability by investing into
development and employees. We understand that our responsibility
is proportionate to the trust that has been placed in us by the
shareholders.
EMPLOYEES
All employees will enjoy an honest relationship. Fair payment for
the work well-done is an unalienable right. We will make sure that
the rights to appropriate information, personal safety and equal
treatment are respected. The duty of the Company’s management
is to promote a positive atmosphere and care for the development
and implementation of the rules and principles of ethical operations.
LOCAL COMMUNITY
Within the scope of the sustainable development philosophy,
investment in environmentally-oriented projects and targeted
technology design, we will strive for optimum paths and methods of
environmental protection and health of our community members.
We will strive for and participate in the development and progress of
the local community in the areas of education, sports and culture to
the highest possible degree.
ANNUAL
REPORT
2020
2020
ANNUAL
REPORT
Celje, March 2021
CONTENTS
I. BUSINESS REPORT 7
Business Operations in Brief 8
General Information 9
Basic Information 9
Registered Office, Locations, Related Company and Representative Office 9
Company Organisation 10
Company Profile 11
Corporate Vision 11
Mission 11
Report by the Management Board 12
Report by the Supervisory Board of Cinkarna Celje, d. d. 16
Internal Audit Report 21
The Company’s Activities and Product Lines 22
Operational and Performance Analysis for 2020 23
SALES 23
OPERATING PROFIT OR LOSS 26
SHARES – PRICE AND TURNOVERT 27
DIVIDENDS 28
EXPENSES AND COSTS 29
ASSETS AND LIABILITIES 31
The Company’s Operating Risks and Their Management 35
Corporate Governance Statement 49
The Internal Control and Risk Management System in Relation
to the Financial Reporting Procedure 49
Information on the Activities of the Company’s General
Meeting and its Competencies, Shareholders’ Rights and their Enforcement 50
Information on the Composition and Functioning of the Management
and Supervisory Bodies and their Committees 51
Remuneration of the Members of Management and Supervisory Bodies 53
Corporate Governance Code for Publicly Listed Companies 56
Code of Ethical Conduct and Work 57
Diversity Policy 57
Development Foundations and Strategy 59
INVESTMENTS 59
DEVELOPMENT ACTIVITIES 61
QUALITY ASSURANCE 62
STRATEGY 63
5
CINKARNA.SI
Non-Financial Statement 65
Description of the Non-Financial Business Model 65
Environmental Policy in Brief 65
Social Policy in Brief 68
HR Policy and Safety at Work in Brief 72
Costs of Occupational Health and Safety and Fire Safety 79
Human Rights Policy in Brief 79
Anti-Corruption and Anti-Bribery Policy in Brief 79
Key Non-Financial Indicators 80
Key Risks and their Management 81
Due Diligences 81
II. FINANCIAL REPORT 83
FINANCIAL STATEMENTS 84
NOTES TO THE FINANCIAL STATEMENTS 90
Significant Business Events After the End of the Financial Year 127
Independent Auditor’s Report 128
Summary Overview of Operations since 2010 133
The Company’s General Meeting & Capital Structure 134
Statement by the Management and the Persons Responsible
for the Compilation of the Annual Report 135
Corporate Culture (on the cover) 138
6
ANNUAL REPORT 2020
I. BUSINESS
REPORT
7
CINKARNA.SI
Operations in the Last Three Years in Brief
2018 2019 2020
Change in %
2020/2019
Sales 163,960,861 172,586,979 172,386,851 -
Net profit or loss 30,558,183 21,436,385 18,950,656 - 12
Total dividends paid 21,547,246 22,848,863 13,559,325 - 41
Equity (31 Dec) 173,925,466 170,342,846 174,016,279 + 2
ROE 21.7% 14.7% 12.5% - 15
Per share values (diluted)
- Net profit or loss EUR 37.51 EUR 26.53 23.45 - 12
- Dividends paid
Gross EUR 26.52 EUR 28.27 EUR 17.00 - 40
Net EUR 19.89 EUR 21.20 EUR 12.75 - 40
- Equity EUR 213.50 EUR 210.8 EUR 215.37 + 2
- Market price (31 Dec) EUR 181.0 EUR 187.5 EUR 178.0 - 5
No. of shares 814,626 807,977 807,977 -
No. of treasury shares 6,649 10,652 21,951 + 106
No. of shareholders (31 Dec) 2078 1920 1920 -
No. of employees (31 Dec) 908 846 824 - 3
In EUR
8
ANNUAL REPORT 2020
General information
Basic Information
Cinkarna, metalurško kemična industrija Celje, is a public limited company with re-
gistered office in Celje, at Kidričeva 26, and entered in the Companies Register kept
by the Court of Celje, no. I-402-00.
The Company's principal activities include:
■ titanium dioxide production,
■ sulphuric acid production,
■ zinc recycling,
■ manufacture of products for use in agriculture,
■ manufacture of anti-corrosion coatings and powder coatings,
■ processing of fluorinated polymers and elastomers, and
■ ancillary service activities.
Other information:
■ tax no. 15280373
■ registration no. 5042801
■ activity code 20.120
■ size large public limited company
■ financial year calendar year
Registered Office, Locations, Related Company and Representative Office
Company Cinkarna, metalurško kemična industrija Celje, d. d.
Registered office Kidričeva 26, 3000 Celje
Telephone –
switchboard: (+386) 03 427 6000
Fax – Management
Board: (+386) 03 427 6106
Fax: 36517 METKEM SI
E-mail: info@cinkarna.si
Website: www.cinkarna.si
Dislocated
business unit Chemistry Mozirje
Registered office Ljubija 11, Mozirje
Telephone: (+386) 03 837 0900
Fax: (+386) 03 837 0950
9
CINKARNA.SI
Company Organisation
The Company is organised as a set of business profit centres, separated in terms of
organisation and management, accompanied by centralised support departments
and a centralised unit providing maintenance and energy infrastructure.
MAINTENANCE AND ENERGY BU
JOINT SUPPORT SERVICES
TITANIUM DIOXIDE BU
METALLURGY BU
CHEMISTRY CELJE BU
CHEMISTRY MOZIRJE BU
POLYMERS BU
Finance Department
Marketing Department
R&D Department
Investment Department
HR & General Department
Department for Occupational
Health and Safety
Legal Department
Quality Assurance Department
Environmental Protection Department
Accounting Department
IT Department
Internal Audit Department
Director Jože Gajšek
Director Tomi Gominšek
Director Friderik Madarasi
Director Andrej Lubej
Director Irena Vačovnik
Director Darko Košak
Director Jurij Vengust until 30 June 2020
Director Irena Franko Knez
Manager Pavel Blagotinšek
Manager Blaž Črepinšek
Manager Marko Cvetko
Manager Otmar Slapnik
Manager Gregor Gajšek
Manager Ksenija Gradišek
Manager Bernarda Podgoršek Kovač
Manager Karmen Fujs
Manager Boris Špoljar
Manager Patricija Veršič until 30 September 2020
Manager Jure Vezjak since 1 October
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ANNUAL REPORT 2020
Company Profile
Corporate Vision
Mission
With its 148-year tradition of uninterrupted operations, Cinkarna
Celje, d. d. is among the best surviving companies in the Slovenian
business sector. Until 1968, the Company’s fundamental activity
was metallurgy, but having started the production of titanium
dioxide pigment in 1972 and its subsequent expansion, Cinkarna
Celje, d. d. is now classified as a company in the chemical
processing sector. It employs 824 people and generates EUR
172.4 million per year in sales revenues, with around 92% of sales
generated on international markets. It thus occupies the leading
position in the Slovenian chemical processing industry and is
one of the most important and successful Slovenian industrial
companies.
Cinkarna Celje aims to consolidate and improve its international
status as a trustworthy, reliable and dedicated manufacturer
of titanium dioxide pigment. Special emphasis is placed on
achieving an excellent relationship between price, quality and
prompt delivery of our products. We wish to retain our market
position and continue to produce more than one percent of the
entire world consumption and over three percent of the entire
European consumption of titanium dioxide pigment. We wish
to achieve the status of a premium supplier of copper fungicides
on the demanding Western markets and upgrade our position
as the leading supplier of powder coatings in the region.
Carrying out chemical and metallurgical processes professionally
and socially responsibly, we produce a wide range of products
necessary for everyday life. We provide work and personal growth
to our employees and expected returns to our shareholders.
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CINKARNA.SI
Report by the Management Board
In 2020, we achieved sales comparable to those in 2019 and approached the plan for
2020. In the context of the current situation, the one percent failure to achieve the
planned sales is minimal. An increase in demand for our flagship product minimised
the negative impact of the epidemic. The deterioration of the epidemic situation
provoked our customers to accumulate pigment inventories at the end of the first
quarter. Decreased production and increased inventories held by our customers
resulted in a decline in our sales in the second quarter compared to the second
quarter of last year. Sales in the third quarter improved compared to the previous
quarter owing to a better epidemiological picture. The last quarter was characterised
by optimism in the industry, which was reflected in exceeding the monthly and
planned values.
In Cinkarna Celje, d. d., we took a number of measures to prevent the possibility of the
spread of the coronavirus. To ensure everyone's safety, employees are able to perform
work in various ways; if they are at the company's location, they are subject to the
prescribed preventive measures. At the time of preparing the report, the Company
operates smoothly and performs all its business functions, including production.
Titanium dioxide pigment and the rationalization of the portfolio of strategic business
areas, which is aimed at our core product lines and abandoning unprofitable
activities, remain the essential building blocks of the Company's success. In terms
of global titanium dioxide pigment production, we are one of the smaller producers.
In Europe, the Company is comparable to minor East European producers. Industry
analyses and business performance benchmarks place Cinkarna Celje, d. d.
among the top performing players in the titanium dioxide pigment industry. The
Management Board estimates the Company's business results to be objectively
good and exceeding the forecasts for 2020.
In the international economic environment, despite encouraging indicators at the
beginning of this year, economic activity has declined. This is related to the risk
arising from the still unclear outcome of the COVID-19 epidemic and the related
factors. After a distinct rebound of economic activity in the third quarter and a slight
decline in the fourth, the decline in GDP was lower than initially projected. This is due
to the successful adaptation of consumers and businesses to the existing situation.
Regardless of the successful adjustment of selling and purchasing activities,
monetary and fiscal policy and growth in foreign demand will have the greatest
impact on further growth in the short term. However, the situation is unlikely to
finally stabilize until an adequate level of vaccination is achieved. In addition to the
uncertainty associated with the spread of COVID-19, we have not perceived any
other significant risks in the international economic environment that could have a
significant negative impact on the Company's operations and business plans in the
current year.
In the context of the specific markets and flagship products of Cinkarna Celje, d.
d., despite the otherwise diminished general economic activity explained above, we
saw initial growth of demand due to customers’ fear related to the future supply
of raw materials. The situation began to deteriorate in the second quarter, which
was mainly due to a significant drop in customer orders from Italy, Spain and
Turkey. In the third quarter, the situation in these markets partially improved. In
the last quarter, we recorded non-traditionally high growth in orders. Demand was
significantly higher for all producers of titanium dioxide. This is mainly a reflection
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ANNUAL REPORT 2020
of increased volume of domestic renovations and the demand for pigment types for
the paint industry, as well as the aforementioned adjustments of consumer habits.
The favourable conditions will spill over the value chain and improve the margin in
the coming months. Pigment inventories held by customers are dwindling faster
than usual. Average global sales prices have been 10% lower since the end of 2019
and 4% lower since the end of September 2020. In 2020, the changes in sales prices
by markets were harmonious. Past pressures from key raw material suppliers are
still reflected in higher average prices of key titanium-bearing raw materials. In the
coming quarters, we can expect price increases and occasional shortages of raw
materials due to the abundance of fresh money, disrupted supply chains and the
reopening of markets in line with the release of measures related to the COVID-19
epidemic.
As the situation in the titanium dioxide pigment industry stabilises, we maintain
our long-term business strategy based primarily on an active marketing approach
aimed towards finding and developing the most profitable customers and markets,
increasing market shares in the highest quality markets and establishing long-term
partnerships with key customers. We are planning a more restrictive policy in the
area of managing the costs of materials, raw materials, energy, and services. At the
same time, we are aware that employees are the most important foundation of
business success, so we will continue to ensure, in agreement with representative
trade unions and employees’ representatives, that employee benefits will adequately
reflect the Company's performance and its business results.
As a relatively small producer of pigment, Cinkarna Celje, d. d. is facing the changes
and the situation on the market as a typical follower, while we also endeavour to
make the most out of market potentials within the given framework in terms of
scale and time dynamics. In terms of business results and benchmarks, we exceed
the average. In 2020, we sold 7.1% more tons of pigment than in the same period in
2019, while our average sales prices were 4.6% lower than the average prices achieved
in 2019.
In 2020, the operation of product lines other than zinc processing was above the
level of the previous comparable period. This relates particularly to the value of sales
of metallurgic products, which was lower than in the same period last year due to
lower stock market prices of zinc and lower demand. Despite increased demand for
metallurgic products towards the end of the year, it was not possible to compensate
for the outage and reach the plan.
The main focus of the Company's business policy remains the same. We aim our
attention at maximizing our production capacity, exploiting market potentials in
the direction of raising sales prices, optimizing production costs and implementing
investment plans. Our financial operations are traditionally conservative, the Company
is financially stable, the volume of funds is high and enables smooth and timely
coverage of all liabilities. On 7 July 2020, in accordance with the Company’s General
Meeting resolution of June 2020, we paid dividends above the industry average in
the total amount of EUR 13.54 million (EUR 17.00 per share), which represents an 11%
dividend yield.
The Company actively prepares and implements several interconnected projects
providing the basis for comprehensive management of environmental risks. In order
to eliminate risks arising from old burdens related to the current production in Celje,
we collaborated with CDM Smith to prepare a summary of all research performed
so far and a comparison of different legislations. We forwarded the documents
13
CINKARNA.SI
to the Ministry of the Environment and Spatial Planning. The latter informed
us of their position, to which we will adjust our activities specified below. A very
important achievement in the period under review was the beginning of work on
the rehabilitation of the Bukovžlak non-hazardous waste landfill (ONOB). We used
49.8% of the funds from our environmental provisions planned for 2020. The work
was slower due to the epidemiological situation, and we plan to compensate for
the lost work in 2021. There are also some investments in progress to improve the
operation or upgrade the treatment plants. We are preparing measures to reduce
emissions in the work environment.
In 2020, Cinkarna Celje, d. d. generated EUR 172.4 million of sales revenues, which
is at the level of the comparable period in the previous year. Sales in 2020 were 1%
below the annual sales plan. Total exports in the period reached EUR 157.8 million,
which is 3% more than in the previous corresponding period and stands for 101%
of the annual sales plan for foreign markets. Effective cost management, increased
demand in the last quarter, the postponement of a major overhaul to 2021 and the
extension of the production year had a positive impact on the Company’s net profit,
which exceeded the planned annual profit by 34%.
Within the scope of HR activities and management, due to the limited operation
of human resources during the COVID-19 epidemic, we geared our activities into
a set of measures aimed at ensuring the smooth operation of the Company and
thus the maximum level of safe and healthy work, protection of our employees
against possible infections and optimization of working conditions. We pursue the
principle of positive, motivating wage policy and ensure a suitable level of employee
satisfaction and motivation.
In 2020, we spent EUR 12.23 million on investments, acquisition of fixed assets
and replacement equipment, which represents 61.5% of the planned funds. The
amount is lower than planned, which is mainly due to the suspension of non-urgent
investment and maintenance work during the COVID-19 pandemic. Part of this work
will be completed in the current year. The bulk of the funds invested was allocated for
the production of titanium dioxide, i.e. improving the quality of products, ensuring
the reliability of individual devices or processes, improving the safety and health of
the working conditions and reducing environmental impacts.
As regards our development activity, we pursue a five-year strategy. We carried out
our development activities according to trends and customer expectations. We
implemented improvements in all processes, enhancing the quality of our products,
achieving greater efficiencies and facility capacities, and more efficient work. In
our efforts to ensure sustainable development of titanium dioxide production,
we continue the project of integrated water management spanning over several
years (separate collection of wastewater from Water Preparation, water treatment,
preparations for the implementation of reverse osmosis for the treatment of part
of the wastewater from titanium dioxide production, development of a process for
reducing sulphate in wastewater and identifying solutions to reduce BOD5 and COD
in wastewater).
The Company's financial position remains stable, the Company settles all its liabilities
in full and on time. The Company has no bank debts, the remaining financial liabilities
refer to assignments. Cash at the end of the year amounted to EUR 37.7 million and
was 19% higher than at the end of 2019.
14
ANNUAL REPORT 2020
The Business Report presented in the continuation contains more detailed
information on operations, including comparisons and analyses. It comprises
information that is relevant for fair and objective presentation of the operations in
the previous year. The financial standing and operations of the Company in 2020 are
presented in the enclosed financial statements and the notes thereto.
Business Plan for 2021
The business plan for 2021 was prepared based on global macroeconomic forecasts,
projected GDP growth forecasts for the economically most important countries as
well as industry analyses and forecasts. The plan for 2021 was prepared amidst poor
macroeconomic conditions and the resulting uncertainty over the outcome of the
epidemic. We based our expectations and trend forecasts on these facts. For now,
market indices and indicators are at a better level than initially expected. We do
not expect significant market imbalance in for the 2021 period. We predicted that
average sales prices of pigment and, on the input side, also raw materials, would
remain approximately at the same level – i.e. stable conditions. The beginning of
2021 saw dynamic rise in the prices of pigment and raw materials. Energy prices
will be lower than in 2020 due to favourable provisions of the supply contract. In
terms of annual level comparisons, the relative relationship between purchasing and
selling prices is not to change substantially. The Company’s strategy for 2021 will be
oriented towards ensuring maximum levels of production quantities and sales and
utilising the potential of the most profitable pigment markets. With a high degree
of flexibility, we will allocate sales quantities to the most profitable markets. We are
traditionally pursuing the principles of conservative financial policy and reliable
financial position, bearing in mind the market’s volatility and the related risks. At
the same time, solid operations, cash surpluses and forecasts also imply adequate
and suitable payouts to owners in compliance with the Company’s strategic plans
and its financial position. The proposal for distribution is included herein. We plan
to generate EUR 165.9 million of sales revenues in 2021 and net profit in the amount
of EUR 10.6 million. It should be noted that the non-traditionally high demand in
the last quarter of 2020 helped to exceed the sales plan and the projected business
results for 2020. Good demand for pigment has also been noted at the beginning of
2021.
In line with the investment plan, which includes finishing the project of modernising,
stabilising and intensifying the titanium dioxide pigment production, we will invest
a total of EUR 14.4 million in the Company’s fixed assets, an increase of 17% over 2020.
The increased volume of investment is primarily due to extensive overhauls in the
production of titanium dioxide and in water treatment. We will invest in individual
programmes based on the need, ability and prospect as well as in line with the five-
year strategic plan. The planned value of investments for 2021 does not include the
reversal of environmental provisions in the amount of EUR 2.6 million.
The business plan is an assessment of future operating conditions and operating
performance that is based on the currently available set of key information, which
is why it should be understood as a forecast that inexorably carries with it a certain
level of uncertainty.
Management Board of the Company
Cinkarna Celje, d. d.
15
CINKARNA.SI
Report by the Supervisory Board of Cinkarna Celje, d. d.
In 2020, the Supervisory Board held/decided at 16 meetings, of which five extraordinary
and five correspondence. The Supervisory Board was as a rule in full attendance
at the meetings. Within the legal framework defined by law, regulations, the
Company’s Articles of Association as well as relevant codes and in line with the due
care approach, we carried out and implemented conscientiously our competencies,
duties and responsibilities. We discussed the submitted materials, presentations,
special explanations and notes diligently as well as organised and held interviews
with individual external experts. We tried to additionally clarify and study certain
topics through proposals, questions and requests for additional data, analyses and
reports. We believe that the Supervisory Board acted with the due diligence required
by the law and to the best of our knowledge and conscience, thereby responsibly
protecting the interests of the Company and the shareholders.
At the end of 2020, the Supervisory Board of Cinkarna Celje, d. d. had the following
composition: Dr Mario Gobb – Chairman, MBA, MSc, Luka Gaberščik, LLB – Deputy
Chair, David Kastelic, MSc, Dušan Mestinšek, BSc (Electrical Engineering) and Jože
Koštomaj, BSc (Mech. Eng.). At the end of the second quarter, the latter two were
elected by the Works Council as employee representatives in the supervisory body.
On 30 June 2020, Aleš Stevanovič was replaced by Jože Koštomaj. David Kastelic
replaced Dejan Rajbar on the part of capital representatives. Pursuant to Article 273
of the Companies Act, on 30 June 2020, the Supervisory Board appointed Aleš Skok,
member of the Supervisory Board, BSc (Chemical Engineering), MBA, USA, as an
interim Chairman of the Board.
The Management Board had the following composition: Tomaž Benčina BSc
(Metallurgy) and BSc (Economics) – President of the Management Board,
Nikolaja Podgoršek-Selič, BSc (Chemical Engineering), Specialist – member of the
Management Board, Deputy Chair, and mag. Jure Vengust, MSc – Member of the
Management Board in charge of Finance, Accounting and IT, whose term of office
expired on 30 June 2020. The term of office of member of the Management Board –
Worker Director, Marko Cvetko, BSc (Chemical Engineering), Specialist, expired on 23
October 2020. The Supervisory Board devoted its attention and time equally to day-
to-day operations, investments, business plans and regular internal audit activities,
as well as to finding suitable candidates to take over the management of one of the
largest chemical companies in the region. In the recruitment process, with the help
of a recruitment agency and internal proposals, some potential candidates were
identified and introduced to the members of the Supervisory Board. No candidate
received sufficient support from the Supervisory Board in the voting. Pursuant to
Article 273 of the Companies Act, Aleš Skok was appointed as interim President of
the Management Board. Together with Nikolaja Podgoršek-Selič and Marko Cvetko,
he took over the management of the Company on 1 July 2020.
In line with the Rules of Procedure of the Works Council and the Worker Participation in
Management Act, the Works Council proposed Filip Koželnik, MSc (Business Studies),
to the Supervisory Board to take the position of a member of the Management Board
– Workers Director for the 2020–2025 term of office. At the 5th extraordinary meeting
on 5 November 2020, the Supervisory Board agreed to the proposal of the Works
Council and appointed the proposed candidate as member of the Management
Board. Due to their professional profiles and with the aim to ensure the continuity of
management, the SB gave a full term until 30 June 2025 to Aleš Skok and Nikolaja
Podgoršek-Selič at the December meeting of the Supervisory Board.
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ANNUAL REPORT 2020
In 2021, the Company's Management Board has the following three-member
composition: Aleš Skok – President of the Management Board, Nikolaja Podgoršek-
Selič – member of the Management Board – Deputy President of the Management
Board – Technical Director, and Filip Koželnik – member of the Management Board
– Worker Director.
Among other things, it is necessary to outline the Company's activities for the containment
or prevention of COVID-19 and the possible impacts on business, the report and
discussion on the implementation of the development strategy, environmental issues,
safety and health/TiO2 classification issues, and reporting on energy consumption. The
Supervisory Board was kept informed of the development and course of environmental
protection projects. The Management Board informed the members of the Supervisory
Board in detail about the risk of shortage of process water and of the possible solutions.
Attention was also paid to monitoring the implementation of the Company's Strategic
Plan adopted in 2018 for the 2019–2023 period.
In 2020, investment scope grew by 2% compared to the year before, but it reached
only 61% of the planned funds due to the interruption of non-essential work and the
postponement of major overhauls. Investments thus totalled EUR 12.2 million. The
bulk of the funds were earmarked for the production of titanium dioxide pigment
to improve product quality, attain the planned production volumes and reduce
environmental impacts.
In December, we discussed and adopted the 2021 operating plan. The 2021 business
plan is based on relatively pessimistic macroeconomic forecasts and is traditionally
conservative. Sales plan stands at over EUR 165.9 million, which is 4% less than
achieved in 2020, and the planned net profit equals EUR 10.6 million. The planned
decrease of the latter is mainly due to market pressures to lower average sales prices.
The Supervisory Board was of the opinion that the plan was sufficiently ambitious,
adequately reflecting the situation in the business environment as well as the
competitive position and the possibility of generating results by the Company.
Owing to the efforts of employees and the Management Board in the emergency
situation we are facing, the results achieved in 2020 are very good and are among
the best in the history of Cinkarna Celje, d. d. They are also above average among the
top Slovenian industrial companies. The new Management Board has successfully
taken over the operations and continues the excellent management of the Company.
International industry comparisons as well again reveal that the Company’s results
are at the very peak of the global titanium dioxide pigment industry. The Company’s
profitability exceeded the business results of the majority of competing producers
of titanium dioxide pigment. We therefore believe that the earned net profit of EUR
18.9 million and total sales of EUR 172.4 million are excellent accomplishments. The
Company is traditionally pursuing the strategy of conservative financial operations
and is operating without long-term loans or external financial resources, thus being
financially stable and solid.
As mentioned, the good results in 2020 are the result of the still relatively high average
prices or margins, and a rise in demand seen towards the end of the year. We also
closely monitored progress with regard to the indicators of the physical volume of
business. Despite the epidemic and consequently deteriorated macroeconomic
conditions, the Company demonstrated organic growth and increased market
shares. The same applies to masterbatches and copper fungicides, which rank
among the major product lines of the Company in terms of relative importance.
Consequently, the 2021 goals are a logical continuation of the processes outlined
above, so special emphasis will be placed on improving/strengthening competitive
17
CINKARNA.SI
position, increasing market shares and boosting the physical volume of business.
In parallel, the possibility of further diversification of the product portfolio will be
explored.
The year of 2020 was also successful for the Company in the area of environmental
protection and employee health, and especially in containing the spread of COVID-19
among the employees. The Management Board took effective measures to adapt to
the situation and successfully prevent the mass spread of the virus.
The Supervisory Board believes that the measures of the Management Board are
also successful in terms of the implementation of investment plans and targeted
development work. Despite the high dividend payout, a high level of financial stability
was maintained. Efficient operations coupled with robustness and stability of the
system provide answers to the Company’s long-term prospects. The fundamental
business orientations and development policies set in the mid-term strategy were
qualitatively implemented in all key items. In 2018, the Supervisory Board participated
in the preparation of the development strategy up to 2023 and adopted it. The strategy
underscores the Company’s focus on the core activity of titanium dioxide and the change
of the sales portfolio of this flagship product towards enhanced quality, optical features
and development of products for advanced user applications. The Supervisory Board
actively supports the business policy focused on reducing risks and uncertainties and
ensuring a stable financial position of the Company. Together with the Management
Board, we also pay attention to and ensure compliance and requirements in relation to
permanent progress in environmental protection and employee health.
The Annual Report, comprising the mandatory financial statements, disclosures,
notes and the Business Report is deemed by the Supervisory Board to contain all the
relevant information and indicators and appropriate notes to the specific events and
facts. Acting upon the proposal from its Audit Committee, the Supervisory Board
approves the Annual Report of Cinkarna Celje, d. d. for 2020.
The Supervisory Board also took note of the independent auditor’s report received by
the Company on 26 March 2021 and believes the report to be a suitable presentation
of the mandatory audit of the financial statements and notes thereto and accepts
the auditor’s opinion that the Business Report is in line with the audited financial
statements. Therefore, the requirement for true and fair presentation of the
Company’s assets and financial position in the relevant period has been met to a
sufficient extent.
Report by the Supervisory Board’s Audit Committee on its Work in 2020 and on
the Review of the Annual Report of Cinkarna Celje, d. d. for 2020
The Audit Committee of the Supervisory Board of Cinkarna Celje, d. d. with the
following composition: David Kastelic, MSc – Chairman, Jože Koštomaj, BSc (Mech.
Eng.) – member and Gregor Korošec, BSc (Economics) – independent external
expert, met at seven regular meetings in 2020, of which two were correspondence
meetings due to the circumstances in the first epidemic wave. Regardless of the
circumstances, the members of the Audit Committee focused on the regular and
current tasks and responsibilities.
Members of the Audit Committee were present at all meetings. The meetings were
also attended by Jure Vengust, MSc – member of the Management Board in charge
of Finance, Accounting and IT (for the remainder of his term of office, then Aleš
Skok – President of the Management Board) and Karmen Fujs, MSc – Accounting
Department Manager, who provided answers and explanations to the questions
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ANNUAL REPORT 2020
of the Committee members. Certified auditors Sanja Košir Nikašinović and Lidija
Šinkovec from the audit firm Ernst & Young, d. o. o. were present at two meetings.
Internal Audit Department Manager was also present at all meetings (Patricija Veršič,
MSc until 18 September 2020, Jure Vezjak from 24 September).
At all regular meetings, the Audit Committee familiarised itself with interim operating
results of Cinkarna Celje, d. d. and paid special attention to financial and accounting
information. The Committee carefully considered the contents of the Company’s
interim and annual business reports and prepared proposals and recommendations
for modifications. As already mentioned, the Committee verified and examined on an
ongoing basis also internal audit reports, which also included reporting on the status
of implemented measures based on its recommendations, at the same time actively
cooperating, proposing improvements and directing internal audit operations.
The Audit Committee reviewed again the system for identifying, assessing and
managing operating risks of the company Cinkarna Celje, d. d. In 2020, the system
was adequately integrated into the Company’s business processes, thus substantially
enhancing its responsiveness and serving as a highly desired tool for active corporate
governance. The risk management system, which is fully incorporated in the
Integrated Management System, is based on prompt updating of the risk register,
in which the risks are classified systematically in terms of the estimated probability
of occurrence of individual types of risks and the level of potential damage. The
system also includes a range of measures aimed at managing these risks. The Audit
Committee has assessed the system as satisfactory.
In line with its authorities, the Audit Committee was in 2020 active in the regular audit
procedures for Cinkarna Celje, d. d. The principal activities could be summarised as
follows:
■ It met with the auditors and was briefed on the course of the final audit of the
financial statements of Cinkarna Celje, d. d. for 2019.
■ It reviewed the findings of the audit of the financial statements of Cinkarna Celje,
d. d. for 2019 and the auditor’s opinion.
■ It was familiarised with the management letter including findings of the audit of
the financial statements of Cinkarna Celje, d. d. for the year ended 31 December
2019.
The meetings and activities in 2020 were carried out for acknowledgement of the
final audit of the financial statements of the Company for 2019, for review of the
Annual Report of Cinkarna Celje, d. d. and the Internal Audit Report. In 2020, the
Internal Audit Department was implementing all internal audit tasks successfully
and in line with the plan, also reporting promptly to the Audit Committee.
The Audit Committee received the first draft annual report of Cinkarna Celje, d. d. for
2020 on 8 March 2021. At the meeting held on 8 March 2021, the certified auditors
were also present and answered further questions of the Audit Committee members.
The members of the Audit Committee carefully reviewed the draft annual report
and gave their comments at the Audit Committee meeting held on 16 March 2021.
The consolidated text of the Annual Report of Cinkarna Celje, d. d. for 2020 was
received by the Audit Committee on 29 March 2021 and discussed at its meeting on
6 April 2021. The Audit Committee confirmed that the Annual Report of Cinkarna
Celje, d. d. for 2020 was compiled in a timely manner and in accordance with the
Slovenian Accounting Standards as well as the provisions of the Companies Act in all
important aspects.
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CINKARNA.SI
The business section of the Annual Report of Cinkarna Celje, d. d. for 2020 comprises a
summary presentation of operations for the last three financial years. The operational
and performance analysis for 2020 provides a detailed overview of the assets and
profit of the Company as it contains all of the necessary notes on sales, operating
profit or loss, expenses and costs, assets and liabilities.
The development of the Company is based on its employees, investments, the
development activity, quality assurance and successful implementation of the
strategic plan for the following period up to and inclusive of the year 2023.
The Annual Report also includes the Non-Financial Statement, which includes, based
on the amended Companies Act, useful information regarding social responsibility,
the environment, HR matters and anti-corruption and anti-bribery activities.
The financial statements of Cinkarna Celje, d. d. for 2020, including the accounting
policies and notes, were audited by the audit firm Ernst & Young, d. o. o., which was
approved by the General Meeting at its 23rd regular meeting on 4 June 2019. On 26
March 2021, the auditor issued an unqualified opinion on the financial statements
of Cinkarna Celje, d. d. for 2020 and confirmed that the information contained in the
Business Report was in line with the attached financial statements. In the opinion,
the auditor pointed out the key audit matters disclosed in the financial section of
the report, namely Note 9 – Provisions and long-term accrued costs and deferred
revenues, which states that as at 31 December 2020 the Company disclosed EUR
16,350 of environmental provisions, which were set aside based on projects, reports
and assessments made by external advisors and by the management in relation to
the costs that will arise due to the rehabilitation of landfills and covering of future
obligations related to land redevelopment at the existing location of the Company,
formed based on the report of CDM Smith.
The Audit Committee came to the conclusion, based on the unqualified opinion in
the auditor’s report, additional explanations provided by the auditor and support
departments of Cinkarna Celje, d. d. and the data and disclosures contained in the
Annual Report of Cinkarna Celje, d. d. for 2020, that the Annual Report had been
compiled in accordance with the Companies Act (ZGD-1) and that the financial
statements, in all material respects, give a true and fair view of the financial position
of Cinkarna Celje, d. d. as at 31 December 2020 and its profit and cash flow generated
in the year then ended, in accordance with the Slovenian Accounting Standards.
The Audit Committee assessed the auditor’s work as objective and independent and
in compliance with the Auditing Act. The certified auditor and the audit firm did not
render any non-audit services to the Company.
The Audit Committee had no objections to the Annual Report of Cinkarna Celje, d. d.
for 2020 that would lead the Committee to withhold the proposal to the Supervisory
Board to act in accordance with Article 282 of the Companies Act and approve the
Annual Report of Cinkarna Celje, d. d. for 2020.
Chairman of the Supervisory Board
dr. Mario Gobbo
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ANNUAL REPORT 2020
Report of the Internal Audit Department
Internal audit in Cinkarna Celje, d. d. is carried out by the Internal Audit Department,
which is headed by Internal Audit Department Manager. Audit Department is
an independent organisational, responsible directly to the Management Board
in organisational terms and to the Audit Committee or the Supervisory Board in
functional terms. The Department operates in line with the International Standards
for the Professional Practice of Internal Auditing and other rules included in the
International Professional Practices Framework and the Hierarchy of Internal
Auditing Rules.
Its role is an independent and impartial assurance and consulting activity designed
to add value and improve the operations of the Company. It helps the Company
to achieve its objectives through systematical and methodical assessment and
improvement of the performance of risk management, control procedures and
corporate governance. It acts in compliance with the Fundamental Charter and
follows the principles of demonstrating integrity, professionalism, professional
diligence, impartiality and independence.
It carries out its activities in areas where key risks for the Company arise or may arise
and where it can contribute to the improvement of operations and increase business
security and business benefits for the Company, where dangers and weaknesses
emerge in the course of business that threaten the Company's continued existence
and development or where there is probability of fraud, error, override or disputes
with a view to making the Company's operations more effective, economical and
efficient.
It carried out its activities in 2020 in accordance with the approved annual work plan.
Seven of the eight internal audits and other internal audit activities planned were
performed, such as periodic monitoring of the implementation of recommendations,
internal audit planning, activities related to the work methodology, etc. The Manager
of the Internal Audit Department regularly reported the results of audits and other
activities to the responsible auditees and to the Management Board, and periodically
to the Audit Committee and the Supervisory Board.
Manager of the Internal Audit Department
Jure Vezjak
Certified Internal Auditor
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CINKARNA.SI
The Company’s Activities and Product Lines
Cinkarna Celje, d. d. produces and sells a wide range of products. The various product
subgroups can be combined into different product sales groups with similar intended
functions. Over the last years, the Company abolished some product lines, which
were not achieving planned profitability and performance levels.
The core product and sales group is titanium dioxide pigment, which combines
a range of various pigment types. Titanium dioxide pigment is a special inorganic
chemical; its extraordinary optical characteristics make it extremely useful in the
production of varnishes and paints, plastic materials, laminates and paper. Cinkarna
Celje, d. d. markets the pigment to global markets and successfully competes with
international corporations thanks to its constant progress in terms of technological
advances, formulations, adaptability, reliability and the achievement of an optimal
relationship between price, quality and delivery. This group is complemented by a
number of types of ultrafine titanium dioxide pigments. These are products featuring
high added value that can assume the role of a photocatalyst or UV absorber thanks
to their crystalline structure. They are incorporated in high-tech products (self-
cleaning systems, photovoltaics, suntan lotions, materials with UV stabilisers, etc.).
Plant protection products represent one of the key sales groups. The leading
products in this group are copper fungicides with various formulations and active
substances (copper hydroxide, copper oxychloride and tribasic copper sulphate).
The strategy for plant protection products focuses mostly on superior quality and
environmentally safe use. Over the last years, we achieved a major breakthrough in
sales to the demanding Western European markets. This group is also one of the key
pillars of the Company’s future development.
The product group consisting of coatings, powder coatings and masterbatches is
increasingly gaining in importance. It is a sales group which represents a vertical
upgrade of the basic production of titanium dioxide pigment. The coatings are
used predominantly for anti-corrosion protection of construction materials, and the
majority of powder coatings are intended for anti-corrosion and decorative needs in
the production of household appliances, heating elements and other metal goods.
Masterbatches are dynamic products intended for incorporation in plastic materials
for the purpose of improving their applicable characteristics.
Other significant products and sales groups of Cinkarna Celje, d. d. are:
■ the group of zinc alloys, anodes and wires,
■ the group of fluorinated polymers and elastomers that, owing to their
characteristics, are suitable for transport of aggressive mediums and protection
of process equipment and hardware,
■ sulphuric acid,
■ semi-finished products from the production of titanium dioxide pigment: titanyl
sulphate, metatitanic acid and sodium titanate, and
■ by-products from the production of titanium dioxide pigment: white gypsum
– CEGIPS (intended for the cement industry and use in agriculture), and red
gypsum – RCGIPS (intended for the filling in civil engineering construction,
construction of low dikes and covering layers).
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ANNUAL REPORT 2020
Operational and Performance Analysis for 2020
SALES
The Company's total sales in 2020, in the uncertain conditions created by the
epidemic, were less than 1% lower than sales achieved in 2019 and represent 99% of
the annual sales plan. Total sales, i.e. net sales revenues, reached EUR 172.4 million.
In EUR
Market 2020 2019 Change in 2020 (%)
Slovenia 14,623,430 18,818,634 - 22
EU 130,529,281 122,771,835 + 6
Third countries of the
former Yugoslavia 3,730,801 3,570,343 + 4
Third countries – other 23,503,340 27,426,167 - 14
Total 172,386,851 172,586,979 -
Slovenia 9% 12%
EU 76% 71%
Middle/Near East & Africa 4% 7%
Eastern Europe 11% 10%
USA & Mercosur 0% 0%
Monthly and quarterly sales analysis reveals that sales were relatively successful in the
first and fourth quarter of 2020. The first quarter of last year was exceeded, mainly
due to extremely high sales in January and March. The rise in sales in Q1 results from
the higher value of sales of titanium dioxide, copper fungicides, powder coatings
and the services of the Polymers BU. In the second quarter, sales did not reach the
plan or exceed the sales of the comparable period in the previous year. This is due
to the tightening of measures to prevent the spread of the coronavirus. Sales in the
second quarter were significantly below expectations and below the sales for the
comparable period in 2019, which represents a Q-o-Q decline of 13%. Third-quarter
sales are slightly below the comparable sales in the previous year, down 4% from the
plan. The last quarter was characterised by a non-traditionally high level of demand
in all BUs, which reflects the changed consumer habits and increased optimism
surrounding vaccine approval.
In March, we achieved one of the record monthly sales, which amounted to EUR 17.9
million. The lowest sales of the period under review in the amount of EUR 11.9 million
were recorded in December, which is in line with the expected reduced customer
activity in this month. Sales in October, November and December exceeded the
monthly sales plan and the results in the comparable periods in 2019.
Total sales to foreign markets rose by 3% in 2020 as compared to 2019. The increase
in sales to foreign markets is undoubtedly due to higher quantities of pigment sold.
In relative and absolute terms, the most obvious increase was in sales to EU markets,
as we exported significantly more to Europe's largest trading partners than in 2019.
Due to last year's increased sales to Algeria, we recorded a 14% drop in sales to third
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CINKARNA.SI
countries. We still maintain minimal control market shares in the dollar markets,
as higher placements would be irrational due to the specific conditions, which are
certainly less favourable than in the European markets. Lower sales on the domestic
market are the result of a drop in the value of sales of construction compounds and
lower sales of metallurgic products and pigment.
Sales to the EU market are up 6% compared to the same period last year. The driver
of growth in this market is increased demand for titanium dioxide, masterbatches
and copper fungicides. In the EU market, we saw a severalfold increase in sales of
Teflon-coated ball valves and elements for the transport of aggressive mediums.
Sales to the markets of the former Yugoslavia increased by 4%. The growth is
mostly due to higher demand for pigment. The loss of sales of powder coatings and
masterbatches was to some extent compensated by increased exports of zinc alloys.
Sales to the domestic market dropped by 22% as compared to the same period in
2019. The drop is mainly due to lower sales of the Metallurgy BU and the abolition of
the construction compounds line. With the exception of the Polymers BU, sales of
other business units are lower.
The share of total exports in the Company's total sales amounted to 91.5% in the year
under review, an increase of 2.4 percentage points compared to the previous year.
The increase in the share of exports is due to increased exports to the European
market. The bulk of it is achieved by exporting titanium dioxide pigment.
33.6% of the Company's export sales and 30.8% of its total sales were directed to
the German market. The importance of the German market increased slightly
compared to the previous year, due to the higher sales value of titanium dioxide
pigment. Compared to 2019, the quantities of pigment sold to the German market
increased by 21% (from 15,869 t to 19,226 t Y-o-Y). The most important reason for the
increase in the sales volume of titanium dioxide pigment in 2020 in relation to the
comparable period of 2019 is the positive sentiment in the second half of the year,
which materialized mainly towards the end of the year.
The reasons for other significant and more prominent changes in export sales are
described below. In Italy, there was a decline in the sales of titanium dioxide and
copper fungicides, which coincided with the contraction of the Italian economy due
to COVID-19. We increased the sales of pigment and zinc wire to Turkey. We recorded
a drop in sales to Belgium and growth in sales to France due to a redistribution of
quantities within the corporation (leading European masterbatch manufacturer).
We acquired new buyers of copper fungicides in the Dutch and Greek market. At
the same time, we saw a reduction in the amount of pigment sold to the Greek
market. In Austria and Hungary, there was a significant increase in demand for
pigment. In the Polish market, we strengthened our sales of pigment, copper
fungicides, masterbatches, varnishes, paints and products/services of the Polymers
BU. The mentioned market recorded a drop in wire sales. In the Croatian market,
we recorded slightly lower sales, as a major buyer of copper fungicides realized their
transaction in the last quarter of 2019. Higher demand for metallurgic products on
the Czech market did not mitigate the decline due to lower demand for coatings,
masterbatches, varnishes and pigment. We increased exports of titanium dioxide
pigment to Ukraine, Kuwait and Romania. Declines in Spain, Algeria and Portugal
are connected with lower volumes of pigment sales.
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ANNUAL REPORT 2020
Sales structure by national market is, of course, quarterly and significantly changing
in line with the conditions prevailing on individual markets from time to time.
Roughly speaking, the structure depends on market profitability, market strategy,
political and economic security, and market reliability.
Product line
2020 2019
Value in EUR Share in % Value in EUR Share in %
Titanium Dioxide 143,056,990 83 140,356,503 81
Zinc recycling 5,125,075 3 7,301,913 4
Varnishes, coatings,
masterbatches and printing inks
15,207,872 9 14,824,299 9
Agricultural products 5,525,614 3 4,762,037 3
Other 3,471,300 2 5,342,227 3
Value of sales 172,386,851 100 172,586,979 100
The sales of the most important product line of the Company, titanium dioxide
pigment, reached EUR 143 million in the relevant period. The supply and demand
curve reached a new equilibrium. Fear of shortages in supply of raw materials in
the first quarter boosted purchasing on the part of European pigment producers.
Changes in consumer habits during the epidemic towards the end of the year
resulted in much higher demand for pigment. It is estimated that the demand for
the purpose of supplying DIY projects has increased. The increase in the value of
sales by EUR 2.7 million is due to the volume of pigment sold. The 7% increase in the
volume helped us to overcome the impact of lower prices (-4%). The said increase in
demand has spilled over into this year as well. The competition has already adjusted
the sales prices, which is visible in the latest sales analyses. As a typical follower and a
small player in the global market, we adjusted prices with a delay.
The scope of the zinc recycling line, following the termination of the titanium-
zinc sheet line in early 2017, brings together the zinc wire, anode and alloy product
groups. Business operations are 30% lower than in the comparable period last year.
The decline is due to the lower stock market price of zinc and a drop in sales volumes,
as most buyers reduced or even suspended production due to a lack of orders. In
the last month of the third quarter and especially in the last quarter, sales of this line
increased.
In the relevant period, there was a comparative 3% increase in the sales of varnishes,
coatings, masterbatches and printing inks, which is mainly related to the increase
in the volume of sales of masterbatches. In the second half of the third quarter,
the situation in the industry improved. Higher sales of masterbatches replaced
the impact of lower sales prices (changed structures of products sold, customers
and markets). The decline in sales of powder coatings is associated with reduced
activity and a temporary halt of production of a significant number of domestic
and foreign customers. The volume of sales halved, especially in the area of trade
and production of white goods. The drop in the value of printing inks sales by 2% is
due to lower average sales prices. Quantities increased in the segment of paints for
printing packaging materials for food and hygiene products on the domestic and
foreign markets. We recorded lower average sales prices in all product groups, which
coincided with lower sales prices of titanium dioxide.
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CINKARNA.SI
Sales of the agricultural product line comprising copper fungicides, Pepelin, green
vitriol (copperas) and Humovit rose by 16% as compared to 2019. The growth is due
to both higher quantities and higher sales prices achieved in new markets, which is
paramount with regard to managing the risks of seasonal climate conditions, as it
indicates decreased dependence on seasonal conditions in a limited geographical
area. Average sales prices of copper fungicides increased slightly due to changes in
the sales structure. We achieved higher value of sales with Humovit. The fact remains
that our sales of soil depend on the situation in the local and nearby markets, as we
are not able to enter more distant markets due to additional costs of transporting
the product. In 2021, we will continue to produce the very commercially attractive
active substance, i.e. tribasic copper sulphate (TBCS).
The category “other” comprises the sales lines of thermoplasts, polymers, elastomers
and systems for transport of aggressive mediums (STAM), sulphuric acid, CEGIPS,
merchandise and services, and sales of abolished products and product groups. The
value of sales of this product group is lower due to the inclusion of the abolished
construction product line, which reached EUR 1.9 million in sales in the comparable
period of last year. In the period under review, the sales of the construction product
line reached EUR 90 thousand and have not been monitored separately since the
closure of the construction plant. STAM sales are significantly higher (+ 40%). The
value of sulphuric acid sales is down 50%. For product groups from this category,
we should mention the 28% increase in the value of CEGIPS sales. We sold 169.7
thousand tonnes of CEGIPS, which is 11% more than in 2019. The volume of CEGIPS
sales is important in the context of prolonging the useful life of the Za Travnik landfill.
PROFIT OR LOSS
In 2020, we generated operating profit at the level of EUR 22.5 million. This result
accounts for 88% of the 2019 operating result of EUR 25.7 million. As compared to
the planned operating result for 2020 (EUR 17.4 million operating profit), it is evident
that the business plan was exceeded by 30%. Business operations thus objectively
deteriorated as compared to the year before, but at the same time exceeded
the business plan levels. Among other things, this surplus was the result of the
postponement of overhaul to 2021, record sales volume in the last quarter and the
extension of the production period. EBITDA reached EUR 32.9 million and equals 19%
of sales. Compared to the previous year, EBITDA is down 11%.
Year 2006 2007 2008 2009 2010 2011 2012
Operating profit or loss
in millions of EUR
10.8 11.0 4.6 4.7 13.7 32.8 24.1
2013 2014 2015 2016 2017 2018 2019 2020
8.6 16.2
8.1 10.6 35.7 36.4 25.7 22.5
Taking into account the impact of finance revenue and expenses, profit before tax
for 2020 stands at EUR 22.5 million, whereas in 2019 it totalled EUR 25.7 million. The
pre-tax result decreased by 12% as compared to the year before, while the planned
profit before tax was 29% higher. In 2020, minimum negative financing balance
of EUR 22.8 thousand was recorded (in 2019, positive financing balance of EUR 9.6
thousand). The resulting negative financing balance arises from foreign exchange
gains of EUR 2.9 thousand, revenue from investments and other loans in the
26
ANNUAL REPORT 2020
amount of EUR 43 thousand and other financial liabilities in the amount of EUR 52.7
thousand (the costs of provisions for termination and jubilee benefits equal EUR 36
thousand). Minimum foreign exchange losses totalling EUR 2.9 thousand represent
the effective use of hedging instruments to manage the volatile movements of the
euro-dollar currency pair in the procurement of titanium-bearing ores.
Year 2006 2007 2008 2009 2010 2011 2012
Net profit in millions of EUR
5.6 6.1 0.8 1.0 8.9 25.5 18.3
2013 2014 2015 2016 2017 2018 2019 2020
7.2 13.9
6.8 9.8 28.8 30.6 21.4 19.0
Net profit for the period reached EUR 18,950,656 or 12% less than the one generated
in 2019 and 34% more than planned (we planned EUR 14.1 million net profit for 2020).
Taking into account the development of events in the international economy and
in the titanium dioxide pigment market, and, above all, the results of competitors
from the titanium dioxide pigment industry and the COVID-19 situation, we assess
the result to be more than excellent. Net profit comprises profit before tax, corporate
income tax of EUR 3.4 million (effective tax rate of 15.23%) and deferred tax of EUR 131
thousand. The amount of deferred taxes and the change in the balance of deferred
taxes refer to the reduction and derecognition of provisions for termination and
jubilee benefits, the use and derecognition of environmental provisions and the final
write-offs of previously revalued operating receivables and investments. The increase
is mainly related to the higher provisions for employees under SAS 10. The tax relief
comprises relief for investments into equipment and research and development,
hiring of disabled persons, voluntary supplementary pension insurance and
donations.
SHARES – Price and Turnover
In 2021, the shares of Cinkarna Celje, d. d. were listed on the standard market of the
Ljubljana Stock Exchange with the ticker symbol CICG. As of February 2021, they are
listed on the prime market of the Ljubljana Stock Exchange. The average price on
the first day of trading, 6 March 1998, was EUR 33.71 per share.
The total number of shareholders as at the last day of 2020 was 1,951, whilst the total
number of shares issued was 807,977, whereby 21,751 shares are the Company’s
treasury shares. The number of shareholders decreased by 62% from the start of
trading on the free market to the last day of 2020.
The price of a share of Cinkarna Celje, d. d. in 2020 was fluctuating between EUR 125
per share and EUR 203 per share. The changes in the first half of the year were mainly
the reflection of the general sell-off in the first epidemic wave. There was a rebound
in the second half of the year and the share price ranged between EUR 150 and EUR
180. The movement was relatively in line with the developments on the Slovenian
market (SBI TOP). The share price fell from EUR 187.5 to EUR 178, a decrease of 5%,
between the last trading day in 2019 and the last trading day in 2020.
The Company’s market capitalisation equalled EUR 143.8 million as at the last trading
day of 2020. It is lower than the Company’s equity, reflecting the Slovenian capital
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CINKARNA.SI
market and the lack of investors’ trust. The Company’s market capitalisation as at
the last day of 2019 was EUR 151.5 million. The table below shows changes in the
price of the CICG share over the last year (average price at the end of the month) and
previous years.
Year 1998 2017 2018 2019
Month 3 12 12 12
CICG price in EUR
33.6 217.0 181.0 187.5
2020
1 2 3 4 5 6
194.0 180.0 134.0 158.0 165.0 173.0
7 8 9 10 11 12
160.0 166.0 160.0 150.0 168.0 178.0
The average cumulative monthly turnover in the shares of Cinkarna Celje, d. d. in
2020 was EUR 1.4 million or 8% higher than the average monthly turnover in 2019,
when it was EUR 1.3 million. The total annual turnover was EUR 17.1 million (EUR 15.6
million in 2019).
The table shows extreme values of the share price and the cumulative monthly
turnover over the last three years.
2018 2019 2020
Maximum Minimum Maximum Minimum Maximum Minimum
Share price in EUR per share 274.0 173.0 225.0 174.0 203.0 125.0
Cumulative monthly
turnover in EUR thousand
10,586.0 1,564.2 2,296.0 572.2 3,317.1 495.4
DIVIDENDS
On 17 June 2020, the Company’s General Meeting voted in favour of the proposal of
the Management Board and the Supervisory Board on the use of distributable profit
for 2019, which was at the level of EUR 15.9 million. In accordance with the adopted
proposal and resolution, the major part of distributable profit of EUR 13.5 million was
paid out in the form of dividends. The dividend per share was worth EUR 17.00 gross,
which is 40% less than in 2019 and represents an 11% dividend yield. The remaining
amount of EUR 2.3 million was allocated to retained earnings.
On 5 June 2018, the General Meeting of Shareholders authorised the Management
Board to redeem treasury shares. On the last day of 2019, the number of these shares
was 10,652. In 2020, 11,299 shares were obtained from the free market, totalling EUR
1.9 million in value. As at 31 December 2019, the Company had 21,751 treasury shares.
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ANNUAL REPORT 2020
Dividend distributions over the last three years are shown in the table below.
2018 2019 2020
Change
in 2020
Change
in 2019
Gross dividend in EUR per share 26.52 28.27 17.00 - 40 +7
Net dividend in EUR per share 19.89 21.20 12.75 - 40 + 7
P/E 31 Dec 4.83 6.99 7.60 + 9 + 45
The Company paid out 63% of net profit for 2019 in the form of dividends in 2020.
The dividend yield of the share as at the distribution date was a high 11%. The
payment represented 40% of total free cash flow from operations in 2020. With
above-average dividend payout as compared to the industry, the Company was in
2020 operating smoothly and confidently in terms of ensuring cash for continuous
financing of operations and investments. The balance of cash increased by 19%.
EXPENSES AND COSTS
The analysis of expenses and costs provided below relates mostly to the cost of
material, raw materials and energy and labour costs. The biggest impact on the
Company’s operating performance was exerted by the changes in the cost of material,
raw material and energy as the Company pursues capital-intensive activities. Labour
cost is defined primarily through a constructive dialogue with social partners and by
operating performance. The cost of interest again did not represent an important
efficiency and performance factor in 2020, as the Company has had no debts as
of 2014. The most important factor for the scope and dynamics of costs are the
conditions in the global and European economies. Economic climate indicators were
at lower rates in early 2020. Economic growth rates of the major trading partners are
mostly negative due to the impact of the epidemic on consumption. The situation
in the Slovenian economy is currently encouraging, though the economic climate
was deteriorating during the year. The decline in the domestic economy was
mitigated by adjustments on the part of businesses and consumers and by fewer
disruptions in manufacturing and construction. The prices of the key goods on the
commodity markets (non-ferrous metals, steel, energy, basic chemicals, etc.) were
quite volatile during the year, which was mainly evident in the comparison of the
first and the last quarter. Towards the end of the year and in parallel with growing
optimism, purchase prices mostly rose. We limited the gradual growth of energy
prices, and other increases will materialize in the current year. The purchase prices of
titanium-bearing raw materials remained at similar levels. Political and security risks
related to the situation in the Near and Middle East and the protectionist measures
of the former US administration have not had a direct material impact so far. The
combination of the mentioned macroeconomic trends and situation of the titanium
dioxide pigment industry led to a deteriorated relationship between purchase and
selling prices. The pressure on labour costs increased in Slovenia and the reasonable
increase in expectations of employees, but the Company managed to stay within
business performance plans with the pay policy.
The shares of consumption of raw materials, packaging and energy slightly changed
from 2019. The reason lies in different dynamics of changing of individual categories
of direct production costs. In relative terms, the decrease in energy cost of 24% is the
most significant one. Packaging costs are 2% lower due to the demands of buyers
regarding packaging.
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CINKARNA.SI
The total direct cost of material, energy and packaging grew by EUR 3.3 million in the
period as compared to 2019, while the scope of production rose by 6% at constant
prices. Owing to significantly lower volume of production in the Metallurgy BU and
discontinuation of the production of construction materials in the Chemistry Celje
BU, raw material costs are marginally higher by 1%. The dynamics of raw material
costs corresponds to the dynamics of production scope, while packaging costs
fell due to the said abolition of the construction material line – the last major B2C
product line. Energy prices are expected and planned to be higher than in 2019, but
we keep them at bay with measures aimed towards improving energy efficiency.
The increase in energy costs results from a 38% rise in electricity prices.
The ratio between purchasing and selling prices did not change significantly,
the margin squeeze was reduced slightly at the expense of lower selling prices of
pigment. Purchasing prices of titanium-bearing raw materials remained at the
level of the previous comparable period. The containment of raw material costs was
influenced by lower purchase prices of sulphur. Copper and zinc are slightly above
the 2019 level, which is mainly linked to price growth in the last half of the year.
The biggest share of production costs in 2020 was again arising from raw materials
for production (86.0%), which was followed by energy (12.3%) and packaging (1.7%).
In line with the increased efficiency and return in the titanium dioxide industry and
in Cinkarna Celje, d. d., we implemented a motivating pay policy in 2020 and, within
a realistic framework, followed the dynamics of business results, which significantly
exceeded the results from the year before as well as the plans. The foundations of the
pay policy were agreements and guidelines of social partners at the level of the state
and within the Company.
The average monthly gross salary increased by 1% YOY and came in at EUR 2,314.42
in 2020, while it was EUR 2,296.92 in 2019 In April 2020, we paid employees a holiday
allowance of EUR 1,806.5 gross per employee. In January 2020, we paid employees a
bonus of EUR 1,700.00 gross per employee owing to exceptional business results and
high sales. Also, in January 2021, we paid employees a performance bonus as part
of the salary in the amount of EUR 1,300.00 gross per employee, charged against
the 2020 financial year. In 2020, the Company also paid supplementary pension
insurance contributions for employees into the Modri krovni pokojninski sklad
(MKPS) managed by Modra zavarovalnica, whereby the annual contribution was
EUR 601.6 per employee.
The generated labour costs at the Company level were 3% lower as compared to
2019. Labour costs per employee grew by 1% in 2020 from 2019. The bulk of labour
cost is the cost of gross salaries, accounting for 80.8%. Compared to the year before,
total gross salaries increased by 2%.
Based on the data on the production value (measured at constant prices) and the
average number of employees in 2020, it is concluded that productivity at the level
of Cinkarna Celje, d. d. was 10% higher than in the same period last year, and 4%
higher than planned for 2020. The productivity growth is mainly due to 9% higher
value of production of the Titanium Dioxide BU and 5% higher value of production of
the Chemistry Mozirje BU. Productivity was positively affected by a decrease in the
average number of employees by 4%.
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ANNUAL REPORT 2020
Amortisation and depreciation expense dropped by 9% on 2020 resulting from the
scope of investments, which was lagging behind the amounts of accounted annual
amortisation and depreciation over the previous 10 years. 2018 was an exception, as
we significantly exceeded the amount of accounted amortisation and depreciation
for the year with EUR 22.6 million invested. Investment scope increased by 2% as
compared to 2019.
In 2019, the Company had no interest cost as it had no financial debts (in 2014, the
Company recorded interest cost arising from bank loans for the last time). The cost
of interest thus has no impact on the business performance and at the same time
the Company is no longer exposed to risks related to potential changes in interest
rates. In 2020, minimum negative financing balance of EUR 22.8 thousand was
recorded (in 2019, positive financing balance of EUR 9.6 thousand). The resulting
negative financing balance arises from foreign exchange gains of EUR 2.9 thousand,
revenue from investments and other loans in the amount of EUR 43 thousand and
other financial liabilities in the amount of EUR 52.7 thousand (the costs of provisions
for termination and jubilee benefits equal EUR 36 thousand). Minimum foreign
exchange losses totalling EUR 2.9 thousand represent the effective use of hedging
instruments to manage the volatile movements of the euro-dollar currency pair in
the procurement of titanium-bearing ores.
Despite the situation in the past year, we operated extremely successfully in the
period under review. We generated net profit of EUR 18.9 million. Corporate income
tax for 2020 amounted to EUR 3.4 million. The decrease in deferred taxes stood at
EUR 131.3 thousand.
Operating profit or loss &
expenses
2020 2019
Value in EUR Share in % Value in EUR Share in %
Operating profit or loss 22,526,270 13 25,726,942 15
Costs of materials and services 110,970,369 63 108,285,638 61
Labour costs 30,099,442 17 30,856,980 17
Write-downs in value 10,349,655 6 11,287,681 6
Other expenses 1,283,476 1 1,542,270 1
Total operating revenues 175,229,212 100 177,699,511 100
ASSETS AND LIABILITIES
The sources of financing for the achieved scope of operations in 2020 were mostly
our own assets accumulated over the course of current operations and to a minor
extent debts. The financing of the increase in and upgrading of production/business
equipment and buildings as well as investments underway was exclusively from our
own assets accumulated over the course of current operations. Over the last year,
we used no bank sources and focused on management of net current, short-term
assets, thus ensuring the Company’s reliable, safe and stable financial position and
adequate liquidity at all times.
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CINKARNA.SI
Assets
2020 2019
Value in EUR Share in % Value in EUR Share in %
Long-term assets 110,083,986 52.3 107,290,529 51.6
Current assets 99,955,723 47.5 100,183,266 48.2
- Inventories 35,524,605 16.9 40,992,387 19.73
- Financial assets (investments) 35,056 0.0 360,650 0.2
- Receivables 26,738,238 12.7 27,131,987 13.1
- Cash 37,657,824 17.9 31,698,242 15.3
Short-term deferred costs and
accrued revenues
295,987 0.1 333,270 0.2
Assets 210,335,696 100.0 207,807,065 100.0
Share of non-current assets in total assets increased by 0.7 percentage points from
the end of 2019 to 52.3%. The lion’s share of non-current assets is accounted for by
property, plant and equipment (96.7%). Their value increased by EUR 3.1 million or 3%,
i.e. by the difference between the amount invested in property, plant and equipment
and the accounted depreciation in 2020. Long-term investments did not change in
2020 and include shares and interests in companies. Deferred tax assets decreased
by 7% or EUR 131 thousand, mostly due to reversal of provisions and derecognition of
final write-offs of previously revalued operating receivables and investments.
The share of current assets in total assets decreased by 0.7 percentage points from
the end of 2019 to 47.5 %. In terms of value, the most important item of these assets
are cash (38%), inventories (35%) and receivables (27%).
Inventories decreased by 13% as compared to the end of 2019, with inventories of
material (including advances) decreasing by 13% and inventories of work-in-progress
increasing by 10%, while the total value of inventories of finished products and
merchandise dropped by as much as 18% (as compared to the end of 2019). The key
factor for decreased inventories of finished products is higher quantity of pigment
sold.
Short-term financial assets (investments) mainly comprise the fair value of
derivative financial instruments, having decreased by 78% compared to the end of
2019.
Short-term operating receivables include short-term trade receivables and short-
term operating receivables due from others (mostly from the state for input VAT).
They decreased by 1% from the end of 2019. Trade receivables grew by 3%, while other
short-term receivables dropped by 37%, mostly due to the corporate income tax
advance payment being lower than the corporate income tax expense. The overview
of trade receivables by maturity reveals that the age structure of receivables remains
very solid.
Cash (and cash equivalents) account for 38% of total current assets; their balance
increased by 19% as compared to the year before. The relatively high balance of cash
mostly arises from excellent operations throughout the year.
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ANNUAL REPORT 2020
Short-term deferred costs and accrued revenues represent deferred costs paid in
advance. Their value decreased by 11%.
Funding source
2020 2019
Value in EUR Share in % Value in EUR Share in %
Equity 174,016,279 82.7 170,342,846 82.0
Provisions 20,876,401 9.9 22,578,045 10.9
Short-term operating and
financial liabilities
14,361,213 6.8 13,991,310 6.7
Short-term accrued costs and
deferred revenues
1,081,803 0.5 894,864 0.4
Liabilities and equity total 210,335,696 100 207,807,065 100
The value of equity in the structure as at 31 December 2020 accounts for 82.7%,
which is 0.7 percentage point more than at the end of 2019. The amount of equity
increased by 2% as compared to the end of 2019. The increase (EUR 3.7 million) relates
to the difference between net profit for 2020 and pay-out of dividends for 2019 in the
amount of EUR 13.6 million, the purchase of treasury shares out of provisions in the
amount of EUR 1.9 million and due to changes in the surplus from the revaluation
of termination benefits equalling EUR 0.2 million. Based on the resolution of the
General Meeting dated 5 June 2018 and the resolution dated 17 June 2020, the
Company redeemed 11,299 treasury shares in 2020 totalling EUR 1.9 million in value (of
which 11,099 of the acquired shares were subscribed as at 31 December 2020), setting
aside reserve for treasury shares against other revenue reserves at the same time. As
at 31 December 2020, the Company has 21,951 treasury shares (21,751 subscribed to
the treasury shares fund). There were no other material changes in equity.
The amount of share capital within total equity stood at EUR 20,229,769.66 and
comprises 807,977 ordinary freely transferable no-par value shares (of which 21,951
are treasury shares and 21,751 are subscribed in the treasury shares fund). The carrying
amount of a share as at 31 December 2020 was EUR € 215.4 (it increased by 2% from
the beginning of the year).
Provisions and long-term accrued costs and deferred revenues comprised 10%
of liabilities. Provisions for pensions and similar liabilities were established as at
1 January 2006 (termination and jubilee benefits under SAS 10) and are adjusted
annually based on actuarial calculations. Other provisions were established in
the ownership transformation procedure for environmental provisions. Over the
last years, we established the following additional environmental provisions: EUR
5 million in 2010 for rehabilitation of the Bukovžlak solid waste landfill and EUR 7
and 5 million in 2011 for rehabilitation of the Za Travnik landfill and destruction of
low-level radioactive waste. At the end of 2017, we reviewed in detail, checked and
only set aside new provisions for elimination of risks arising from old burdens in the
amount of EUR 6.4 million. In the period under review, the volume of environmental
provisions decreased by 8% due to the coverage of costs of the above mentioned
rehabilitation projects. Long-term accrued costs and deferred revenues decreased
by 16% owing to the depreciation of assets acquired free of charge and their present
value in the coming years.
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CINKARNA.SI
Financial and operating liabilities rose by 3% compared to the end of the previous
year due to a 15% increase in liabilities from advance payments and a rise in other
short-term liabilities arising from taxes and obligations for employee contributions
and corporate income tax by 12%. All financial and operating liabilities are short-
term. The Company’s gross debt rate was 6.8% and was 0.1 percentage points higher
as compared to the balance as at 31 December 2019, when it was 5.3%.
Short-term financial liabilities as at 31 December 2020 amounted to EUR 60.1
thousand, which is 35% more than at the end of 2019 (with EUR 44.6 thousand); the
difference arises from increased assignment of our liabilities and receivables of our
suppliers. The Company’s debt ratio is thus 0.29‰ (in the previous period: 0.22‰).
Short-term operating liabilities rose by 3% in the period. Short-term trade payables
as at the last day of December 2020 stood at EUR 9.3 million and were down 2% as
compared to the end of 2019, mostly due to decreased scope of supplies in December
2020 as compared to December 2019. Liabilities from advances received increased
by 15% due to compensation for customers for larger purchases. Other short-term
operating liabilities rose by 12% (EUR 0.49 million) due to higher liabilities for the
payment of corporate income tax for 2020 from advance payments and include
mostly EUR 2.2 million of liabilities for net salaries and performance bonuses, EUR 1.1
million of liabilities for salary-related contributions and taxes, EUR 0.8 million for the
payment of corporate income tax and EUR 0.4 million of VAT liabilities and liabilities
to other institutions.
Short-term accrued costs and deferred revenues increased by 21% in the period
concerned. They mostly comprise accounted liabilities for annual leave and labour
costs, accrued environmental contributions and taxes and VAT on advances given.
PERFORMANCE INDICATORS
Financial ratios 2020 2019
Equity financing rate 82.81 % 81.98 %
Long-term financing rate 92.66 % 92.84 %
Operating fixed assets rate 51.07 % 50.28 %
Long-term assets rate 52.34 % 51.63 %
Equity to fixed assets ratio 1.62 1.63
Acid test ratio 2.62 2.27
Quick ratio 4.49 4.23
Current ratio 6.96 7.16
Operating efficiency ratio 1.15 1.17
Net return on equity 0.13 0.15
Dividends to share equity ratio 0.67 1.12
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ANNUAL REPORT 2020
The Company’s Operating Risks and Their Management
Cinkarna Celje, d. d. is a regional company operating globally. Therefore, it is exposed
to risks of economic, environmental and social nature. The risks are perceived
individually or collectively as a series of events that could significantly impact the
achievement of tactical and strategic goals of the Company and/or its capacity for
long-term operations. These events include both positive and negative impacts, those
with negative potential impact being risks and those with positive potential impact
being opportunities.. The risk management system/process (SRM) is designed in the
same way and operates in the same, complimentary way for both managing risks
and exploiting opportunities.
The Company’s risk management system is comprehensively integrated into
all business processes. Its design, process structure and organisation (in terms of
competencies and responsibilities) is a combination of corporate knowledge,
experience with specific external and internal environment and recommendations,
norms, frameworks of international standards for risk management (ISO31000,
COSO, RME/ferma, etc.) and established good practices in the industry.
Integration of SRM into Business Processes and Their Substance
The risk management system itself combines sub-processes of risk identification, risk
assessment/evaluation, risk management, control and reporting. SRM input is data
obtained based on monitoring and analysing the external and internal environment,
whilst the risk management process results co-define business processes in
interaction with operational, tactical and strategic planning. The risk management
process is presented below.
EXTERNAL ENVIRONMENT INTERNAL ENVIRONMENT
MONITORING & ANALYSIS
IDENTIFICATION OF RISKS AND OPPORTUNITIES
BUSINESS PROCESSES
CONTROL & REPORTING
STRATEGIC AND
OPERATIONAL
PLANNING
RISK
MANAGEMENT:
-description /
estimate
-valuation
-decision-
making /
management
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CINKARNA.SI
The sub-process of assessing and evaluating risks is of utmost importance. For this
purpose, we use a uniform manner for describing and defining risks and a combined
quantitative and qualitative method for their evaluation. Risks are evaluated in terms
of the scope of their impact and the probability of their occurrence. The scope of
impact on the Company’s results or damage is structured in the following way:
■ Low: < EUR 2 million
■ Moderate: > EUR 2 million < EUR 5 million
■ High: > EUR 5 million
The probability of occurrence is defined in a combined, descriptive manner and is
based on arbitrary experiential method:
■ Low probability: the probability for occurrence of event in the next five years is
low.
■ Moderate probability: the probability for occurrence of event in the next year is
low and the probability for occurrence of event in the next five years is high.
■ High probability: the probability for occurrence of event in the next year is high.
This risk structuring manner enables a relatively clear definition of significance,
ranging and prioritising.
Active operational management of risks and their control includes various tools and
their combinations primarily aimed at avoiding risks, eliminating sources of risks,
risk taking and integration of risks in the business model, transfer of risks to external
partners, reducing probabilities, limiting consequences, etc.
Cinkarna Celje, d. d. is a long-standing company with traditionally prudent approach
and business culture, which does not favour taking risks and risky operations.
Consequently, the range of measures is primarily focused on rejecting and eliminating
risks and less on calculating risk and return trade-off.
SRM Organisation and Responsibilities
The risk management system and its efficiency is a direct collective responsibility of
the Company’s Management Board. The Management Board defines the process,
supervises it and adopts key decisions (strategic development, investments,
divestments, business area portfolio, etc.). Administration of the system is divided
into key areas (sales, production, finance, environment, HR), for which individual
members of the Management Board are responsible.
The Management Board is directly supported by directors and managers of business
units and support departments, i.e. Management Board College, which meets at
least once quarterly. In terms of integration into business processes, the support of
organisational units of Finance, Accounting, Internal Audit, IT and Planning & Analytics
is of key importance. Coordinated actions of all risk management stakeholders and
clearly defined responsibilities are prerequisite and enable successful integration
of risk management into tactical and strategic plans and operational business
processes of the Company.
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ANNUAL REPORT 2020
Specific risks and opportunities related to individual product and sales lines or specific
areas, such as HR, security, IT safety, safety at work, etc., are managed by heads at
the level of organisational units or processes, taking into account organisational acts
and work instructions and they report systematically on these to the Management
Board College, which is responsible to adequately register individual risks and initiate
adequate control measures.
It oversees the operations of the system and reports on it to the Internal Audit
Department. In compliance with ZGD-1, the Supervisory Board monitors and
familiarises itself with the operations and findings of the system for risk management
and internal controls. External audit verifies whether the system for risk management
and internal controls is in place and operational in compliance with the Accounting
Act (ZR).
The Company reports to the external public about its operating risks and their
management formally through its annual and semi-annual reports (published on
the SEOnet portal and the Company’s website), which means every six months.
Key SRM Cornerstones and Tools
■ The most important integration and implementation tool of the risk management
system is the ‘Integrated Management System’ (ISO 9001, ISO 14001, BS OHSAS
18001, EMAS), which combines in a formal and standardised manner data
monitoring and collection, its analysis, processing and evaluation, operational
planning, implementation monitoring & supervision and measures (PDCA)
together with final reporting to the Management Board and its College.
■ A specific SRM tool is the expanded risk register, which is regularly updated in
compliance with changes in the environment, risk management measures and
strategic decisions. The structure of the risk register is aligned with the structure
and hierarchy of business processes and organisational units. The risk register
is directly integrated into the Integrated Management System process and
represents its database. The processes of recording, monitoring and reporting are
comprehensively computerised. The Company’s operating risks are dynamically
grouped into the following major groups:
I. Sales and purchasing risks;
II. Production risks;
III. Financial risks;
IV. Spatial, environmental and legislative risks;
V. HR and organisational risks; and
VI. Support process risks.
■ Regular systemic reporting to internal users, which integrates data from the
extremely large database ORACLE (using internally developed programmes and
tools) and external databases (either free or subject to payment). The Accounting
or Planning & Analytics Department is responsible for reporting. Specific
information is prepared by specialised organisational units using the same tools.
Reporting is made on a monthly basis.
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CINKARNA.SI
■ An important part of the risk management system is also the process of strategic
planning that integrates all strategic risks and opportunities and defines the
fundamental, key guidelines for the Company's future development. Standard
tools, such as SGA, SWOT, PA, etc., are actively used within the strategic planning
process. The Company prepares strategic plans for a period of five years. Strategic
planning is the responsibility of the Management Board.
The system for managing risks and opportunities is constantly dynamically changing
and being adjusted to the needs and challenges of the environment, at the same
time integrating new knowledge and positive international practices and experience.
The overview of key risks in the continuation has been made and updated in
accordance with the circumstances and expectations prevailing at the time of the
compilation of this Report.
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ANNUAL REPORT 2020
I. Sales Risks
Product sales
risk
Probability of occurrence Amount of damage
Moderate Moderate
Definition The risk is associated with the possibility and ability of successfully selling products
on target markets. It relates to the increasing negotiation power of buyers, economic
(in)stability of markets, growing power of competitors (on account of capital
concentrations) and the suitability of the elements of our own marketing mix
(price, product, market, promotion). The risk related to selling the flagship product,
titanium dioxide pigment, is present and arises from four critical factors: drop in
basic demand due to the decreasing economic activity of the leading economies,
expansion of production capacities in China and Mexico, protectionist policies of
the USA federal administration and the spread of the COVID-19 virus. The increase
of customs duties on imports of Chinese materials into the USA from 16% to 31%
presents the biggest challenge in the short term. At the same time, the issue of
growing production capacities in China is becoming a long-term trend, which will
affect significantly the industry structure also in the long term. Certain changes in
consumption related to the increase in DIY projects have reduced sales risk.
Management The risk is mitigated by expansion of the sales network, diversification of the
production and sales portfolio, introduction of new and shortening of existing
sales channels, development of marketing partnerships, and development of
new products that allow entry to new markets and industries. In the last years,
we have been actively reducing the product sales risk by optimisation of the
sales portfolio with exclusion of products with a high market risk. By way of
target-oriented technological investments, we are focusing our sales portfolio on
applications and markets of a more demanding nature with a higher quality that
represent a shift from the commodity markets, characteristic of which is lower
value added and high exposure to Chinese pigment at favourable prices. We also
manage sales risks through systematic monitoring and comparative analyses
of relevant industries (competitors and buyers), participation in marketing and
professional industry events and the introduction of standards for managing
quality, safety, the environment and health. The risk is managed through strategic
development and maintenance of the so-called compensation markets (USA,
Near/Middle East) where we can direct any surplus of unsold quantities, taking
into account their current profitability. This sales risk management strategy is
used to manage the loss of sales due to the COVID-19 virus epidemic.
Purchasing
risks related to
raw materials
and energy
Probability of occurrence Amount of damage
Moderate Moderate
Definition The Company is highly dependent on purchasing of quality and appropriately
priced raw materials and energy. These are mostly standardised raw materials of a
global character (which are often traded on organised markets), primarily titanium-
bearing raw materials, copper, zinc and sulphur. The negotiating power of suppliers
is high (and is rising). In the long-term, the risk is considerable in terms of prices and
also availability. Due to the growth of sales markets for titanium dioxide pigment in
2017 and at the beginning of 2018, market pressures increased significantly, which
caused high increases in the prices of titanium-bearing raw materials in the second
half of 2018. Between 2016 and 2018, the risk related to the purchasing of titanium
slag increased slightly due to the discontinuation of production of a long-standing
supplier (one of the two global producers), but we have managed to establish
business with a quality alternative supplier, so quantities are secured for the long
run. We estimate that the current market situation in the field of titanium-bearing
raw materials is relatively stable. Slightly less stable conditions exist in relation to
epoxy resins, where demand in the Asian market exceeds supply. The risk in the
area of energy products (gas and electricity) is important mostly in the long-term
due to the expected trend of growing prices and objective long-term limitations
of resources. In 2018, the prices of energy products related to crude oil increased,
but the situation stabilised in the second half of the year and in 2019. Between the
first and the second epidemic wave, the energy market declined. An increase in
energy prices is expected or has to some extent already materialised. Transport
restrictions in the first and second quarters of 2020 resulted in lower oil prices. The
last quarter, however, was characterised by growth and exceeding the initial prices.
Lower operating levels of refineries during the epidemic and the replacement of
fossil fuels increase the possibility of sulphur price volatility. We estimate that in the
next medium-term period the supply of energy will be good and that the market,
including price levels, will stabilise. We assess the risk as relatively manageable.
39
CINKARNA.SI
Management We manage the risk by searching for and evaluating alternative raw material
sources (catalogues of verified alternative raw materials and suppliers). We
build long-term and stable partnerships in a targeted manner. We monitor and
analyse the situation on international markets ourselves and with the help of
market specialists. We are in regular contact also with suppliers with whom we
do not cooperate, but that could be a solid alternative. In this way, we managed
to establish cooperation with three new/additional suppliers of titanium slag
(or equivalent raw material) in 2017 and 2018, resulting in somewhat decreased
risk of dependence on one supplier. We have guaranteed quantities with a
long-standing supplier of epoxy resins. In the period of lower energy prices, we
concluded a supply contract at relatively favourable prices. We are developing
infrastructure, information systems, technologies and products so as to limit
the use of critical raw materials, reduce dependence on individual suppliers and
limit the volatility of purchasing prices. Where possible, we conclude long-term
fixed-price purchasing agreements, use various hedging systems, balance the
structure of consumption of individual energy products, implement energy
management and continuous measures/projects aimed at optimising energy
consumption. We include targets for specific consumption of raw materials and
energy products into the Integrated Management System.
Risk of
macroeconomic
conditions
in target
economic
environments
Probability of occurrence Amount of damage
Moderate Moderate
Definition Considering that the Company is not limited geographically, it is exposed to
the risk of changes in regional and global macroeconomic conditions, political/
security conditions and even damaging climate events. The international
economy climbed out of recession in 2013 and in the period from 2014 to 2017
gradual economic recovery was underway. Unfortunately, in 2018 the positive
trend started deteriorating. Forecasts, projections, confidence indicators and
the indicators for 2020 and beyond are at a lower level than the year before.
Nevertheless, they are higher than initially projected. The majority of negative
consequences cannot be estimated. The general macroeconomic risk is definitely
present at the moment, but we believe to be prepared well enough for possible
additional deterioration of conditions. Extreme prudence and attention are still
in place due to the escalation of relationships between Russia and the West,
complicated security situation in the Middle East, the unpredictable impact of
the previous US administration's international economic policy and the ongoing
epidemic on the wider economy. The long-term situation in Turkey, which is one
of the biggest markets for titanium dioxide pigment, is particularly important
for Cinkarna Celje, d. d., although the economic situation has improved towards
the end of 2020. In 2021, we will have to devote special attention also to the
consequences of Brexit, although so far, we have not detected and do not expect
any significant direct impact on our operations in this respect.
Management We manage the risk by focusing on relatively safe and stable markets within EU+
(more than 80% of sales), while sales outside the borders of EU+ are distributed
over a broad portfolio of markets such as: the USA, Near/Middle and Far East. We
develop a balanced sales structure from the point of view of risks & returns. An
important element of the strategy for the management of this risk is flexibility
in directing sales to different geographic markets. We consequently maintain
an optimum scope of the so-called compensation markets. In doing so, we
regularly monitor macroeconomic forecasts and projections and adjust our
business policy accordingly. We are carefully monitoring developments in Turkey,
promptly assessing and adjusting our business decisions together with our local
partners. We mitigate manageable risks strategically (e.g. financial risks) in order
to enhance the compensation ability in objective risks of the global economic
environment.
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ANNUAL REPORT 2020
II. Production Risks
Risks of
availability of
the means of
work
Probability of occurrence Amount of damage
High Low
Definition Cinkarna Celje, d. d. is a capital-intensive company involved in the processing
industry with a high share of continuous processes. From the point of view of
loading and wear of the means of work, the conditions are mostly unfavourable
(chemically aggressive substances, high temperatures, pressure, etc.).
Management The risk is mitigated through professionally elaborated and excellently organised
preventative and curative maintenance system. Special attention is placed on
preventative maintenance, which implies excellent technical diagnostics. We ensure
operational safety through integrated spare devices at critical points.
Risk of
accident, fire,
uncontrolled
substance
release into the
environment
and accidents
at work
Probability of occurrence Amount of damage
Low High
Definition The chemical processing and metallurgical industry implies the risk of the
occurrence of such accidents.
Management The risk is managed through systematic evaluation of environmental and
employee impacts, periodical assessments of fire threats and job systematisation
in line with risk assessment. In the area of environmental impact mitigation, we
have systematically introduced European environmental standards through
the implementation of the principles of the ‘Responsible Action Programme’
and alignment of our activities with the requirements of the IED directive. We
implement our processes by observing the ‘best available technique’ (BAT)
principle. As regards fire safety, we have our own firefighting unit organised,
and the Company also holds adequate fire insurance. As concerns accidents
at work, we have a service established that controls compliance with rules and
measures for safety and health at work. We provide regular education and
training for employees. The Company holds liability insurance. We conclude
written agreements with external contractors and provide them with training.
We have engaged a permanent coordinator for safe and healthy work. We have
introduced work instructions for the performance of maintenance interventions
in terms of fire prevention, accident prevention and improvement of cleanliness
in the workplace. We have had the ISO 14001 environmental management
system and the ISO 45001 safety and health management system in place since
2009, both of which are certified and supervised by an authorised institution.
A part of the Company certifies compliance with environmental regulations also
by registering in the EMAS register kept by the Ministry of the Environment and
Spatial Planning. We have performed an assessment of hazards and prepared
the protection and rescue plan. We identify and eliminate process risks for the
environment, safety and health through annual framework and implementation
goals. We carry out evacuation drills in line with the programme. In 2020, we
revised the concept of environmental risk in accordance with the Seveso
directive. We are implementing improvement measures resulting from the
revision. e have started a comprehensive rehabilitation of the Bukovžlak non-
hazardous waste landfill, thus reducing the possibility of accidents in this area.
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CINKARNA.SI
III. Financial Risks
Currency risk
Probability of occurrence Amount of damage
Low Low
Definition Cinkarna Celje, d. d. performs its purchasing and sales on the global market, which
is why it is also exposed to the risk of unfavourable inter-currency ratios. The most
important is the euro/US dollar exchange rate. Because the majority of sales
are transacted in euros, exposure is worrying especially in dollar-denominated
purchasing of titanium-bearing and occasionally also copper compounds.
Management We are continuously monitoring changes and forecasts in relation to the
dynamics of the euro/US dollar currency pair. Based on market data and prices of
financial instruments (hedging costs), we are defining the strategy for hedging
cash flows (method and extent) on an ongoing basis. In essence, the risk of
adverse changes in the dollar exchange rate is limited in two ways: we cover part
of the exposure by operational hedging, i.e. exchange rate coordination of sales
and purchases, and we systematically limit the risk of short-term fluctuations
using short-term financial instruments (especially dollar futures).
Credit risk
Probability of occurrence Amount of damage
Moderate Low
Definition This is the risk of potential non-fulfilment of contractual obligations on the
part of buyers, meaning that buyers are in delay with payments or default on
their past-due liabilities. The risk is limited as we mostly do business with long-
standing partners who are frequently well-known traditional European industrial
companies with a high credit rating. Over the last years we noticed that the
payment discipline is relatively poor in Slovenia, the Balkans and Eastern Europe,
but we do not expect further deterioration of problems in this area in the future.
Exposure to credit risk decreased significantly by reorganising the portfolio of
the Company’s strategic business areas, specifically by abolishing the product
lines of graphic intermediate goods, the titanium-zinc sheet, the anti-corrosion
coatings and the construction compounds. As concerns credit risks, we should
point to the consequences of the unclear outcome of the epidemic and of the
associated changes in consumer habits.
Management The risk is mitigated by development of long-term partnerships, checking of
ratings of new domestic and international buyers, selection of reliable buyers,
and regular monitoring and verification of the business health of our buyers. We
are using the credit limit system, which limits systematically potential damages.
We also have a department with adequate IT infrastructure organised for
dynamic monitoring of maturity of outstanding receivables, balance of overdue
receivables and their collection. When it comes to mediation, court and out-
of-court recovery of receivables, we cooperate with external providers of such
services. We make use of payment security instruments (collateralisation of
receivables, advance payment, bills of exchange, documentary letter of credit,
bank guarantee or documentary collections) in individual cases.
Liquidity risk
Probability of occurrence Amount of damage
Low Low
Definition Liquidity risk is related to the liquidity of a company or the liquidity of an
individual financial instrument. The emergence of such a risk would indicate the
Company's inability to repay overdue liabilities and could have a chain effect.
Management The Company’s operations are traditionally conservative with high cash flow.
Liquidity management includes, among other things, the planning of expected
monetary liabilities and their coverage, ongoing monitoring of customers'
solvency and regular collection of overdue receivables. The credit rating is AAA.
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ANNUAL REPORT 2020
Interest rate
risk
Probability of occurrence Amount of damage
Low Low
Definition Interest rate risk is the possibility of losses due to unfavourable changes in
interest rates on the market.
Management The Company has no long-term financial liabilities and has no related measures
put in place. Should this fact change, appropriate measures would be put in
place in order to manage this risk.
IV. Environmental, Spatial and Legislative Risks
Rehabilitation
of the
Bukovžlak
non-hazardous
waste landfill
Probability of occurrence Amount of damage
Low High
Definition In the last quarter of 2010, the Management Board adopted the decision not
to include the Bukovžlak non-hazardous waste landfill in the application for
the environmental permit because of the high financial burdens and limited
availability/capacity of the landfill and for the landfill closure procedure to be
commenced immediately. An overall rehabilitation is needed for long-term
safety and minimisation of environmental impacts.
Management In 2010, the Company formed environmental provisions in the amount of EUR
5 million that was debited against operating results. We have obtained the
environmental permit for the period of closing down the landfill (30 years).
We finished the first phase of comprehensive rehabilitation, strengthening of the
barrier. Further works on project documentation revealed a need for additional
interventions not anticipated at the time of establishing provisions in 2010, thus
we established additional provisions of EUR 782,563 at the end of 2017.
In line with the integral permit, in June 2020, we started the implementation of
the remaining phases of the comprehensive rehabilitation (cover, drainage of
backwaters, central and western drainage, diversion dam). From the view of risk
management, we completed the most demanding operation before the end of
2020. The entire rehabilitation is expected to be completed in 2022.
Pipeline for
pumping
neutralising
agent at the Za
Travnik waste
disposal plant
Probability of occurrence Amount of damage
Low Low
Definition The Company only has one functioning pipeline for pumping the neutralising
agent at the Za Travnik waste disposal plant. The pipeline has already been
partially replaced and a bigger, new one was partially set up, whilst the original is
still partially operating. In the event of leaks, production of titanium dioxide must
be stopped. We were able to repair the leaks to date in sufficiently short periods
of time, which is why the risk is still assessed as low.
Management The problematic part of the pipeline has been replaced. We are obtaining the
necessary easements for the old part of the original pipeline.
In 2016, we set up a new pump for suspension pumping, which reduces the
risk of malfunctions arising from hydraulic shocks. We are implementing the
necessary improvements to the procedure for thickening gypsum suspension,
which will decrease the pumping volume, thus reducing the risk of leakage due
to overburdening of the pipeline.
Due to rehabilitation work on the plot 115/1 K.o. Teharje, which will take place
under the jurisdiction of the City Municipality of Celje (MOC) in 2021, we will
replace the part of the pipeline that crosses that plot.
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CINKARNA.SI
Availability of
the Za Travnik
waste disposal
plant
Probability of occurrence Amount of damage
Low High
Definition The time to dry backfilling of the Za Travnik waste disposal plant is limited. It
depends on available volume, pigment production quantity and by-product
quantity. The backfilling of the waste disposal plant means that the titanium
dioxide production is stopped.
Management We produce the maximum amount of CEGIPS possible, thus reducing the
amount of red gypsum for disposal.
The acquired integral permit for the rehabilitation of the Bukovžlak non-
hazardous waste landfill endorses the use of red gypsum for the construction of
an airtight cover and the setting up of a diversion dam.
We have revised the project for backfilling red gypsum into the Za Travnik
waste disposal plant, the aim of which is to optimise backfilling (more natural
settlements). Given the changed conditions (increased removal of white gypsum,
different crystal structure, settlements), we have prepared a new estimate of the
available backfilling volumes.
The time to backfilling is being prolonged by way of all these measures. Based
on Article 9 of the decree on the construction plan for the Za Travnik landfill in
the Municipality of Šentjur, we have initiated the process of amending the OPPN
(Detailed Municipal Spatial Plan). Coordination with the Municipality of Šentjur
is underway. For 2021, we also set the goal of checking the possibility of changing
the technology of waste acid treatment, which now results in the formation of
red gypsum. We are looking for ways to reduce the dependence of production
on the available backfilling volumes.
Ensuring the
stability of
barriers
Probability of occurrence Amount of damage
Low High
Definition Barriers represent a hazard in case of a collapse. The latter could mainly occur in
the event of a powerful earthquake.
Management We carry out the prescribed monitoring that is analysed once a year by experts
from the Faculty of Civil and Geodetic Engineering of the University of Ljubljana.
We observe all recommendations by concurrent maintenance.
Projects of the break wave have been developed.
We amended the network for technical monitoring at the Za Travnik barrier
and renovated the primary and secondary geodetic monitoring network.
We plan additional security and drainage measures on the east side. Based
on data from new monitoring wells, we will order preparation of the water
balance for any necessary measures on the west slope of the barrier. Due to the
improved situation following rehabilitation works in previous years, we reversed
environmental provisions to EUR 450,000 based on expert assessment of still
necessary works.
We perform regular maintenance of the high barrier for red gypsum Bukovžlak. At
the end of 2017, we established EUR 3 million provisions for more comprehensive
rehabilitation of this barrier. In 2018, we made new monitoring wells on the east
side of the barrier, where monitoring started in 2019. On the basis of the data
obtained we will formulate a plan for the rehabilitation measure. A concept
project for lowering lake water level that would contribute significantly to safety
of the barrier was prepared. We improvised noise reduction to obtain data for
further work. The seismic observation of the high barrier Bukovžlak is in regular
operation. Surveillance is carried out by a hired certified seismological observer.
Rehabilitation of the barrier of the Bukovžlak non-hazardous waste landfill was
carried out in 2016 and 2017. Complete rehabilitation of the entire landfill, which
began in June 2020, will further improve stability in the long run.
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ANNUAL REPORT 2020
Environmental
due diligence –
phase II
Probability of occurrence Amount of damage
Low Moderate
Definition The results of the environmental due diligence – phase II revealed that the current
production location in Celje is built on waste of past activities. Deposited waste has
impact on groundwater, which can affect human health and the environment.
Management We implemented several simultaneous activities to define the potential impact
on human health and the environment and promptly informed the public of the
results. In August 2018, we concluded and publicly presented the Human Health
and Environmental Risk Assessment arising from consumption of agricultural
crops produced under ONOB. It has been established that the polluted hanging
underground water under ONOB has no negative impact on crops. In November
2018, we also presented the Ecotoxicological Research of impact of old burdens
on the current production location in Celje on the biota in Hudinja and Vzhodna
Ložnica water courses. Four locations requiring action have been identified. In
2019, we conducted the first part of the activities to supplement the Ecological Risk
Assessment in segments for which the previous research does not provide sufficient
causal explanation. One location remains that we cannot explain and requires some
additional sampling. We prepared a comparison between the requirements of the
Slovenian, German and Dutch legislation and a summary of the work done so far,
and submitted the documents to the Ministry of the Environment and Spatial
Planning. In its reply, the Ministry stated that the current environmental legislation
does not prescribe any measures, therefore the Ministry is unable participate in the
working group. Cinkarna may prepare the measures itself.
In view of the above, the Management Board commissioned a revision of the legal
opinion. It also commissioned the company CDM Smith to prepare a proposal for
technically feasible rehabilitation measures with a feasibility assessment for the two
most polluted areas of the current production site.
Water permit
for pumping
process water
from the
Hudinja river
Probability of occurrence Amount of damage
High High
Definition Continuous measurements with constant data on water flow and pumping
quantity are required.. Production can be restricted during months of drought.
Management We are looking for solutions and we are already making minor investments in
partial water recycling.
We submitted an application to the Slovenian Water Agency to supplement the
application for amending the water permit in accordance with the scientific bases
prepared by the Institute for Water of the RS. Given the scientific bases, we expect
slightly milder requirements for the determination of ecologically acceptable flow.
Given the lengthy nature of the procedure with unpredictable outcome, we
undertook the task of examining the provision of process water from other
sources in 2020. The terms of reference showed that the existing reservoirs, lake
Šmartinsko jezero and lake Slivniško jezero, are not a viable solution due to other
purposes of use, environmental requirements and inadequate capacities. The
construction of reservoirs is not an economically reasonable solution.
Possible solutions have been indicated in the direction of:
■ transforming this part of the water body into the so-called heavily modified
water body (HMWB) and thus change the conditions for determining the
ecologically acceptable flow,
■ use of own accumulation in Bukovžlak,
■ use of water from the waste water treatment plant Tremerje.
In relation to the first indent, during the collection of initiatives for the preparation
of the Water Management Plan for the next period, we submitted an initiative to
the Ministry of the Environment and Spatial Planning to transform this part of the
water body into a HMWB. We are examining the second and third indents against
the objective for 2021.
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CINKARNA.SI
TiO
2
classification
according to
CLP legislation
Probability of occurrence Amount of damage
Low Moderate
Definition In March 2020, the European Parliament, on a proposal from the Commission,
voted to classify TiO2 under CLP legislation – class 2 with the risk phrase H350i – “May
cause cancer by inhalation”.
Producers of titanium dioxide must arrange for an extended safety data sheet and
the appropriate labelling on the packaging within 18 months.
Interpretation of the classification together with notes and derogations allows for
several different options, making the consequences difficult to define. We estimate
that the probability of greater titanium dioxide substitution is small, as there are no
real alternatives.
Management An expert fact, which was also endorsed by RAC members in their opinion, is that
titanium dioxide as such is not toxic or genotoxic. It merely causes a problem if
lungs are overloaded with extremely large amounts of dust, which is not possible
in real situations. The measure is not proportionate, the CLP legislation is not
an appropriate tool for this purpose. This is why we, titanium dioxide producers,
have brought an action to the Court of Justice of the European Union against the
European Commission.
The European Titanium Dioxide Manufacturers Association (TDMA) organises
several activities for collecting evidence, informing the users and communicating
with the decision makers. Among other things, guidelines on how to understand
the legislation have been drawn up. As a member, we are actively involved in
these activities.
An extensive 5-year scientific program has been launched by TDMA to further
investigate the potential risk of using various forms of titanium dioxide in both
inhalation and skin contact and ingestion. A programme to define appropriate
methods for measuring dust in the work environment is being implemented.
We draw the attention of the decision-making bodies to the unresolved problem
of waste that will largely prevent the circular economy.
The Company has initiated a prevention measure to eliminate dust sources
in manufacturing jobs. As a result, a series of minor and major investments
is in progress. We communicate with employees through managers, co-
management bodies and bulletin boards. We make employees aware of the
importance of ensuring a clean working environment and the use of personal
protective equipment in cases where other measures are not sufficient.
We commissioned a study to check the damages of dust from our production to
lung cells. The results will be presented in early 2021.
We are also implementing additional measures to verify and eliminate risks.
They are mainly related to:
■ implementation of the necessary labelling-related activities,
■ harmonization of safety data sheets,
■ execution of dust measurements and the related definition of what falls
under the classification and what does not, and
■ the potential risks of competition arising from the latter.
Lawsuit by
the City
Municipality of
Celje
Probability of occurrence Amount of damage
Low Low
Definition MOC requests from the Company the reimbursement of the costs of rehabilitation
of the soil excavated by the construction company that acted on request of
the investor (MOC) in the scope of construction works (urban wastewater). The
excavations were carried out on the land (location of the old Cinkarna) that MOC
took over from the Company based on a contract on transfer of redundant assets
free of charge. The material was excavated in 2009. At the time of excavation, it was
classified as material that could not be disposed of in a non-hazardous waste landfill
due to its heavy metal content. Pursuant to the decision of the administrative
authority, MOC rehabilitated the material via an external contractor. Prior to that,
MOC had already unsuccessfully sued the construction contractor, against whom
bankruptcy proceedings had been initiated in the meantime.
Management According to the current assessment of the law firm that represents Cinkarna in
the legal proceedings, the possibility of a favourable outcome for the Company
is greater than 50%.
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ANNUAL REPORT 2020
Adaptation
to the BAT
conclusions
on wastewater
and gas
treatment and
management
in the Chemical
Sector (BAT
CWW)
Probability of occurrence Amount of damage
Moderate High
Definition Pursuant to Article 78 of the Environment Protection Act (ZVO-1), the Ministry
of the Environment and Spatial Planning shall update the environmental
protection permit ex-officio due to the publication of BAT conclusions relating
to the activity of the installation. Consequently, it is necessary to adapt to the
requirements. Along with the publication of BAT CWW conclusions, which
also refer to the treatment of wastewater (liquid waste) from the production of
titanium dioxide, the levels of chemical oxygen demand (COD) emissions will
have to be adjusted below 100 mg/l per each discharge. The level of BAT-related
emissions is stricter than the emission limit values set out in the Decree on the
emission of substances and disposal of waste from titanium dioxide production,
which now sets a limit value.
Management With the competent authority (ARSO), we will carefully review and coordinate
the conditions for a certain COD emission level and the possible exceptions
provided by the BAT conclusion. We are also looking for a technical solution to
reduce COD below 100 mg/l.
V. HR and Organisational Risks
Ensuring
continuity
of human
resources
Probability of occurrence Amount of damage
Low Moderate
Definition The nature of the Company’s operations is inherently complex and specific as
it operates in several industries that are not interrelated and at the same time
supplies products to end users from very different industrial areas. Consequently
it is exposed to the risk related to networking and interactions and, above all,
transfer of its managerial, engineering and supporting know-how. These risks
are thus related both to the HR structure and the system of continuous learning
and transfer of acquired knowledge and information through communications
paths and structures.
Management We are training and preparing responsible successors for the key functions at
all levels of the Company’s organisational structure through target-oriented
programme. We ensure adequate information flow for the key managerial
and expert fields in all phases of operations of organisational units through
constant communications, informing and harmonised actions of all key
employees. Successors are actively participating and are closely familiarised
with actions and issues related to ensuring uninterrupted operations of business
functions and processes. In cooperation with support services we thus ensure
undisturbed takeover of the Company's key functions in case of foreseeable and
also extraordinary events (illness or longer period of absence, resignations and
retirement).
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CINKARNA.SI
Ensuring
the smooth
operation of
the Company
during
COVID-19
Probability of occurrence Amount of damage
High High
Definition During the global COVID-19 pandemic and the consequent outbreak of the
virus also in Slovenia, the Company's internal environment was exposed to a
large number of people, both employees and external contractors. In the event
of a virus infection, this presents a risk to the smooth operation of individual
production organizational units within the Company. The system of adopting
a set of measures and internal testing of employees ensures the stability and
reliability of human resources in the time of threats posed by the COVID-19
pandemic.
Management In many areas of the operational and organizational structure of the Company, we
used a number of measures, protocols and channels for targeted communication
with employees to ensure the smooth operation of the Company. We restricted
or minimised contacts with external partners and contractors, adjusted our
internal processes in such a way as to ensure the minimum number of employees
required in the workplace, adjusted shift work, limited contacts during shift
changes, arranged for a certain reserve of critical crews of workers, introduced
instruments for work reassignment and work from home, adjusted out canteen
service, established protocols for online communication, prohibited gathering of
people and established a system of self-supply with disinfectants and protective
masks, while ensuring external procurement of personal protective equipment,
taking into account all measures taken by the Slovenian Government and the
National Institute of Public Health. We established an internal testing system
with rapid antigen tests and promptly informed all employees of the measures
and protocols in force within the Company. With these measures, we ensured
the uninterrupted operation of the Company in the event of infections, possible
quarantines and the required self-isolation of employees.
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ANNUAL REPORT 2020
Corporate Governance Statement
The Internal Control and Risk Management System in Relation to the Financial
Reporting Procedure
The Company has set up a system of operational and supervisory internal controls at
all levels and areas of operations in order to manage risks that impact achievements
of objectives in terms of:
■ business efficiency and effectiveness,
■ reliability of financial reporting, and
■ compliance with legislative and internal regulations.
Control activities and responsible persons are defined by internal acts (job
descriptions, authorisations, organisational regulations, rules, and rules of procedure).
The Company provides for:
■ Accounting controlling of data that encompasses the assessment of the
correctness of accounting information and elimination of irregularities found.
Accounting and Finance Departments are in charge of implementation;
■ Verification of reliability of accounting data that is performed by listing assets
and liabilities (inventory). Inventorying is performed by the permanent inventory
commission in accordance with the annual inventory schedule. The head
of inventory and member of the inventory commission are organisationally
assigned within the Accounting Department. For the purpose of individual types
of inventory or extraordinary taking of inventory, the Management Board can
appoint special inventory commissions;
■ Assessment of deviations of the actual amounts from the planned amounts that
can indicate deficiencies in implementation as well as planning of objectives. The
activities are performed by the Accounting Department;
■ Internal control over implementation of prescribed procedures in the area
of purchasing, warehousing and consumption of materials and the area of
production, warehousing and sale of products (control of consumption and
approval of prescribed documentation, analysis of eventual discrepancies
and proposals of measures). Activities are performed within the scope of the
Accounting Department and by the Company’s management;
■ Internal controls in the computer-assisted IT system relating to the management,
infrastructure, protection, purchasing, development and maintenance of software
are provided by the IT Department. Controls within individual applications or
controls for software solutions of users provide for the completeness and accuracy
of capturing and processing data;
■ The internal control system is complemented by the assessment system
according to:
ISO 9001 – quality management systems,
ISO 14001 – environmental management systems and the EMAS Regulation for
the Chemistry Mozirje BU,
BS OHSAS 18001 – occupational health and safety systems.
The internal assessment of the functioning of processes is performed by qualified
internal assessors so as to verify whether activities are performed in accordance
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CINKARNA.SI
with management systems and whether the introduced management system is
suitable and effective for the achievement of set objectives. External assessments
are performed by a certification entity;
■ Audit of annual financial statements is performed by an external audit firm;
■ Based on the resolution of the Management Board, verification of the functioning
of operational and supervisory internal controls is performed once a year. By way
of a resolution, the Management Board designates a responsible person, the area
of supervision and the schedule for the implementation of supervision;
■ In 2016, we set up the Internal Audit Department. Based on the adopted
fundamental charter, the rules and plan, the Internal Audit Department has been
fully operational since 2017.
Discrepancies established through different forms of internal controls are analysed
by responsible persons and the Company’s management and on the basis of these
analyses they initiate measures for elimination or prevention of the causes for the
occurrence of risks that caused or could cause deviations from the set rules and
objectives of the Company.
Information on the Work of the Company’s General Meeting, Including Compe-
tencies, Shareholders’ Rights and their Enforcement
The General Meeting is convened by the Management Board at their own initiative, at
the request of the Supervisory Board or at the request of the Company’s shareholders
representing one twentieth of the share capital.
The General Meeting is familiarised with the Annual Report and takes valid decisions
at sessions with a regular majority of votes cast, whereby they decide especially on:
■ use of distributable profit,
■ appointment of the members of the Supervisory Board,
■ granting discharge to the members of the Management Board and the
Supervisory Board,
■ appointment of the auditor and other matters.
They decide by a ¾ majority especially on amendments to:
■ Articles of Association,
■ measures for increasing or decreasing share capital,
■ status changes and winding up of the Company and other matters, provided this
is stipulated by the law or the Articles of Association.
Shareholders can attend the General Meeting and exercise their voting rights only
under the condition that they announce their attendance at the General Meeting
to the Company’s Management Board in writing no later than by the end of the
fourth day prior to the General Meeting session. An individual shareholder’s number
of votes at the General Meeting is determined by the votes vested in the shares that
the former owns according to the information in the share register on the fourth day
prior to the date of the General Meeting session. Shareholders can exercise their rights
arising from shares directly at the General Meeting or through proxies, whereby the
letter of proxy must be issued in writing and deposited with the Company. As a rule,
one General Meeting is held per year.
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ANNUAL REPORT 2020
Information on the Composition and Work of Management and Supervisory
Bodies with Committees
Management Board
The temporary term of office of the Management Board started on 30 June 2020,
while on 31 December 2020 the Supervisory Board extended the term of office of the
President of the Management Board and the Deputy President of the Management
Board by 4.5 years. A member of the Management Board – Worker Director,
Filip Koželnik, was appointed by the Supervisory Board for a five-year term on 5
November 2020. Until 30 June 2020, the Management Board consisted of Tomaž
BENČINA, BSc (Metallurgy) and BSc (Economics) – President of the Management
Board and Jurij VENGUST, MSc – Member of the Management Board in charge of
Finance, Accounting and IT. Until 23 October 2020, Marko CVETKO, BSc (Chemical
Engineering), Specialist, was Member of the Management Board – Worker Director.
The Company has a two-tier governance system and is governed by the Management
Board and the Supervisory Board. The Management Board represents and presents
the Company. It is composed of a President and two members, one of whom is
the Worker Director (conditions for the appointment and discharge of the Worker
Director as well as his/her competencies are stipulated by the Worker Participation
in Management Act).
President of the Management Board
Aleš SKOK
BSc (Chemical Engineering), MBA, USA
(from 1 July 2020)
Member of the Management Board –
Deputy President of the Management Board,
Technical Director
Nikolaja PODGORŠEK - SELIČ
BSc (Chemical Engineering), Specialist
Member of the Management Board – Worker Director
Filip KOŽELNIK
MSc (Business Studies)
(from 5 November 2020)
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CINKARNA.SI
The Management Board adopts all decisions in accordance with the law and the
Articles of Association, with the exception of decisions that fall within the express
competence of the General Meeting and the Supervisory Board. The Management
Board has in particular the following competencies vis-à-vis the General Meeting:
■ prepares information on matters involving the Company, expert materials and
resolutions within the competence of the General Meeting,
■ convenes the General Meeting,
■ implements the General Meeting’s resolutions.
The Management Board reports to the Supervisory Board on:
■ the Company’s profitability,
■ planned business policy and transactions that could materially affect profitability
or solvency of the Company as well as other matters pursuant to the law and the
Supervisory Board’s requests.
Supervisory Board
The General Meeting of Cinkarna Celje, d. d. appointed a new member of the
Supervisory Board on 17 June 2020 (five-year term of office as of 18 June 2020): David
Kastelic. It also familiarised itself with the appointment of employee representatives
as members of the Supervisory Board, namely Jože Koštomaj, who replaced Aleš
Stevanovič, and Dušan Mestinšek (from 18 June 2020 for a five-year term) as well as
the with the expiry of the term of office of Supervisory Board member Dejan Rajbar.
Due to the resignation of the Chair and member of the Supervisory Board Borut
Jamnik on 20 November 2019, the General Meeting at an extraordinary meeting
appointed Mario Gobbo member of the Supervisory Board for a five-year term of
office starting on 23 December 2019. Mario Gobbo took over the running of the
supervisory body on 26 May 2020. The Supervisory Board consists of:
Chair
Dr. Mario GOBBO
(as of 26 May 2020)
Deputy Chair
Luka GABERŠČIK
LLB
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ANNUAL REPORT 2020
The Supervisory Board comprises six members, two of whom are employee
representatives elected by the Worker’s Council that notifies the General Meeting
thereof. The Supervisory Board is appointed by the General Meeting, within the
exception of those Supervisory Board members who are employee representatives.
The competencies of the Supervisory Board are stipulated by the law. More detailed
regulation, method and conditions for their work are regulated by the Supervisory
Board by way of the Rules of Procedure on the Work of the Supervisory Board. The
Management Board must obtain the consent of the Supervisory Board for the
adoption of the business policy and plans, establishment and co-establishment of
companies, increases and transfers of the founding contributions of the Company in
other companies, purchase and transfer of shares and shareholdings of the Company
in other companies, awarding of the authorisation for procuration, etc.
The Supervisory Board meetings are convened by the Chairman of the Supervisory
Board at their own initiative or the initiative of any member of the Supervisory Board
or at the initiative of the Management Board. The Supervisory Board constitutes a
quorum for decision-making in meetings if at least half of the members are present
during decision-making.
As a rule, the Supervisory Board meets six times a year.
Member
David KASTELIC
MSc
(as of 18 June 2020)
Member
Dušan MESTINŠEK
BSc (Electrical Engineering)
(as of 18 June 2020)
Member
Jože KOŠTOMAJ
BSc (Mech. Eng.)
(as of 18 June 2020)
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CINKARNA.SI
The Supervisory Board of Cinkarna Celje, d. d. has the Audit Committee, which has
been composed of three members since 2 July 2020 and is a permanent body within
the Supervisory Board. Members of the Audit Committee are David Kastelic – Chair,
Jože Koštomaj – Member and Gregor Korošec as external independent expert.
Based on its consideration, the Committee drafts proposals for resolutions, position
statements and opinions within the competence of the Supervisory Board and
relating to the annual and business reports of the Company’s Management Board,
reports and opinions of external auditors, and also prepares Supervisory Board reports
for the General Meeting. It must inform the Supervisory Board promptly of its work
and activities and deliver to it reports on meetings.
The Supervisory Board’s HR Committee has been operating in the following
composition since 2 July 2020: Mario Gobbo – Chair, Luka Gaberščik – Member and
Dušan Mestinšek – Member. The Committee drafts proposals for resolutions, position
statements and opinions within the competence of the Supervisory Board, in particular
in relation to drafting proposals concerning criteria and candidates for members of the
Management Board, members of the Supervisory Board committees, and support for
designing and implementing the pay system for the Management Board.
Remuneration of the members of management and supervisory bodies
Remuneration of the members of the management bodies equalled EUR 1,149,153 in
2020 (in 2019: EUR 888,874) and remuneration of the members of supervisory bodies
EUR 121,410 (in 2019: EUR 110,818). Remuneration of each member of the management
and supervisory bodies is specified in detail in tables below.
Composition and remuneration of the Management Board members in the 2020
financial year – excluding the costs of company cards
In EUR
Name and
surname
Position
(President,
Member)
Fixed
salary -
gross (1)
Variable income
- gross based
on quantitative
criteria
Benefits
Other
remuneration
Total
gross
Aleš Skok
President
(as of 1 July 2020)
107,100 0 4,507 2,119 113,725
Tomaž
Benčina
President
(until 30 June
2020)
162,349 55,489 6,403 133,727 357,968
Nikolaja
Podgoršek
Selič
Deputy President 210,354 44,390 12,079 3,964 270,787
Jurij
Vengust
Member (until 30
June 2020)
118,021 41,616 13,401 100,882 273,920
Marko
Cvetko
Member (until 30
October 2020)
91,006 23,582 4,890 5,295 124,773
Filip
Koželnik
Member (as of 5
November 2020)
6,219 0 200 1,561 7,980
TOTAL 695,049 165,077 41,480 247,548 1,149,153
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ANNUAL REPORT 2020
Composition and remuneration of the Management Board members in the 2019
financial year – excluding the costs of company cards
In EUR
Name and
surname
Position
(President,
Member)
Fixed
salary -
gross (1)
Variable
income
- gross
based on
quantitative
criteria
Benefits
Other
remuneration
Total
gross
Tomaž
Benčina
President 252,221 29,569 15,482 3,788 301,060
Nikolaja
Podgoršek
Selič
Deputy President 201,775 23,655 13,880 3,282 242,591
Jurij
Vengust
member 189,163 22,177 3,766 2,774 217,879
Marko
Cvetko
member 107,192 12,567 69 7,515 127,343
TOTAL 750,351 87,967 33,197 17,359 888,874
Remuneration of members of the Supervisory Board and Committees in the 2020
financial year
In EUR
Name and
surname
Position (Chair, Deputy,
Member, external
member of the
committee)
Remuneration
for
performing
the function
– gross
annually (1)
Attendance
fees for the
Supervisory
Board and
Committees’
meetings
– gross
annually (2)
Total
gross
(1 + 2)
Travel
expenses
Total
remuneration
Aleš Skok
Member of the SB
(until 30 June 2020)
8,333 3,049 11,382 204 11,586
Mario
Gobbo
Chairman of the SB
(as of 26 May 2020)
15,253 5,291 20,544 2,724 23,268
Luka
Gaberščik
Deputy Chair of the SB 14,195 5,786 19,981 292 20,273
David
Kastelic
Member of the SB +
Chair of the AC (as
of 18 June 2020)
6,412 2,035 8,447 125 8,572
Dejan
Rajbar
Member of the SB +
Chair of the AC (until
17 June 2020)
7,750 3,487 11,237 234 11,471
Dušan
Mestinšek
Member of the SB +
member of the AC
12,875 5,082 17,957 0 17,957
Jože
Koštomaj
Member of the SB +
member of the AC
(as of 18 June 2020)
5,829 2,035 7,864 0 7,864
Aleš
Stevanovič
Member of the SB (until
17 June 2020)
6,080 3,709 9,789 0 9,789
Žiga
Gregorinčič
External members 0 1,315 1,315 0 1,315
Lea Peček External members 0 1,315 1,315 0 1,315
Gregor
Korošec
External members 0 8,000 8,000 0 8,000
Total 76,728 41,104 117,831 3,579 121,410
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CINKARNA.SI
Prejemki članov NS in komisij v poslovnem letu 2019
In EUR
Name and
surname
Position (Chair, Deputy,
Member, external
member of the
committee)
Remuneration
for
performing
the function
– gross
annually (1)
Attendance
fees for the
Supervisory
Board and
Committees’
meetings
– gross
annually (2)
Total
gross
(1 + 2)
Travel
expenses
Total
remuneration
Borut
Jamnik
Chairman of the SB
(until 20 November
2019)
17,703 4,056 21,759 468 22,227
Aleš Skok
Deputy Chair of the SB
(as of 15 October 2019)
13,009 2,974 15,983 408 16,392
Urška
Podpečan
Deputy Chair of the SB
(until 1 April 2019)
3,777 275 4,052 0 4,052
Luka
Gaberščik
Member of the SB 5,486 1,861 7,347 117 7,464
Dejan
Rajbar
Member of the SB +
member of the AC
14,163 3,682 17,844 702 18,546
Aleš
Stevanovič
Member of the SB 12,875 3,025 15,900 0 15,900
Dušan
Mestinšek
Member of the SB +
member of the AC
12,875 4,070 16,945 0 16,945
Gregor
Korošec
Member of the AC 0 7,000 7,000 0 7,000
Žiga
Gregorinčič
External members 0 1,529 1,529 0 1,529
Špela Bizjak External members 0 765 765 0 765
Total 79,887 29,236 109,123 1,695 110,818
Corporate Governance Code for Publicly Listed Companies
The Company follows the Corporate Governance Code for Publicly Listed Companies
(www.ljse.si) in its operations and also the related set of internal corporate governance
standards included in the general recommendations of the Corporate Governance
Code for Publicly Listed Companies. In line with the business decision of the
Management Board, the Company adopts the Code in the form specified with the
explanations. Due to the specifics of the management of the Company, in areas
deviating from the Code, the legal basis is strictly observed (Companies Act – ZGD-
1, Financial Instruments Market Act – ZTFI-1, Market Abuse Regulation – MAR, etc.).
In the continuation, we provide an overview and explanations of deviations from
individual provisions of the Code:
Item 2 - Governance of the Company is focused on meeting the objectives of its
strategy up to 2023 (Strategic Plan of the Company for the period from 2019 to 2023);
the Management Board has not adopted together with the Supervisory Board a
special document dealing with the Company’s corporate governance policy.
Item 5.5 - To elect members of the Supervisory Board, the candidates are presented
through substantiation of candidacy proposals with submitted data and in line
with substantive requirements stipulated by the Companies Act (ZGD-1). We do not
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ANNUAL REPORT 2020
comply fully with item 5.5 in relation to this matter as it requires public disclosure
of potentially sensitive personal data or as the Company does not have these data
available or the data are not within its competence.
Item 12.8 - The Supervisory Board’s Rules of Procedure do not include the Board’s
communications with the public with respect to the decisions adopted at its
meetings. The Company’s Management Board is competent to communicate with
the public. The Supervisory Board’s resolutions of greater importance are published
at the website of the Ljubljana Stock Exchange, Seonet, and on the Company’s
website.
Item 18.3 - The Supervisory Board did not define the term of office of members of
committees (composed of members of the Supervisory Board, except for the external
member of the Audit Committee). Membership in committees for members of the
Supervisory Board expires upon expiry of membership in the Supervisory Board.
Item 27 - The Company does not have its corporate communication strategy
defined within its corporate governance policy. The Company’s Management Board
and support services are responsible for the Company’s communications and
transparency of operations. Public announcements (Seonet and the Company’s
website) comply with legislative requirements and contain all the information
necessary for a securities investor to assess the situation and estimate the effect of a
business event on the price of the Company’s security.
Item 27.3 - The Company has not adopted internal acts or rules that would, besides
legislative provisions and rules, stipulate restrictions for trading the Company’s shares.
Persons with access to inside information sign a special statement on protecting
inside information and the Company keeps a list of persons with access to inside
information in compliance with the provisions of the Market Abuse Regulation (MAR),
the Market in Financial Instruments Act (ZTFI) and requirements of the Securities
Market Agency.
Code of Ethical Conduct and Work
The Company has adopted the Code of Ethical Conduct and Work, which is published
on its website and defines the fundamental principles and rules of behaviour
and actions of the management and all other employees of the Company. These
principles and rules define the standard of operation, management and leadership,
contributing to the business culture and excellence.
Diversity Policy
The objective of the diversity policy for management and supervisory bodies is to
obtain the optimal efficiency of these bodies, thus enhancing developmental and
competitive advantages and the Company’s reputation.
Cinkarna Celje, d. d. implements the diversity policy in management and supervisory
bodies in particular in terms of adequate procedure for search and selection of
members, in cooperation with the HR (nomination) Committee. The diversity
policy is not specifically formulated in writing. The Company’s bodies comply with
it and implement it in accordance with valid legislation under the Employment
Relationship Act (ZDR-1) as well as principles and provisions of codes defining the
substance and providing recommendations for this field.
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CINKARNA.SI
Each individual expressing an interest and fulfilling the criteria defined by the law, the
Company’s Articles of Association and the Corporate Governance Code for Publicly
Listed Companies can be a member candidate.
The following aspects of the diversity policy are taken into account for composition
of the Management Board and the Supervisory Board: sex, age, education and
professional experience. Currently, one third of the Management Board consists of
women. All members of the Supervisory Board are men. The Company will formulate
a diversity policy by the end of 2021. The policy will be formulated based on current
guidelines and recommendations.
Management of the Company
President of the
Management Board
Member of the Management
Board – Deputy President
of the Management Board –
Technical Director
Member of the
Management Board –
Worker Director
Aleš SKOK,
BSc (Chemical Engineering),
MBA, USA
Nikolaja PODGORŠEK SELIČ
BSc (Chemical Engineering),
Specialist
Filip KOŽELNIK,
MSc (Business Studies)
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ANNUAL REPORT 2020
Development Foundations and Strategy
INVESTMENTS
In 2020, EUR 12.23 million was spent on investments, acquisition of fixed assets,
replacement equipment, and on environmental investments, which represents
61.48% of the funds planned for 2020.
The main deviations from the plan are as regards fixed asset acquisition, where only
30.52% of the plan was achieved. The respective figure for replacement equipment
is 65.40%, while in terms of investments, 67.05% of the plan was achieved. The plan
achievement rate is lower partly because of the two and a half month interruption
of all non-urgent investment and maintenance works, as well as the otherwise
contracted activity due to measures related to the COVID-19 epidemic. We made this
decision with the aim of reducing the possibility of infection of employees, especially
in the production of titanium dioxide, where the spread of disease would make it
necessary to stop production. In 2020, we also planned a larger extent of overhauls
in the Titanium Dioxide BU, but they were not carried out as a result of increased
demand for TiO2 products, low stock and the risk of workers getting infected during
the overhaul, as it is difficult to keep an adequate safety distance.
As usual, this year the bulk of funds again went for the production of titanium dioxide
and sulphuric acid, to continue the activities as part of the multi-year project. We
completed investments in:
■ additional line for the 1st stage of acidic effluents neutralisation,
■ modernisation of ore digestion with a treatment plant,
■ treatment plant for sulphur melting process,
■ filter for the washing of metatitanic acid,
■ calcite grinding,
■ purchase and installation of a hydraulic press for the pressing of textile containers,
■ replacement of the DK1 steam boiler and the steam drum.
We actively worked on investments for:
■ additional treatment plant for purification of flue gases from calcination,
■ separate collection of waste from Water Preparation,
■ reverse osmosis (pilot device),
■ implementation of anti-dust measures.
In the Polymers BU, we completed an investment in increasing the volume capacity
for sprinkling fluorinated polymers.
We also carried out investment works to restore individual facilities (building for
operational TiO
2
maintenance – phase II, detailed design to refurbish the building of
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CINKARNA.SI
Grafika IV into changing rooms and the premises for development and maintenance
of automated processes) and infrastructure (replacement of switches 4, 5, worn-
out railway sleepers at individual sections, 50 m section of tracks, preparation of
documentation for upgrading the rainwater sewage system with oil traps).
In the area of environmental provisions, we used just under 50% of the planned figure.
Most of the funds were used for the rehabilitation of the Bukovžlak non-hazardous
waste landfill.
In the Chemistry Celje BU we invested in the storage of sulphuric acid for the
production of tribasic copper sulphate. In the field of Energy, we upgraded the
cooling of 2.5 and 7 bar compressor stations. There were no significant investment
activities in other units. Of the fixed assets, the largest amount was invested in the
purchase of a new X-ray machine (XRF).
2021 Investment Plans. Investments planned for 2021 total EUR 14,361,931. They
include capitalised own products and services of EUR 1,858,933 and exclude projected
activities arising from reversal of environmental provisions in the amount of EUR 2.6
million. The planned value of investments with capitalised own products, excluding
the funds of environmental provisions, is 28% lower than estimated for 2020. It
accounts for 8.7% of the sales plan for 2021 and nearly 110% of depreciation in 2021.
Of the total, 57.2% will be allocated to investments, 35.2% to purchasing replacement
equipment and 7.6% to acquiring individual fixed assets. Compared to the year
before, the share of funds for replacement equipment has increased, as we plan some
major overhauls in the production of titanium dioxide (calcination furnace with the
1st stage of the treatment plant, renovation of two digestion columns, replacement
of hydrolising unit, replacement of two filters and gel washing vessels) and Water
Preparation (lifting and renewal of sand filters).
Investments will be made in individual lines based on needs, abilities, capacities and
prospects as well as in line with the five-year strategic plan.
Also this year, the biggest share of funds invested will be allocated to titanium dioxide
production. The following activities are planned:
■ installation of parallel storage tanks for black solution filtration,
■ preparation of detailed design and the launch of the investment to install the
third press for squeezing metatitanic acid,
■ continued work to upgrade the treatment facility for flue gases from the
calcination process, which will be completed in 2022,
■ start of the investment for replacement of pigment screw presses,
■ partial installation of the third line for the 2nd stage of acidic effluents
neutralisation,
■ completion of the project of separate collection of waste from Water Preparation,
■ installation of degassing hydrocyclones at the existing gypsum thickener,
■ setting up a reverse osmosis line to treat the clear neutralising agent.
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ANNUAL REPORT 2020
We plan to replace the sulphur combustion furnace in the production of sulphuric
acid so as to reduce production risks and ensure the target capacity.
This year, some major investments are also envisaged in the field of preventive
measures for dust reduction.
A robot cell will be purchased for the Polymers BU for feeding the CNC machine,
which will decrease labour costs per unit of product.
In 2021, a new drainage C under the Bukovžlak high barrier and part of the gypsum
pipeline are planned. The construction of the gypsum pipeline over a different route
is necessary because it now runs across the land plot 115, cadastral municipality
of Teharje, where the Ministry of the Environment and Spatial Planning plans to
rehabilitate an illegal waste landfill, which will prevent access for maintenance on
the existing route.
Moreover, we will start the first phase of arranging oil traps around the Company.
We will also carry out several rehabilitation interventions involving buildings as
required due to ensuring static safety, hygiene minimum, establishing organisational
changes and arranging a suitable working environment.
The majority of funds planned to be used from environmental provisions (77%) will
be spent on the rehabilitation of the Bukovžlak non-hazardous waste landfill.
In line with the plans, the actual need and financial ability, we will also prepare and
introduce new projects during the year as well as purchase spare parts and new
items of fixed assets.
We plan financing using own sources.
A more detailed overview of projected investments is included in the Plan of
Investments, Fixed Assets and Replacement Equipment for 2021.
DEVELOPMENT ACTIVITY
In the Titanium Dioxide BU, a large part of development activities was dedicated to
improving the quality of various types of TiO
2
pigment. By introducing a new calcite
grinding technology, we significantly improved the optical properties, namely the
brightening power and the blue undertone, which is mainly reflected in dispersion
paint applications. We developed, and already introduced some, procedures for
enhancing the technological process, which lead to an increase in the pigment
opacity – a characteristic that is becoming increasingly important for the customer,
mainly due to high TiO
2
prices. Namely, it enables lower pigment consumption.
We developed a new type of pigment for plastics with increased resistance to
weathering in the laboratory and verified it in the Chemistry Mozirje BU.
In the field of sustainable management of resources and energy, we upgraded the
development process of barium sulphate production from wastewater saturated
with sulphates. We produced a large amount of samples and defined the appropriate
washing method after precipitation. With the aim of recycling as much process
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CINKARNA.SI
water as possible, we continued development work on procedures for lowering BOD
and COD, degassing the gypsum suspension before thickening and thus ensuring
the appropriate quality at the reverse osmosis inlet. The procedures are extremely
complex and we have not yet achieved satisfactory results.
Sustainable resource management also encompasses a development project for the
treatment of waste 23% acid in terms of the extraction of titanium dioxide and some
rare metals (scandium, vanadium). In 2020, only the negotiations on the method of
work and costs were held with the selected external institution.
In the field of masterbatches, we installed various portions of pigment in the
appropriate EMA (ethylene methyl acrylate) carrier and received confirmation of
appropriate quality from the market.
We obtained the Class 1.5 certificate for a series of smooth glossy PEQ powder
coatings with Qualicoat requirements.
With the objective in mind, we optimised the process of brochantite nucleation
for the production of tribasic copper sulphate. We defined a process for obtaining
copper oxychloride suitable for SC products throughout the year.
We developed a ball valve in accordance with the requirements of SIST EN 5211.
We were not successful in carrying out remediation of soil contaminated with pyrite
cinder using our waste materials. However, we found a way to remediate it using fly
ash.
QUALITY ASSURANCE
In 2020, 11 internal audits were planned. We audited BUs and departments that have
not been audited recently and reviewed the completion of measures as well as the
effectiveness of ex-ante audits. In the plan, special attention was paid to the horizontal
audit of the implementation of the seven organisational regulations and the review
of the up-to-datedness of the documentation. The audit of three organisational
regulations was postponed to 2021 due to unfinished audit, whereas the rest was
carried out in line with the plan. We did not detect any significant discrepancies,
however, many opportunities for improvement were identified.
Due to COVID-19, the external auditors conducted the ISO 9001:2015 compliance audit
for 2020 with a delay, in August. No inconsistencies were found and the identified
opportunities for improvement were taken into account and incorporated into our
integrated management system.
We regularly monitor the number of complaints and comments of our buyers
and respond to them with corrective measures. In 2020, there were a total of 14
complaints, of which 8 were unjustified (57.1%). In most cases they were resolved to
the satisfaction of the customer.
Compared to 2019, the number of complaints decreased the most in the TiO2 BU,
from 22 last year to 1 in 2020. Compared to last year, the Chemistry Celje BU recorded
3 more complaints and the Chemistry Mozirje BU 2. The Polymers BU received no
complaints in 2019 and 1 in 2020.
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ANNUAL REPORT 2020
We continued working on a project aimed at introducing new qualities of titanium
dioxide. We initiated and partly implemented a series of optimisations of individual
production processes, which should contribute to higher quality of our pigments,
in addition to the implementation of the project for wet and dry calcite grinding
on new machines. The new method of calcite grinding is in regular operation and
represent an improvement especially in terms of greater brightness and bluer
undertone of the pigment. Based on the information collected from customers, we
develop control methods according to their application needs.
The broader framework of ensuring the quality of the Company’s operations also
encompasses the project of formulating a business continuity plan. The tasks
of collecting information, drafting the strategy and preparing the basis for crisis
communication were carried out throughout the year, and are planned to continue
in 2021.
Permanent improvements dictated by standards and quality guidelines are the
driving force of progress and continuous improvements on all areas of the Company’s
operations. The system for collection of useful suggestions, CC UM, resulted in 0.2
improvement per employee.
STRATEGY
Cinkarna Celje, d. d. operates predominantly in the chemical processing sector. The
principal activity of the Company is production of titanium dioxide pigment. The
Company operates and conducts business globally, but generates most of its revenue
on the European market. In the 2020 financial year, the Company generated 91% of
net sales revenue from exports. The biggest market of the Company is Germany,
accounting for approximately one third of sales, followed by Slovenia, Italy, Turkey,
Belgium, France and the Netherlands. At the end of 2020, the Company employed
824 people.
The Company will continue striving for active cooperation with employees, business
partners and the local community with the purpose of continued successful
operations and generating adequate return for the owners.
Continued optimisation of the HR structure is anticipated with reassignment and
new hires of young and technically qualified personnel. Investments in development,
training and further improvement of the working environment of employees will
also continue.
As the Company is highly aware of the environmental issues of the immediate
surroundings, we will continue looking for and introducing additional ways of
reducing potential adverse impacts on the environment, continuously acting
in compliance with all the requirements of the environmental legislation and
regulations. Restrictions in this field could represent additional risks.
Taking into account fluctuations in trends, in the new five-year strategic period
from 2019 to 2023 average sales revenue of EUR 190.8 and average annual growth in
revenue of 2.3% are anticipated.
With the aim of increasing sales and through well-deliberated investments in
renovation, optimisation and expansion of existing production capacities, the
Company will as of 2018 invest on the average EUR 13.4 million per year in fixed
assets and EUR 2.1 in operating current assets, which will enable the Company to
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CINKARNA.SI
achieve the planned organic growth. The majority of funds invested will be directed
to growth and development of the core line of titanium dioxide pigment.
The main objective is to preserve long-term relationships with existing buyers and
acquire new ones through development of products with a higher value added on
the basis of achieving the requisite higher level of quality and a suitable relationship
between responsiveness, flexibility and quality on the one and price on the other
side. Sales will continue focusing mostly on the European markets.
Over the next five-year period, the Company’s Titanium Dioxide strategic business
unit will focus on acquiring new buyers from the industry of printing ink production,
which has significant short-term opportunities due to the current demand exceeding
supply, whilst at the same time its more demanding buyers enable in the long term
higher returns and indirectly serve as protection against potential new entries of
competitors on the European market with products of a lower quality range. The
share of titanium dioxide pigment in sales accounts for 80% and by 2023 this share
will increase by approximately 10 percentage points.
When developing its core line, the Company will strive to develop new products
with a high value added and those vertically integrated products that will enable
professional, income and cost synergies, thus making the best possible use of
competitive advantages of the business environments of individual production
lines. The Company will strengthen its presence on the existing markets for the key
strategic business units of Titanium Dioxide as well as for the accompanying units
and lines of Copper Fungicides, Polymers and Metallurgy. The Chemistry Mozirje BU
is to be disposed of according to the strategic plan.
The Company will also focus on management of the purchasing process due to
unpredictable business cycles with significant changes in selling and purchase
prices, which can impact materially the operating results and cash flows.
Efficiently utilised production process will allow the Company to provide timely the
requested quantities of finished products, which will enable sustainable long-term
profitability under the given conditions. The expected EBITDA margin is to reach
the average of 16.6% and the ROE indicator the average of 11.5%. The strategic plan
includes the dividend policy, which provides for an approximate payment of 75% of
the net profit achieved in a year. The dividend policy is naturally subject to change,
in line with the amendments to the business policy as regards payments to owners
and the structure of the sources of financing.
A new investment cycle required for stable current operations will be carried out
over the future years. By investing in the expansion of production capacities at
the existing location, the scope of titanium dioxide pigment production is coming
close to the regulatory maximum limit, so alternative options for further growth in
operations will have to be looked for in the future.
As part of the implementation of the current strategic plan, the Company achieved
and exceeded all the business performance objectives and at the same time carried
out the optimisation of the portfolio of strategic business units and areas planned
for this period.
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ANNUAL REPORT 2020
Non-financial statement
Description of the Non-Financial Business Model
Cinkarna Celje, d. d. strives for compliance of operations at all levels. Through constant
investments, we provide for technological procedure modernisation in line with the
best available techniques and thus minimum environmental impact. We make sure
to enable healthy and safe working conditions for employees and their permanent
training.
Quality assurance is a constituent part of the Company’s governance and is based
on the vision of growth strategy and key strategic objectives aimed at achieving the
satisfaction of owners, buyers, employees and the environment in which we operate.
As a chemical company, we chose as our 21st century challenge the development
of titanium dioxide in special forms, which we intend to upgrade into finished
products with a higher value added. We are also expanding the range and quantity
of preparations for plant protection based on copper, different master types and
powder coatings and processing fluorinated polymers and elastomer. The majority
of our products is exported to the EU markets.
We are looking for innovative and sustainable solutions for reducing waste quantities,
offering the market two such products, white gypsum (CEGIPS) and red gypsum
(RCGIPS), and we are also developing new ones.
The Company is organised as a set of business pro
fit centres, separated in terms of organisation and management, accompanied by
centralised support departments and a centralised unit providing maintenance and
energy infrastructure.
Environmental Policy in Brief
The elements of the safety, health and environmental management system are closely
intertwined with all business processes in the Company, thus the environmental
policy is part of the Rules of Procedure of Integrated Management System. We
demonstrate environmental responsibility
■ by meeting regulatory requirements in the field of the environment,
■ identifying hazards and risks of environmental impacts,
■ managing risks and performing activities to prevent, as much as possible, any
damage to the environment,
■ by commitment to climate change mitigation and adaptation and the
conservation of ecosystem biodiversity,
■ by planning and implementing activities to reduce risks as well as by effective
handling and communication in emergency situations to prevent environmental
pollution,
■ by monitoring the product life cycle.
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CINKARNA.SI
Every year, the management defines the goals concerning the environmental policy.
For 2020, we set three framework goals in the field of the environment, namely:
I. Measures to eliminate risks in the field of environmental protection
We carried out six activities related to the elimination of process risks in the titanium
dioxide production, water resources management, ensuring the safety of barriers
and the elimination of risks arising from old burdens. The plan was achieved in all
areas except the elimination of risks due to old burdens. Regarding this issue, we
prepared a comparison of different legislations and a summary of the work done so
far for the legislator. We also organised a meeting with the legislator, but failed to get
a clear answer about further action. In the continuation of the year, we clarified our
obligations and we will continue pursuing our activities in 2021 accordingly.
II. Defining measures to reduce emissions to the environment in case of
emergency
We defined and implemented measures to:
■ eliminate the risk of explosion in paste extrusion,
■ control the concentration of zinc content in wastewater from the Mozirje
treatment plant,
■ introduce recycling of waste cakes in the production of masterbatches and thus
decrease the quantity of waste,
■ establish control of sulphate emissions from the treatment plant in the production
of copper preparations,
■ establish emission control at the treatment plant of emissions into air from the
production of copper preparations,
■ eliminate the risk of hydraulic oil leakage on the gypsum filter presses by replacing
the hydraulic lines.
III. Sustainably managing resources and products
In the Chemistry Celje BU, we made an energy analysis and prepared a concept
for the optimisation of the dryer. In the Chemistry Mozirje BU, we introduced the
processing of technological waste and cleaning residues into usable granules.
Worn-out 2.5 bar compressors were replaced with more energy efficient ones. We
renovated the lighting in the machine and electrical repair shops, replacing it with
more energy efficient options. The investment in the use of separately collected
sewage from the Water Preparation is in full swing.
We carry out tasks related to the project Comprehensive Water Management project.
The goal of all activities is to reduce the burden of water courses due to emissions
from our production and to increase the share of recycled water. At the same time,
we pursued numerous development activities. The measures taken allowed us to
successfully decrease the Mn content in the gypsum suspension thickener overflow,
while the additional multifunction filter helped us achieve the required conditions
for water quality before inlet to reverse osmosis. However, tests at the reverse osmosis
pilot plant did not yield the expected result further on. It seems the membranes
clogged too quickly. The manufacturer supplied a new set, which will be re-tested in
2021. Tests were carried out regarding the reduction of BOD and COD in wastewater
using microfilm. The effect achieved does not meet the set goal, which means we will
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have to look for a solution elsewhere. As regards the task of developing a technological
process for the sulphates extraction by use of barium, we prepared a large quantity
of barium sulphate under controlled precipitation conditions. Moreover, we defined
the appropriate washing method, dried the material and Micronesia it. The obtained
sample barium sulphate meets the quality requirements of the market.
Waste management table
Waste type 2020 2019 Index
Quantity
(t)
Sec. quantity
(t/EE)
Quantity
(t)
Sec. quantity
(t/EE)
1/3 2/4
1 2 3 4
Non-hazardous
without gypsum
707.2 0.015 492.1 0.011 144 136
Non-hazardous with
gypsum
171,660 0.0037 181,593 0.0042 95 88
Hazardous 130.3 0.0028 150.3 0.0035 87 80
In 2020, the quantity of non-hazardous waste without gypsum increased by 44%.
This was due to the higher sales of scrap steel equipment and the one-time delivery
of cake from sulphur filtration, resulting from the lack of liquid sulphur and the
consequent greater consumption of solid sulphur.
As we significantly increased the production of white gypsum, the volume of non-
hazardous waste with gypsum decreased by 5%. The quantity of hazardous waste
also dropped, i.e. by 13%.
Some improvements were made to reduce energy consumption (total electricity,
steam, gas), whereby we achieved specific savings from 0.00921 MWH/EE to 0.00907
MW/EE.
To manage the risk of process water shortage in dry periods, we are looking for a
solution to have the water permit amended based on a study by the Institute for
Water. In January 2020, we submitted the respective application, which the Water
Directorate had not considered by the end of the year. We obtained all permits and
easements for the installation of a permanent measuring point for monitoring Qes
of the Hudinja river, and preparations for construction are underway. In parallel, we
also prepared an overview of other options for alternative water supply, informed the
Supervisory Board of the results and passed resolutions to continue the activities.
In February, we received the commissioned Impact Assessment of the construction
of a pipeline for the discharge of liquid neutralised waste from the titanium dioxide
production to the Savinja river. Such an action would reduce the sulphate load on
the rivers of Houdini and Vzhodna Ložnica. The assessment concluded that the
concentration after the mixing zone in the Savinja river would still be exceeded, so
the solution is not appropriate.
After a series of demanding adjustments and a delay due to COVID-19, we started
the comprehensive rehabilitation of the closed Bukovžlak non-hazardous waste
landfill in mid-June, in accordance with the integral building permit. The works are
proceeding according to the plan. The most challenging part of the construction of
the J 20 shaft, the boring of the western pipeline and the hauling of pipes into the
bore were successfully completed by the end of 2020.
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That year, we reported to the Environmental Agency two changes in the operation of
the plant as part of the obtained environmental permits for installations causing large-
scale pollution (production of tribasic copper sulphate and an additional quantity of
waste to be processed in the Chemistry Celje BU, increase in the amount of waste
cake from sulphur filtration and processed volume in sulphuric acid production). We
submitted five applications for amendment to the environmental permit, namely
four for the Celje site and one for the Mozirje site. The applications include changes
in the operation of individual parts of the installation. As of 2010, when we obtained
the integral environmental permit, we have made a total of 13 amendments to the
basic permit. In 2020, we did not receive any decision about the amendment from
the Agency.
In 2020, intensive coordination and supplementation of the application for
the amendment to the environmental permit for an installation posing lower
environmental risk (SEVESO) took place.
One inspection was conducted in the field of environment (at the Celje site – ONOB).
No deficiencies were found.
In the first half of the year, we received two complaints, one regarding excessive noise
and one about yellow dust appearing on parked cars in the vicinity of the Company.
In relation to the complaint about the noise, we located the sources of the noise and
introduced several measures in the production of titanium dioxide. We installed a
fan inlet silencer for transport in the surface treatment plant 2, soundproofed the
flue from the treatment plant for gel pre-drying and replaced the sound attenuators
on the treatment plant for gel pre-drying. The yellow dust on the cars was not due
to any irregularities in the Company but the flowering of dandelion and other plants
this time of spring.
In November, we again received a complaint from the same person about the
recurrence of howling noise. The condition of the devices was inspected in the
TiO2 production and the sound attenuator on the pre-drying treatment plant was
replaced, as a result of which the situation improved.
We prepared and submitted timely all monitoring reports for 2019 in line with
legislative requirements. We did not exceed threshold values.
Social Policy in Brief
SOCIAL PROJECTS
We are aware of the utmost importance of developing intergenerational cooperation,
transfer of knowledge and joint building of a system of values in our society. This is
why we devote special attention to working with the youth from Slovenian primary
and secondary schools, educational institutes and universities. We regularly organise
visits and presentations, take part in the preparation of research and seminar papers,
bachelor’s theses and post-graduate theses as well as scientific papers.
In 2019, we carried out 6 excursions and 71 students were on mandatory practical
training with us, of whom two were preparing their master’s thesis. We participated
at the career fair in Celje with a presentation of occupations and presented our
Company and possibilities for employment. In 2019 we granted 10 new scholarships.
The Company has a total of 26 scholarship holders.
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The Environmental Protection Department has been cooperating for several years
with the Secondary School of Civil Engineering and Environmental Protection
from the Celje School Centre in the implementation of practical training for the
programme of environmental technician. This year, we also carried out four hours
of practical training at our premises. We familiarised students with the principal
activities of Cinkarna Celje, d. d. (video), focusing on activities for environmental
protection. We saw one of the measuring points for emissions into the air and one
for emissions into waters. We also showed them the filtration unit and the device for
removing waste – gypsum. We familiarised them with the basics of environmental
monitoring, waste management, waste water sampling and field measurements.
We are proud of the multi-annual project of intensive cooperation with primary
schools, the fundamental purpose of which is to encourage the creativity and
thought processes of children as well as to promote their awareness of the broader
social importance of industrial production and development.
So far, we have carried out no fewer than thirteen consecutive competitions.
■ In 2008, we encouraged children to think in terms of environment with the
competition »Draw Yourself a Prize«.
■ In 2009, we drew together »Animals in Gypsum Landfills« and introduced to
children the environmental acceptability of our waste while they learned about
the animals that live in our waste disposal facilities.
■ In 2010, we were making bird houses with children under the motto »I am the
Nature«, made bird suet balls and hung them around the Celje park before the
New Year.
■ In 2011, the International Year of Chemistry, we thought about and formulated
ideas on the significance and purpose of the products of Cinkarna Celje, d. d. in
everyday life within the scope of the contest entitled »Cool Chemistry«.
■ In 2012, we prepared interesting projects to mark the jubilee of 140 years of our
continuous operations in 2013 and implemented the competition »Taking Care
of the Environment«.
■ In the 2013 jubilee year, we thus organised the contest entitled »Let Us Create
a New Home for the Bees« and built a study bee house in Socka as part of this
contest.
■ We dedicated 2014 to recycling waste material within the contest »Benches for
Knowledge Thirsty Hikers«, placing the benches in the park Mozirski gaj.
■ The theme of the 2015 competition was to improve the knowledge about the
use of titanium dioxide in everyday life, which was implemented through the
competition »Titanium Dioxide, Where do You Hide?«.
■ The 8th competition in 2016 was the biggest so far as over 40 primary and
secondary schools participated; its title was »Pots and Troughs for Colourful
Flower Beds«. The children inventively painted flower pots, which we planted
with spring flowers and placed on the roundabouts in Celje on Mother's Day.
■ In 2017, we conducted the 9th competition under the title »Let Us Paint Cinkarna«
The children drew BUs and departments on white T-shirts and paper and got
acquainted with the professions and activities in our company. We organised the
closing event with cultural programme at the Central Celje Library, where works
were also exhibited. Included were 37 schools and over 1,000 children.
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■ The title of the 10th jubilee competition was »Cinkarna Celebrates by Making a
Comic Book«. The challenge for young creators was to draw from our jubilees.
They had to present the 145-year development of the Company through a comic
book – from the arrival of the train to Celje, construction of the factory, employee
training and setting up the first treatment plant, closing down some lines,
development of new technologies and products, process modernisation and
introduction of the latest technologies for safe operations. 450 children made 72
comic books about the history of Cinkarna.
■ In 2019, we invited students and mentors from primary and secondary schools to
carry out research in connection with our products. We named the competition
»Find Cinkarna Celje products«. The task focused on creating a variety of
entertaining board games that linked our products and end products in our
daily use. In a fun way we thus made the young people aware that without the
products of our industry there would not be a multitude of everyday objects at
our disposal. 560 pupils from 31 schools participated and made 40 board games.
■ Despite the outbreak of the COVID-19 epidemic, we managed to hold the
competition entitled »We Are Striving for Better Living« again in 2020. We
encouraged children to look through the »Cink« glasses to see how our company
used to operate in the past and how it operates now, and to make a drawing of
progress by comparison. Around 550 pupils from 30 primary and 3 secondary
schools participated, who created around 120 different glasses and 7 videos.
All of the contests were extremely well-received and attended. They saw the
participation of schools and institutes from the broader Celje region and achieved
their aim of enriching the participants, i.e. children, teachers, childcare workers and
employees of Cinkarna Celje, d. d.
In 2020, due to the COVID-19 epidemic and the resulting restrictive measures, we
carried out only one excursion, and 52 students were on mandatory practical training
with us. Of these, three students prepared diploma theses and two master’s theses.
The Company currently has 27 scholarship holders.
We organised the traditional food collection campaign with the association SIBAHE
(Slovenian Food Bank), in which both employees and the Company participated.
Together, we collected a large amount of food for those in need of help.
We cooperated with the SONČEK Cerebral Palsy Association of Slovenia for the fourth
year in a row in sales of their hand-made products, this time only in pre-Easter time.
The response of employees was extremely good as they raised quite some funds
ensuring undisturbed operations of the Association.
We helped our employees in times of trouble. We paid one solidarity grant and two
severance pays to the relatives upon the death of our employees.
We enabled several sports and dance activities to be pursued by our employees and
external participants at our multi-purpose premises, when such was still possible
given the COVID-19 epidemic.
We organised five exhibitions of paintings and photographs of our employees in the
main dining hall and in a special room.
In 2020, we again responded to the invitation to compete in the contest of the Tourist
and Cultural Association Celje, which organised already the 51st awards Golden Rose
and Broom. We received the bronze award for neat landscaping, gardens and flower
beds in the category of business facilities.
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ANNUAL REPORT 2020
We are trying to regularly inform all stakeholders of our plans and achievements
through different forms of communications. For the purpose of internal
communications, we issued 15 notifications by Cinko and Cinka, our mascots
encouraging employees in a humorous way for more productive, efficient and
safe work and delivering important information. We also prepared two issues of
Informator, two issues of Cinkarnar and 31 issues of latest news for employees. We
communicated with external public via SEOnet, the Company’s website and News
releases for journalists. In 2020, 17 News releases were issued.
DONATIONS AND SPONSORSHIPS
We are convinced that it is our duty to act and operate with a long-term view and
sustainably both from the point of view of environmental impacts and relations
with the broader society. We are aware of our role and importance, which is why we
strongly encourage, support and finance activities that improve the quality of life
and work of people and the entire community.
In doing so, we devote special attention to supporting activities geared towards
development and advancement of children and youth.
In 2020, we devoted EUR 688 thousand or somewhat more than 0.40% of total sales
to various sponsorships and donations.
As a socially responsible company we support activities focused on sports, culture
and in particular the environment. In compliance with the strategy, we earmark 90%
of sponsorship and donation funds for sports, 0.01% for cultural (EUR 5,140) and 9.99%
for other activities.
The most important areas and activities that we invest in and develop with the
holders of said activities are:
■ sports associations and clubs (we are the general sponsor of the Women’s
Basketball Club Celje and the Kladivar Athletics Club; we also sponsor the
Handball Club Gorenje Velenje, the Handball Club Pivovarna Laško, the Football
Club Celje, the Hockey Club Celje, the Basketball Club Celje and the Basketball
Club Šentjur, etc.);
■ artistic creation, work of cultural institutes and arts societies (Celeia Institute and
other cultural and artistic associations);
■ educational, childcare and charity organisations and associations (voluntary fire-
fighters’ associations, primary schools, and local communities, etc.).
In March 2020, we donated EUR 40,000 to the Celje General Hospital for the purchase
of a ventilator for COVID-19 patients.
In most cases and especially in cases that involve larger amounts of funds, we get
directly involved in the management, operations and supervision of societies, clubs
and institutes. We thus actively take part in and help ensure that funds are used for
the purpose they were provided for.
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HR Policy and Safety at Work in Brief
EMPLOYEES
Key data:
Number of employees: 824
Average age: 46.92 years
Employee gender structure: 77.7% male and 22.3% female
Percentage of work performed in the first shift: 59.1%
Cinkarna Celje, d. d., which is a basic chemical processing company integrated on
the edge of the industrial zone of the city of Celje, offers interesting and socially
safe work with the possibility of constant learning and personal development as
well as efficient and responsible work. By nurturing the feeling of belonging to the
Company with over 148 years of tradition and responsibility to the micro and macro
environment in which we operate, we orient our employees towards respect for
sustainable development and compliance with norms and ethical attitude towards
fellow beings and the approximate and wider social environment.
As at 31 December 2020, there were 824 employees at Cinkarna Celje, d. d., 77.7%
of whom were men and 22.3% were women. In line with the business policy of the
Company and due to the impact of first and especially the second wave of COVID-19
epidemic on the labour market and planned employment/retirement, the number
of employees decreased by 2.6% or 22 employees. In 2020, 52 people stopped
working at the Company. We employed 30 new hires (generally with levels IV, V and
VII of vocational education). We managed our other employment needs by internal
reassignment.
As at 31 December 2020, the average employee age was 46.92 years (45.08 for men
and 49.49 for women). Due to 30 recruitments and 52 terminations of employment
and continued optimisation of the number of employees by organisational units, the
age structure remained similar as in 2019. The average age slightly increased by 0.03
percentage point, which is reflected in the positive trend of gradual rejuvenation of
the staff.
Average employee age by year from 2010 to 2020
CC 2010 2011 2012 2013 2014 2015
TOTAL 46.47 46.79 46.78 47.11 47.33 47.95
2016 2017 2018 2019 2020
48.20 48.42 47.91 46.89 46.92
According to data, since 1985, when the Company set a restrictive HR policy, the
number of employees has more than halved (from 2,427 to 824, i.e. a cumulative
decrease of 1,603 employees), which has indisputably allowed the Company – while
operating in the world market and undergoing internal restructuring – to survive
and be competitive in increasingly demanding global markets, where it is exposed
to fierce global competition.
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The Company invests a lot in development and education of employees. As concerns
updating existing knowledge and ensuring legal compliance of employees in 2020,
in the light of restrictions related to COVID-19 epidemic, we recorded 11.97 hours of
training per employee (in 2019, 19.49 hours of training per employee), the cost of which
was EUR 273.8 per employee (in 2019, EUR 446.1 per employee). The biggest share
of trainings represents mandatory training, mostly from the fields of occupational
health and safety, work with hazardous chemicals, fire safety, environmental
protection and compliance with standards, which we operationally adjusted to
restrictions and measures with organisational actions. At the individual level, we
implemented significantly less content due to the aggravated situation resulting
from the COVID-19 epidemic and restrictive measures regarding the gathering of
people both at the Company level and at the state level and the freezing of the vast
majority of trainings. Most of the individual content was presented via electronic
means and applications.
In 2020, specific functional trainings at the Company and outside it were attended by
3,519 participants. Due to the above reasons, the number of hours of training totalled
10,065 (in 2019: 16,480), down 38.9%, and we also allocated significantly less funds to
training than in 2019.
In the field of social work, activities were carried out in 2020 in connection with solving
individual employee’s problems, the placement of disabled workers, ergonomics,
employee prevention and the retirement of those employees who meet the
conditions for retirement.
The most common problems arose in the deployment of employees with limited
work ability or disability. We are dealing with an increasing number of employees
restricted at work due to health issues. At the end of 2020, the Company employed
58 disabled people, which is 5 or 7.9% less than at the end of the previous year. The
share of disabled people in the Company, in relation to the entire active population
in 2020, is still relatively high at 7.0%, and exceeds the statutory quota for companies
by one percentage point. Based on the active policy of cooperation with the Institute
of Occupational, Traffic and Sports Medicine and the Disability Commission of the
Pension and Disability Insurance Institute, the percentage of disabled people in
relation to the total number of employees has decreased for the fifth consecutive
year, meaning that the positive trend continues.
Taking into account employee age structure and changes to the legislation, which is
increasingly restrictive in terms of the disabled retirement, we do not expect significant
improvements to the mentioned structure. The main reason for the situation is the
nature of production in the past and, despite technological modernisations, we
cannot expect it to improve in the near future.
External employee turnover in 2020 came in at 6.2%, while the total turnover, which
includes internal reassignments, equalled 12.2%. External employee turnover is 2.8
percentage points lower than the year before, while total turnover is 0.1 percentage
point lower, which can be attributed to more retirements, reassignments between
OUs and decreasing the number of employees by use of soft methods owing to the
reorganisation of Titanium Dioxide BU as well as the optimisation of the employee
number by organisational unit.
The employment and education policy positively affects the rise in the qualifications
structure that is visibly on the rise despite the long-term HR optimisation.
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Level of education
2019 2020
No. of
employees
Share in %
No. of
employees
Share in %
VIII 20 2.4 18 2.2
VII 134 15.8 137 16.6
VI 53 6.3 54 6.5
V 280 33.1 277 33.6
IV, III 275 32.5 265 32.2
II, I 84 9.9 73 8.9
Balance as at 31 Dec 846 100.0 824 100.0
Monitoring and formulation of employment and training policy indicate a drop in
unskilled labour force from the former high 48.7% to the current level of 8.9% and an
increase in highly educated labour force from the former 3.5% to the current 18.8%.
The employment policy, internal reassignments and merging of jobs are slowly
bringing about a positive balance between the actual and required education and
the Company is also willing to invest only in those employees whose education
obtained benefits the Company and the work process or those that are identified
as crucial for the future development and growth of the Company. The employment
and education policy positively affects the rise in the qualifications structure that is
visibly on the rise despite the long-term HR optimisation with simultaneous higher
number of new hires.
The trend of the falling number of unskilled and retrained workers and the hiring of
workers with education levels IV, V and VII is also positive, which is in turn favourably
affecting the educational structure of the Company.
The average level of employee absence from work decreased by 2.7 percentage
points to 21.0% in 2020 as compared to the year before because of a decrease in sick
leave and less annual leave used in the current year (sick leave absences account for
6.4% or 30.5% of all absences, which is 0.3 percentage point less than in 2019). At the
Company level, the percentage of sickness benefits fell by 4% compared to the year
before.
Sickness benefits had a varying dynamic in the structure, dropping in all business
units, except for the Metallurgy BU, Chemistry Celje BU and Chemistry Mozirje BU.
The causes for absenteeism at Cinkarna Celje, d. d. and the associated sick leave are
primarily as follows:
■ nature of the work (difficult, physically straining work),
■ significant increase in the number of injuries outside workplace and maternity
leave,
■ age of the population (distinct impact on absenteeism as the average age is
46.92 years),
■ work in (four) shifts (40.9% of workers work in several shifts),
■ large number of disabled employees (7.0% of all employees),
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ANNUAL REPORT 2020
■ increasing number of long-term sick leave, mostly due to:
■ severe illnesses,
■ locomotor system diseases,
■ cardiovascular diseases.
The 2020 framework plan was 855 employees at the end of the year. The plan for the
number of employees was based primarily on the envisaged production and sales
plan (as well as investment plans) combined with the optimisation of the economy
of production processes and increase in activities in specific professional areas. The
majority of retirements pursuant to the Pension and Disability Insurance Act (ZPIZ-
2) was implemented in the second half of 2020. New hires were anticipated as a rule
only for the medium- and higher-level qualification structures, mostly for the fields
of production business units and only to a minimum degree for support services,
under the condition that a large share of employees leaving the Company would be
replaced exclusively by professionally qualified employees. In terms of production
employees, we tried looking for long-term solutions with young employees, mostly
from the fields of occupations with a shortage of workers (metal worker, mechanic,
milling machine operator, chemical and machine technician, electrotechnician, etc.)
and strove to merge jobs. For certain programmes, mostly those with unforeseeable
business environment, we continued engaging students and hiring employees
through temporary work agencies. In 2020, we continued providing scholarships to
pupils and students of technical sciences.
We continued the policy of productive hiring, decreasing the percentage of unskilled
labour as well as reorganising work so as to reduce the number of administrative
employees. It should be noted that we have managed to reduce the percentage of
all employees with qualification levels I and II to below 8.9%. In 2020, we managed
to lower the structural portion of levels I and II by an additional percentage point.
The success of implementation rested on the willingness or retirement of employees
and other forms of employment termination. As a result, we managed to boost the
qualifications structure of qualification levels VI, VII and VIII by almost one percentage
point (the balance as at the end of 2019 was 25.3% of employees with these levels of
education).
HEALTH AND SAFETY
In 2020, we did not record any serious accidents at work. We dealt with 12 minor
injuries, 1 less than last year.
We implemented a system of identifying potential hazards and taking action in
the event of near misses. We identified 47 potential hazards, which we eliminated
on an ongoing basis. 3 near misses were reported. ‘Minute for Safety’ activity took
place in various forms and time intervals in the production work environments. In
all production BUs, we identified and broke down process risks related to ensuring
safety and health at the workplace, as well as measures to reduce emissions in the
work environment.
In the field of fire protection, we upgraded the system for automatic fire detection
and alarm system as well as the alarm in the “C” storage hall of the Marketing BU in
2020. We re-installed an automatic fire extinguishing system in the archives of the
Maintenance and Energy BU. Moreover, in the Titanium Dioxide BU we extended the
automatic fire alarm system in all smaller rooms that are separate from production.
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We also arranged the control of elevators so that they cannot be used in the event
of a fire. Furthermore, emergency lighting was set up in the Titanium Dioxide BU.
The automatic fire alarm system was also installed in the operational maintenance
offices. All fire control panels in the buildings are connected to the central control
system in the CC Fire Brigade via an optical network connection.
No inspections were carried out in 2020.
The activities of the Occupational Health and Safety Department are aimed
at legislative compliance for occupational health and safety and fire safety. By
introducing the activities of detecting, recording and eliminating potential
hazards and events in the working environment, the Company is actively working
on decreasing the number of accidents at work and improving conditions at the
workplace. We prevent fires with preventive fire safety measures and ensure active
protection against fire with regular supervision, review and servicing of firefighting
equipment. We had three framework objectives in the area of occupational health
and safety in 2020:
1. Zero injuries at work
The objective is long-term. We wish to achieve it step by step by implementing various
preventive activities and improvements. The number of injuries at work decreased
by 1 over 2019. The low FS factor reveals that all injuries were minor.
Comparison of changes in injuries at work/while travelling and absence from
work due to injuries
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
No. of employees ‒
monthly average
1064 1046 999 987 976 941 899 905 873 841
No. of reported NM 102 118 37 37 10 14 9 5 3 3
No. of recorded PH - - 81 62 79 105 79 61 56 47
No. of eliminated
PH
- - 44 88 71 86 65 57 52 47
FS factor 20.7 23.2 27.1 22.2 23.5 14.9 13.0 5.7 5.0 4.7
No. of injuries at
work
30 27 27 22 20 15 14 15 13 12
No. of days lost 735 907 996 1000 1122 934 837 346 334 329
No. of injuries per
100 employees
2.8 2.6 2.7 2.2 2.0 1.6 1.6 1.7 1.5 1.4
No. of injuries while
travelling
14 6 0 0 2 0 0 0 0 0
No. of days lost 388 151 0 0 43 0 0 0 0 0
NM – near misses; PH – potential hazard; FS factor – factor of frequency and severity of injuries
at work (ratio between the number of injuries, sick leave and the number of employees)
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