Message from the Chief Executive Officer, Corus

It is my pleasure to report back to you at the end of what has been a very exciting and busy year here at Corus. Working with our colleagues at Tata Steel we have put in place solid foundations for our future via the continued integration of the companies and delivered good financial results for our first year as part of the Tata Steel Group. In February of this year we launched a new Vision for the Tata Steel Group, which builds on the legacies of both Corus and Tata Steel and articulates our joint ambition to set the world benchmark in Value Creation and Corporate Citizenship. Work is already underway to bring this Vision to life for our 80,000 plus employees.

The economic climate this year has been somewhat challenging. Global demand for steel remained high on the back of a fourth year of above trend growth during 2007, largely fuelled by the emerging economies of China and India, although this masked a slowdown in some advanced economies during the second half of 2007.

As a result the global price for steel products during the year remained good. In Europe, steel product prices were broadly stable through the period, but at a high level historically. Some modest price increases were achieved during the first part of the year, but pressure from imports and related high stocks meant these were partly reversed later in 2007, as customers de-stocked. However, towards the end of 2007 and into the March 2008 quarter, the EU demand and supply balance began to tighten, supporting higher prices.

However, the defining characteristic of the year has been the unprecedented and continuing rise in the cost of raw materials, in particular iron ore and coal, as well as freight and energy. On balance, the impact of our price increases on our performance has been offset by the increase of our input costs.

As far as the performance of our operations is concerned, we have made several significant improvements this year, especially in terms of liquid steel production of 20.3mt (18.8mt during 2006) and deliveries of 23.1mt (21.6mt during 2006). We were able to deliver close to USD 600 million of internal performance improvements, which were generated through specific projects in each of our main divisions as well as our company initiative on continuous improvement.

In the Strip Products Division the project IJmuiden 2010 has met with much success, proceeding on schedule with upgrading facilities to improve quality, product range and productivity. Similarly there has been an increase of our production in Port Talbot, and the new Llanwern 2 programme at CSP UK has the immediate aim of reducing fixed costs by a sizable margin.

The Long Products Division’s Project Starsign, a strategic initiative to improve and enhance capability in the Rod, Rail and Sections businesses has progressed well. In the long term it aims to increase and expand production capabilities, such as 120m rails.

Within Distribution & Building Systems, the past year saw a strong demand for the distribution businesses’ products being sold from steel service centres in the UK, Netherlands and Germany. In contrast, the French business experienced pressure on margins due to increased input costs. On Time and In Full delivery performance, a key measure of customer service, was in excess of 90%.

Being a benchmark in corporate citizenship is an integral part of our vision. It is about acting with responsibility, integrity and respect; providing a safe workplace; respecting the environment and communities; and demonstrating high ethical standards. To maintain a safe workplace for all Corus staff we launched a new Health and Safety 3-Year Plan that aims to reduce injury and improve staff safety across the board, minimising exposure to health hazards and encouraging a healthy lifestyle for all. During the past year we have much improved our lost time injury frequency rate by around 30%. Sadly there were two fatal contractor incidents on Corus sites last year.

We recognise that climate change is probably the biggest single issue ever to confront our industry and we are determined to be a part of the solution. During the past year we have committed to a number of projects and investments with the overall aim of reducing our CO₂ emissions per tonne of liquid steel by at least 20% by 2020 from where we were in 1990. We will also continue to invest in breakthrough technologies such as ULCOS (Ultra-Low CO₂ Steelmaking), which is a steel industry research and development project aimed at reducing CO₂ emissions from the steelmaking process.

Finally, our people are the backbone of our Vision. As such I would like to acknowledge the efforts of our loyal and dedicated workforce, and to thank them for their hard work in achieving the challenging and ambitious goals we set ourselves.

Our aim for the future is to be ranked among the top ‘preferred employers’ across all industries and we will continue to invest in both our people and Human Resources processes as we strive to achieve this goal. As part of this, we have adopted four pillars for our Performance Culture across Tata Steel and Corus : Aspirational Targets to stretch business potential and achieve value-added growth; Safety and Social Responsibility, providing a safe workplace that respects the environment and local community; Continuous Improvement, enhancing performance at all levels; and Openness and Transparency, creating an environment of trust which encourages debate and respects individual opinion.

In summary, I am pleased with the progress we have made during the year. Looking ahead, we have set ourselves some challenging new targets in order to contribute to achieving the Vision of the Tata Steel Group - Tata Steel and Corus together. With the Executive Committee as well as our loyal and dedicated workforce and in close collaboration with employee representatives, I am confident that we will achieve these targets and continue to further improve our performance.