European operations:

Tata Steel Europe's (TSE) turnover for the Financial Year 2012-13 was 15% lower than the previous year. This was due to lower deliveries by about 7% compared to the previous year and a 8% lower average revenue per tonne caused by the deterioration in the market conditions and volatile currency exchange rates in the Financial Year 2012-13. The deliveries in Financial Year 2012-13 were impacted by the lower volume of production due to the rebuilding of Blast Furnace 4 (Port Talbot, United Kingdom), and hearth issues at Blast Furnace 7 in IJmuiden (Netherlands). The blast furnace #4 rebuild, was completed and the furnace was relighted in February 2013. The company continued to press forward with its structured improvement programme OGSM (Objectives Goals Strategies and Measurement) and posted significant gains from the success of this programme. The above improvement programme along with the other short-term management interventions could offset some of the adverse impact of the external market deterioration.

In order to enhance customer service levels, TSE is implementing a major 'supply chain transformation' project aimed at allocating customer demand in the most efficient and timely manner (thereby reducing inventory levels, reducing costs to serve, and improving delivery and availability standards), whilst at the same time improving customer service levels. The company has also been accelerating its new product development programme as 17 new products were introduced in the market.

South-East Asian operations:

NatSteel achieved its best ever performances in Singapore and China driven by capacity expansion in China. NatSteel's Singapore downstream domestic sales achieved a new high of 500,000 tonnes, a 19% increase over the Financial Year 2011-12. This makes it one of the largest reinforcement solutions business in the world with an enhanced product mix of 66% value added products. Other operating entities like NatSteel Vina in Vietnam and China also showed improved performance compared to the previous year. NatSteel's operations in Australia have also undergone a major transformation, with the restructuring of its Queensland operations in Australia.

Tata Steel Thailand (TSTH) production in the Financial Year 2012-13 at 1.167 million tonnes was at par with the previous financial year though it recorded an increase in the finished goods sales by 3% during the year. The enhanced growth in construction sector in Thailand helped in the increase of rebars sales though the wire rods product line was adversely affected by the cheaper imports from China. TSTH further strengthened its leadership position in rebars by increasing its market share from 25% to 29% and also established a stronger foothold of its brand Tata Tiscon in the regional markets of Thailand. The year also saw the launch of Seismic rebars, an earthquake resistant rebar for the first time in Thailand.

Review of Impairment risks:

Under the Indian Accounting Standards a company is required to undertake an impairment review of its assets and investments based on certain triggers relating to the business or the operating environment.

Based on the above review, the Company has made a provision in the stand alone financial statements of Rs.687 crores towards impairment in respect of equity investment in and loans granted to Tata Steel KZN Pty. Limited, South Africa. Further, the Company has recognised a non-cash write down of goodwill and other assets of Rs.8,356 crores in the consolidated financial statements. The above impairment provision relates partly towards the write down of the assets in some parts of the business in Tata Steel Europe and also part write down of goodwill created on the acquisition of Corus Group plc (now Tata Steel Europe) in 2007. The balance provision relates to the investments made by the Company in Tata Steel KZN Pty. Limited, South Africa, Kalimati Coal Company Limited, Australia, Tata Steel Thailand and Tata Metaliks Limited (Redi Plant). The recoverable value of these companies have been adversely affected by various reasons including severe contraction in demand, especially in construction sector, declining output prices and very high raw material prices that has impacted competitive strength of the above businesses. The above provisions are non-cash charges and do not affect any of the financial covenants and the funding position of Tata Steel Group.

EXPANSION PROJECTS:

Brownfield Projects:

Jamshedpur expansion project (2.9 million tonnes)

Tata Steel India has completed implementation of the 2.9 mtpa expansion project at Jamshedpur Works to increase its crude steel capacity from 6.8 mtpa to 9.7 mtpa. The expansion project also entailed augmentation of Noamundi and Joda Iron Ore Mines and related facilities along with a By-Product Plant. Besides the main production units, the expansion project also included setting up the required support systems such as power, water, utilities, raw material handling and plant logistics. All the production facilities have been commissioned in phases. The facilities are currently in various stages of ramp up.

Continuous Annealing and Processing Line

Jamshedpur Continuous Annealing & Processing Company Private Limited (JCAPCPL), a joint venture company between Nippon Steel & Sumitomo Metal Corporation (NSSMC) and Tata Steel was formed in early 2012 for producing high end cold rolled coils and sheets for the Indian automotive market. It is currently undertaking the construction of a 0.6 mtpa Continuous Annealing & Processing Line (CAPL). The construction of the CAPL and all other related facilities is progressing as per schedule.

Greenfield Project

The greenfield project execution in Odisha to produce flat steel products with an ultimate capacity of 6 mtpa in two phases has made significant progress on all fronts during the year. Major orders for all zones of the phase 1 of the project have been placed and construction work is in full swing.

The new facility coming up at Kalinganagar will augment Tata Steel's product range to meet the changing customer needs in segments that the Company serves currently. These include Automotive, Packaging, Tubing, Construction, Appliances and Railways.

The Kalinganagar facility will also enable Tata Steel to enter and have a significant presence in segments such as Oil & Gas, Lifting & Excavation, Infrastructure, Defence, Shipbuilding, Energy, Power, etc. This will help Tata Steel to improve its market share in the domestic market in the future. The first phase is expected to be completed by 2015.

RAW MATERIAL PROJECTS:

Tata Steel continued to implement its long-term strategy to secure ownership of assets that will increase its raw materials security and share of value-added products. During the Financial Year 2012-13 the Company's primary focus remained on expediting implementation of its existing ventures and stabilising the operation of operating ventures.

Benga Coal Project, Mozambique:

In November 2007, the Company entered into Definitive Agreement with Riversdale Mining Company, an Australian listed company for purchasing 35% stake in its Mozambique Coal Project. In April 2011, British Australian Mining Company, Rio Tinto took over Riversdale Mining Company.

The Company holds 35% in RioTinto Benga (Mauritius) Ltd. (RTBML) with the balance 65% held by Rio Tinto. In Financial Year 2012-13 RTBML produced 1.41 Million tonnes of Coal (0.67 million tonne of coking coal and 0.74 million tonne of thermal coal).

Iron Ore Projects in Canada:

The Company holds 26.31% in New Millennium Iron Corp., Canada (NML). NML owns Direct Shipping Ore (DSO Project) and Taconite Iron Ore Projects. A joint venture Company Tata Steel Minerals Canada Limited (TSMC) was formed in October 2010 for development of DSO Project. Tata Steel holds 80% equity stake in TSMC and the balance 20% equity stake is held by NML.

TSMC has commenced production in September 2012 and achieved the production of 0.30 million tonnes in the Financial Year 2012-13 against the plan of 0.25 million tonnes. A production of 2 million tonnes is planned for the Financial Year 2013-14.

In recognition of the progress made by the Company, TSMC has been conferred with the 'Miner of the Year Award' by the Canadian Institute of Mining, Minerals and Petroleum (CIM), New Foundland and Labrador.

In March 2013, the Company through its subsidiary TSMC, entered into a framework arrangement with Labrador Iron Mines (LIM) for acquisition of 51% stake in LIM's Howse deposit which is near the Company's DSO Project. This arrangement is expected to enhance resource and production and will also improve operational flexibility relating to DSO Project.

HEALTH AND SAFETY:

Tata Steel has identified excellence in health and safety in all its operations as a key business imperative. The Company has adopted and applied a range of programmes, including those from DuPont the world benchmark in safety, to establish a strong safety culture by inculcating safe behaviour among its employees and contractors. In Tata Steel the Lost Time Injury Frequency Rate for the Financial Year 2012-13 is 0.60 which is an improvement of 12% over last year.

The health initiatives, driven through Wellness@Workplace programme in India has a special focus on the health of women employees. These are designed to provide an injury-free working environment for a healthy and happy workforce. Tata Steel India has taken a special drive on Fatality Risk Control Programme and elimination of commonly accepted unsafe practices. This initiative has enabled correction of more than 10,000 unsafe conditions and 969 unsafe practices.

In Tata Steel India, a series of safety initiatives helped in enhancing of production capacity from 5 mtpa to 10 mtpa in the last eight years while maintaining complete harmony with the community. Further expansion of 6mtpa at Kalinganagar, Odisha is being carried out by promoting safety culture among the employees including contractors as also involving community through a special project 'AAKAR' to promote the local acceptance. In its endeavour to address the issue of community safety, Tata Steel India is working with external consultants to drive systematic domestic safety management and safety education initiatives for school and college students in Jamshedpur and at the different mines and collieries.

In Tata Steel Europe health and safety improvements are embedded in the business strategic plan (OGSM) and these were delivered well in the Financial Year 2012-13 enabling a 18% reduction in Lost Time Injuries and recordables (4.55 in 2012-13 compared to 5.56 in 2011-12). 'Recordables' are defined as all work related incidents resulting in harm to a person or persons, excluding those that require no more than first aid treatment. Highlights during the period was the full project re-build of Blast Furnace 4 at Port Talbot with no lost time injuries. TSE launched two enabling strategies that were Health & Safety Excellence for senior leaders and positive safety conversation training and implementation for all employees to move to a mature safety culture.

Operations in South East Asia at Tata Steel Thailand and NatSteel are strengthening their safety practices particularly in the areas of positive isolation, stock yard management and employees involvement through train the trainers programme. These are carried out through theme based onsite visits, reviews, recommendations and trainings.

In 2012-13 Tata Steel was again recognised by its peers in the World Steel Association with a health and safety recognition award for Tata Steel and NatSteel.