ENABLING THE FUTURE - Morgan Thermal Ceramics...INSULATING CERAMICS THE GROUP AT A GLANCE £216.6m...

THE MORGAN CRUCIBLE COMPANY PLC EHS REPORT 2007

ENABLING THE FUTURE

Dedicated to providing engineering solutionsbuilt on advanced materials technology, our Carbon Division utilises its unparalledexpertise in carbon, graphite, silicon carbideand related materials to serve a globalcustomer base. Carbon’s leading edgetechnology solutions are applied to a widerange of products including; body armour,petrochemical processing plants, syntheticdiamonds, windmills, cars, computers,photovoltaics and railway networks, among many others.

CARBON

Innovative design and applicationengineering, underpinned by customerfocused research and development, are the drivers that have kept TechnicalCeramics at the forefront of so many rapidlydeveloping markets. From scratch-resistantcoatings for MP3 players to the latestadvances in pioneering medical technology,we work closely with our customers to provide engineered, manufacturing solutions that add-value to the end product. Our base materials include ceramic, glass, precious metals, piezoelectric and dielectric materials.

TECHNICAL CERAMICS

If your business involves materials heated to very high temperatures, there is a strongchance that Insulating Ceramics products or solutions are involved. We are a worldleader in the production of insulatingmaterials such as fibres and firebricks, as well as heating vessels such as crucibles and furnaces. Our continuouslydeveloping expertise ensures close, long-term relationships with customersacross a range of global markets fromautomotive, to iron and steel making, the chemical processing industries, to power generation and fire protection.

INSULATING CERAMICS

THE GROUP AT A GLANCE

£216.6mRevenues

£152.6mRevenues

£324.0mRevenues

GROWTH MARKETS

We provide solutions for fluid handling in chemical and other processing industries

We manufacture the protective plates for bullet proof vests

Our carbon and graphite components are used in many thermal management applications

GROWTH MARKETS

Our power tube componentsare used in security scanning devices

Our braze alloys are used for engine build and repair and our ceramic components and sub-assemblies are used in engine monitoring and control equipment

Our high quality ceramics are favoured by medical device manufacturers and the medical professions

GROWTH MARKETS

Our leading SuperwoolTM

range is extensively used for fire protection in several markets

Our heat management solutions are crucial forsteel manufacturing

Our materials are used in the chemical processingindustry for heat management applications at temperaturesup to 1400˚C

Insulating Ceramicsrepresents 40.2%of Group

operating profit*

Carbon represents38.0% of Group

operating profit*

Technical Ceramicsrepresents 21.8% of Group

operating profit*

* Operating profit before unallocated costs and one-off items.

EHS REPORT 2007 /// THE MORGAN CRUCIBLE COMPANY PLC /// 2

CONTENTS1 Group at a glance2 Our strategy3 Introduction 4 About this report

About Morgan Crucible5 EHS Policy & risk

management

6 EHS Management & organisation

7 EnvironmentalPerformance

11 Health & SafetyPerformance

12 Group Targets

OUR STRATEGY

OVER THE FOLLOWING PAGES WE TAKE A LOOK AT HOW OUR EHS PROGRAMMES

SUPPORT OUR STRATEGY

1: FOCUS ON HIGHER GROWTH, HIGHER MARGIN,

NON-ECONOMICALLY CYCLICAL MARKETS

2: BE HIGH VALUE-ADDED TO OUR CUSTOMERS

3: BE NUMBER 1 OR 2 IN OUR

CHOSEN MARKET SEGMENTS

4: HAVE A CULTURE OF OPERATIONAL

EXCELLENCE AND COST EFFICIENCY

5: FIND, KEEP AND DEVELOP

THE RIGHT PEOPLE

OUR VISION IS TO BE ONE OF THE WORLD’S VERY BEST ADVANCED MATERIALS COMPANIES

OUR AIM IS TO CREATE LONG-TERM SUPERIOR SHAREHOLDER VALUE

OUR STRATEGIC PRIORITIES ARE TO:

3 /// THE MORGAN CRUCIBLE COMPANY PLC /// EHS REPORT 2007

INTRODUCTION

Our vision for Morgan Crucible is to be one of the world’s best advancedmaterials companies with the aim ofcreating long-term superior shareholdervalue. Achieving this means we worktowards excellence in all areas of ourbusiness and in our 2007 Annual Reportwe reported on our progress against the strategic priorities we have set andhighlighted the contribution of ourcorporate responsibility programmesand performance to this progress.

Excellence in environmental, health and safety (EHS) performance throughongoing and continuous improvementmakes sound business sense and is in the interests of all our stakeholders. This report helps illustrate our approachand some of the key developments the Group has made, including ourprogress towards the targets andobjectives outlined in last year’s report.

In 2007 we made significant stridestowards addressing two of the key EHS-related challenges which weoutlined in our 2006 EHS report:

• To address the challenge of the shift in our manufacturing footprint tolower cost/ higher growth countries, we launched a major EHS trainingprogramme in China during the year.This Board approved programme is helping to ensure that the culture of these operations emphasises theimportance of EHS, and the need fortransparency and openness in allcorporate responsibility matters, as strongly as in our businesses in Europe and North America.

• Another key challenge is climatechange. During the year we workedwith organisations such as the CarbonTrust to explore ways we can reduceour carbon footprint in absolute andrelative terms. The impact of this isstarting to be seen in our reportednumbers with CO2 emissions intensitydown in the year.

We are also addressing related business opportunities. For example our bio-soluble SuperwoolTM insulatingfibre helps enhance energy efficiency in industry and the home. Furtherexamples of the Group’s products which make a positive contribution to environmental sustainability areincluded on page 10.

In addition we have aligned our EHSperformance reporting with our financialreporting systems which enables theExecutive Committee to receive regularupdates on EHS performance. The Boardalso reviews EHS risks and opportunitiesat least annually.

We will be building on theseachievements in 2008 and will continueour on-going dialogue with ourstakeholders, including our employees,customers, investors and regulators as we find this a valuable source ofinformation and feedback to help usidentify and respond to specific issuesand evolving requirements.

We look forward to reporting on ourfurther progress next year, but in themeantime, if you have any comments or suggestions, please let us know.Mark RobertshawChief Executive Officer

Kevin DangerfieldChief Financial Officer

April 2008

MARK ROBERTSHAWChief Executive Officer

KEVIN DANGERFIELDChief Financial Officer


ABOUT MORGAN CRUCIBLEABOUT THIS REPORT

This is our fourth annual EHS Report. It summarises Morgan Crucible’senvironmental, health and safetyperformance in the year to 4 January2008 covering the available data for thewhole Group. It also details our policiesand management systems.

We are committed to improving our EHSperformance as part of our corporateresponsibility programme. Our statementof core values also commits us toincorporating environmental sustainabilityin our product development programmesand to strive to minimise the impact of our operations on the environment.We are also committed to ensuring thatthe working environment is safe and that all individuals take responsibility for achieving this.

Our Core Value Statement can bedownloaded from the “Ourresponsibilities” section of our website.

The health and safety data in this reportcovers 99% of our employees and theenvironmental data covers 98% of ourproduction capacity, up from 98% and94% respectively in 2006. During 2007 weacquired a 49% stake in NP Aerospaceand in December we announced theacquisition of Certech and CarpenterAdvanced Ceramics. We plan to coverthese businesses in our reporting fromthe first full year after they join the Groupand in the case of NP Aerospace afterwe have a majority shareholding in thecompany in 2011.

Many of Morgan Crucible’s productsand services help to improve theenvironmental and health and safetyperformance of our customer’s products.Although we have not sought toquantify this benefit, a key part of our contribution to sustainability is thedevelopment and supply of new andimproved products.

Morgan Crucible is a global specialistmaterials engineering company andhas a wide portfolio of products servingthe needs of customers in selectedmarkets such as electrical components,transportation, fire protection, medicaland alternative energy. Morgan Cruciblewas founded in 1856 and during 2007employed some 9,600 people in 35countries around the globe. Listed on the London Stock Exchange, and a member of the FTSE4Good index, in 2007 our turnover was £693million.

Morgan Crucible’s strengths inapplications engineering and superiormaterials technology, coupled withglobal process and managementcapabilities put us at the forefront ofmaterials science. This breadth enablesMorgan Crucible to respond quickly tomarket changes and provide customerswith high value added tailored solutions.By understanding the global demandsfor a variety of high technology markets,Morgan Crucible has established anoutstanding reputation for providingvalue-added solutions through world-class research and development and innovative design.

2007 2006

Sales (£m) 693.2 677.8

Operating profit margin# (%) 12.5% 10.9%

R&D spend* (£m) 8.7 8.2

Dividends (£m) 18.7 13.2

Charitable donations (£k) 193 146

#Operating profit margin before one-off items * Excludes the amount working with customers by way of productdevelopment and enhancement

Further information about MorganCrucible is available on our website at www.morgancrucible.com

EHS POLICY AND RISK MANAGEMENT

Morgan Crucible’s EHS policy applies tothe whole Company. Its purpose is to:

• Govern the environmental and health& safety performance of the Groupworldwide

• Maintain open communication onenvironmental and health & safetyperformance with all MorganCrucible’s stakeholders

• Integrate environmental, health &safety management into MorganCrucible’s business strategies toenhance competitive advantage.

The key features of the Group’s EHSpolicy are to:

• Comply with environmental and health& safety legislation, regulations andother applicable requirements

• Minimise the environmental impact ofhistoric, current and future operations

• Conduct operations in such a manneras to avoid unacceptable risk tohuman health and safety

• Supply products that will not presentan unacceptable risk to human healthand safety when used in compliancewith product safety communicationsand common safety practices

• Establish measurement tools for, andcontinuously monitor environmentaland health & safety performance

• Set objectives for the continuousimprovement of environmental andhealth & safety performance

• Train our people in relevantenvironmental and health & safety matters

• Encourage our business partners to adopt this same accountability.

Where appropriate, the Group EHS policyis supplemented by Divisional, businessunit and site policies which reflect locallegislation and the particular risks andopportunities of each operation.

Risk Management

Morgan Crucible operates a consistentand systematic risk managementprocess. This includes EHS related risksand helps to ensure that risks whichcould impact the Group’s long andshort term performance and value are identified, managed and mitigated.The process also helps to identifybusiness and performance opportunities.



EHS MANAGEMENT AND ORGANISATION

The management of EHS is aligned with the operation of our day-to-daybusiness. The Chief Executive Officer has overall accountability for corporateresponsibility matters, supported by theChief Financial Officer who has specificresponsibility for EHS policy andperformance. Operational responsibilityis delegated to the Chief Executive ofeach Division and to the manager ofeach operation. This structure issupplemented by EHS professionalswithin each business and in practice, allemployees are responsible for ensuringthat our EHS policies are implementedand for identifying opportunities fordevelopment and improvement.

Morgan Crucible’s EHS managementprocesses also include the EHSCompliance Audit Programme. This programme provides assuranceand helps ensure compliance withnational and other regulatoryrequirements and with recognised goodmanagement practice as set out in theMorgan Crucible Environmental, Healthand Safety Good Management PracticeManual which is issued to all sites world-wide. The audits also identify howsites can anticipate and respond todeveloping and impending regulations.

Where necessary, sites are required to develop a corrective action planfollowing the audit, and these actionsare regularly tracked, by the auditors, to monitor progress.

During 2007 24 sites were audited,meeting our target for the number of audits conducted during the year.Audits were conducted at sites in theUSA, Mexico, Brazil, Venezuela, the UK,France, Germany, Luxembourg, Korea,India, Hong Kong, Taiwan and Australia. A total of 127 audits have been carriedout in the past seven years. Our 2008objective is to undertake a further 31 site audits, including audits of the 9 sites acquired with the TechnicalCeramics businesses of CarpenterTechnology Corporation.

In Europe and Asia-Pacific, theprogramme is conducted by externalauditors, whilst in the Americas it isconducted by internal experts andreviewed by external consultants.

EHS MANAGEMENT AND TRAINING IN CHINAMorgan Crucible has had a long-termpresence in China and we have invested indeveloping our operations in the country toserve both local and international markets. With some 1,500 employees and 9 locations,including the MMS site under construction at Suzhou, each of our Divisions has at leastone site in China.

Over the past year we have been investing to ensure that our facilities in China aremanaged to the same EHS standards as oursites in other parts of the world. A key part of thisof this has been a Board approved programmewhich will be ongoing in the coming year. This programme uses external specialists andincludes EHS training for general managersand senior staff covering EHS management, risk and commercial implications, regulatoryresponsibilities and relevant policy frameworks.This is complemented by intensive EHS trainingand workshops for the EHS leaders from eachsite and is to be followed up by onsite training.

We are working to develop an EHS managementsystem for our Chinese businesses. This willcomplement the existing systems of those sitesthat are already certified to ISO 14001 and willprovide a sound basis for the EHS managementfor non-certified sites. Once developed, theprogramme will be individually tailored to meetthe requirements of the different sites and eachsite will be instructed in its establishment anduse. This will help to develop and reinforce a culture of continuous EHS improvement at all our Chinese operations.

These initiatives and ongoing performance willbe monitored and supported by our EHS auditprogramme and by regular monthly reporting.


In addition to Morgan Crucible’scorporate EHS policy, outlined on page 5, our operations have specificenvironmental policies, key performanceindicators and targets according to the environmental impacts, nature andneed of the particular business.

Environmental Management Systems

Morgan Crucible’s environmentalmanagement systems, including the EHS Compliance Auditing Programme,provide the framework for theimplementation of our environmentalpolicies. The essential objectives of oursystems across the Group are to identifylegal and other requirements and tomonitor and continuously improveperformance.

Formal environmental managementsystems are in place at 61 (2006: 57)major sites, representing some 84%(77%) of production capacity, including27 (23) sites covering 48% (39%) ofcapacity which are certified to ISO14001.

The planned certification of a number of sites was deferred from 2007 to 2008 and as a result, we have not yetachieved our target of doubling thenumber of ISO14001 certified sites from16 in 2005. However, with a further 10certification planned for 2009, this targetshould be achieved in the coming year.These additional certifications are inaddition to the rolling programme of re-certifications.

Key Environmental Impacts

Morgan Crucible’s key environmentalimpacts include the emissions due tothe use of energy in our processes andfacilities, raw materials usage, waterconsumption, the re-use, recycling,discharge and disposal of waste andthe impact of our products on ourcustomers’ environmental performance.

In a number of areas, Morgan Cruciblehas direct control of its environmentalimpacts, whilst in others although wehave influence, our suppliers have directcontrol. Where possible we report onboth of these.

During 2007 we aligned ourenvironmental data collection with our financial systems and extended our environmental reporting to cover100% of our production sites and themajority of our sales and technicaloffices. The data in this report covers the 98% of production site sales (2006:94%) for which comparative date for2006 is also available. The environmentaldata collected is focussed on thatrelevant for benchmarking and drivingperformance internally.

ENVIRONMENTAL PERFORMANCE

CARBON MANAGEMENT PROGRAMMEMorgan Crucible has been working with theCarbon Trust in the UK over the past two yearsto develop and implement a programme toproactively manage energy usage and carbonemissions. The first stage was a study to scopethe overall potential for energy reduction atproduction sites and to identify where the main opportunities lie. These include:

1. Heat recovery from kilns

2. Space heating (air change analysis/zonedheating control)

3. Base load reviews

4. Electric motor reviews

Five sites were included and, including theeffect of existing improvement plans andreductions in electricity use, their combinedCO2 emissions due to energy use were cut byover 1,350 tonnes in 2007 compared with 2006.

The second phase of the programme includesthe development of detailed energy policy and improvement plans to cut energy use andcarbon emissions at key production facilities.Following this it is expected that the companywill further develop its carbon reductionmethodology so that it can be rolled out to Morgan Crucible sites world-wide.


INTELLIGENT LIGHTING AT TECHNICAL CERAMICS RUGBYThe Technical Ceramics team at the Rugby, UK plant continued to look for innovative waysto reduce energy use. During 2007 they trialedan intelligent lighting system in one key area of the plant. The system constantly monitors thelevel of natural light and automatically adjuststhe intensity of the lights to maintain a constantlight level within the building. The system alsoincludes movement sensors so that the lightsonly operate when required. The new lightsdemonstrated a 71% energy saving,contributing to the plant’s 105 tonne reductionin C02 emissions in the year. The Rugby teamplans to phase in the new lights across the restof the factory and to share the success of thetrail with other plants.

Energy Use and Emissions Intensity

Much of the Group’s production involvesthe use of high temperature processes.We report the environmental impact ofthe energy used in these process andelsewhere in our facilities as equivalentCO2 emissions, indexed to turnover. Thistakes into account the use of all sourcesof energy. We assess site, Divisional andGroup performance on the basis ofenergy and emissions “intensity” i.e.energy use indexed to turnover.

Our target is to reduce our CO2 emissionsintensity due to energy use by 5% overthe two years 2007-8. Our 2007performance was on track to achievethis with a 2.5% reduction. Underlyingenergy intensity was down by 3.6% but the full impact of this did not flowthrough to reduced emissions intensitydue to changes in the mix of energysources and the fall in the proportion of our electricity from 100% renewablesources. Our plan was to increase this to 4% over two years but we are nowbehind plan due to uneconomic pricingin the market for renewable electricity.We will continue to target increases inour use of renewable energy where this is economically viable.

Energy & Emissions KPIsincrease/

2007 2006 (decrease)

CO2 intensity 611 627 (2.5)%(tonnes per £m revenue#)

Energy intensity 1,942 2,015 (3.6)%(kWh per £k revenue#)

% electricity from 1.9% 2.6% (70)bpsrenewable sources

Total CO2 due to 428 427 n/a*energy use* (ktonnes)

* takes no account of business growth # allows for inter-company sales

In addition to improving energyconsumption and emissions performancethrough increased efficiency, changes in our business and product mixinfluence our energy and emissionswhen indexed to turnover.

MMS INDIA REDUCES CO2 EMISSIONSDuring 2007 the team at the Molten MetalSystems plant in Aurangabad, India reducedtheir CO2 intensity due to energy use by 25% in 2007. Key to this was a project to investigatethe use of LPG used to fire the site’s main kiln. By optimizing the firing cycle the teamachieved a 30% cut in LPG use, reducing thesite’s CO2 emissions by 312 tonnes. This benefitwas complemented by cost savings and animproved working environment around the kiln area due to reduced smoke generation.


ENVIRONMENTAL PERFORMANCE CONTINUED

Waste and Recycling

Waste management is a key area offocus for the Group with opportunities to reduce our use of raw materials,packaging and other consumables. As well as saving money by recyclingcertain waste streams we can turn costsinto revenue. We monitor hazardous andnon-hazardous waste at a site, Divisionaland Group level according to wastestream and disposal route. We assessperformance on the basis of wasteintensity (i.e. waste amounts indexed to turnover) and the proportion of totalwaste which is recycled.

Our target is to cut our waste intensity by 5% over the two years 2007-8 and to increase the proportion of our totalwaste which is recycled to 35%. Our 2007waste intensity was down by 1% but thisis less than the amount needed to be on track to achieve the target and theproportion of total waste which isrecycled fell by 100 basis points duringthe year.

A number of major sites achieved doubledigit decreases in waste intensity duringthe year and recycled over 50% of theirwaste. The impact of these sites on theoverall Group performance was heldback by increased reporting at anumber of sites in emerging marketsand as a result Group level performancewas behind plan. We regard this as apositive opportunity as consistent globalattention to waste management hasbrought increased site-level awarenessand we will focus this on re-use, wasteminimisation and recycling opportunities.

Some 22,000 tonnes of waste materialwas recycled during the year, around29% of total waste. This included 828tonnes of paper and cardboard, 477 tonnes of wood and 768 tonnes of metal.

Waste Management KPIsincrease/


Waste intensity 110 112 (1)%(tonnes per £m revenue#)

Recycled waste 29% 30% (100)bpsas % of total waste

Total waste recorded 77,147 76,029 n/a*(tonnes)

* takes no account of business growth# allows for inter-company sales

TURNING WASTE COSTS INTO REVENUE AT THERMAL CERAMICS CANADAAn environmental action team comprisingmarketing, engineering and productionspecialists at the Thermal Ceramics plant in Ontario, has been investigating ways toincrease recycling and to convert wastestreams into usable products.

The plant’s most significant waste stream is ceramic fiber waste from dust collection,product finishing and scrap. Ceramic fiberwaste is not easily recycled and the teamdevised a process to grind the waste into dust. This is sold to customers as filler, or usedwithin the plant in the fiber board and shapemanufacturing process. As a result the teamgenerated additional revenues and cut waste disposal costs. Overall, the plant’s wasteintensity was 46% per unit of sales or by some300 tonnes in 2007.

TECHNICAL CERAMICS HAYWARD CUTS WASTE AND SAVES WATERThe Ceramics business unit at Hayward, CAproduces premium ceramic components for the semiconductor, laser and medicalindustries. A specialist wax is used to hold theceramic parts during machining operations.This wax needs to be removed prior to finishingof the parts. Historically a solvent basedcleaning solution was used to remove it,creating over 8 tonnes of waste solvent eachyear. During 2007 the solvent process wasreplaced with an aqueous-based soapalternative. The waste solvent was classified ashazardous waste where as the used aqueoussolution can be processed through the site’sevaporator system and the water is reclaimedand re-used, cutting waste and saving water.


Water Use and Intensity

We include information on all water used for potable, sanitary and processpurposes from both on-site extractionand from local authority and similarsources. A significant proportion of theGroup’s water usage is in productionprocesses, much of which is subsequentlydischarged. We monitor use of waterfrom all sources and assess performanceon the basis of water intensity.

Our target is to reduce our water intensityby 10% over the two years 2007-8. 2007performance was ahead of this with a 19% reduction reflecting increasedawareness of the use of water and avariety of reduction initiatives at sitesaround the world. Our 2006 water useincluded the impact of a leak at one of our major US facilities. Excluding theimpact of that facility from both yearsour water intensity improved by 12%.

We will continue to target opportunitiesto reduce and control our use of water in 2008.

Water Use KPIsincrease/


Water intensity 4,299 5,301 (19)%(m3 water per £m revenue#)

Total Water Use 3,011 3,612 n/a*(m3 x 1000)

* takes no account of business growth# allows for inter-company sales

Products

Many of the Group’s products make apositive contribution to the environment.Examples include:

• In the wind-power market, our CarbonDivision is using its expertise in materialsscience to improve the performance of the power transfer slip ring systemsused in wind generators. The improvedproducts can withstand the highhumidity and salt corrosiveatmospheres of offshore wind farms.

• Carbon also supplies vital componentsfor many of the world’s suburban railsystems and has helped one customerachieve a 60% improvement in thereliability of their electric motors.

• The latest electric resistance meltingand holding furnaces supplied byMorgan Molten Metal Systems use 30-50% less energy and offer higherproductivity and enable higher scrap recovery rates

• Insulating Ceramics’ SuperwoolTM

range of high temperature insulatingproducts help reduce energyconsumption in a wide range ofindustries contributing to significantreductions in greenhouse gasemissions

• Our Technical Ceramics Divisionsupplies ceramic components andsub-assemblies for aero-engine controland monitoring which help optimiseengine efficiency

Environmental Regulatory Compliance

During the year one of our US facilitiesreceived a notice of violation followingan inspection in July 2007. This resulted in a fine of $4,500. In the UK one of oursites is working with the environmentalauthorities to ensure their watersampling is appropriate as sampleshave picked up traces of materialswhich are not used at the site.

The Group also has a small number ofongoing remediation programmes toaddress historical soil and groundwatercontamination issues.

CARBON SWANSEA CUTS WATER USEThe Carbon Swansea site uses water to coolhigh temperature furnaces and hydraulicpresses used to manufacture various grades of carbon material.

Regular environmental reporting helpedidentify that water consumption increaseddramatically in 2006. The Swansea engineeringteam seized the initiative with a programme toimprove the management and use of coolingwater across the plant.

By integrating equipment, installing closed re-circulatory cooling systems and through real-time monitoring and control they were able toreduce the plant’s water intensity (i.e. water useper unit of sales) by 51% – a saving of over20,000m3. The investment necessary to achievethis was paid back within the year throughsavings in clean water cost and reductions inwater discharge.

HEALTH AND SAFETY PERFORMANCE


In addition to Morgan Crucible’scorporate EHS policy, outlined on page 4, our operations have specifichealth and safety policies according to the operations, risks and needs of each business.

Health and Safety Management

Morgan Crucible’s health and safetymanagement is integrated with theGroup’s risk management and othergovernance processes and is covered in the EHS Compliance Audit Programme,in addition to national, legal and otherregulatory requirements. A number of the Group’s sites are working towardsOSHAS18001 and our Carbon Divisionachieved certification for its facility in Johannesburg during the year. Five further certifications are plannedover the period 2008-9.

Health and Safety Key Performance

Morgan Crucible’s health and safetyperformance data includes lost workingtime incidents arising from work-relatedinjuries and ill-health. Performance ismonitored on a monthly basis and ourreporting systems are aligned with ourfinancial systems covering 100% of ourproduction sites and the majority of oursales and technical offices. In total 99%of employees are covered by this report.

Our long term goal is to have noaccidents and as a result of ongoingpro-active preventative programmesand training, the frequency of lost timeaccidents (major + minor) was reducedby 20% in the year, exceeding ourtargeted 10% reduction. However, losttime as a percentage of total timeworked was up 3%. This was caused by a 28% reported increase in the averagetime lost per lost time accident. This waslargely due to the improved reporting of lost time to include long term caseswhich were not consistently covered by the 2006 data.

Health and Safety KPIsincrease/


Lost working time 0.079% 0.077% +3%% of total time worked

Major* incidents 0.39 0.48 (18)%per 100,000 hours

Minor** incidents 0.17 0.21 (23)%per 100,000 hours

Days lost 17.6 13.8 +28%per lost time incident

*Major = work related injuries resulting in four ormore days lost time **Minor = work related injuries resulting in one, twoor three days lost time

We continue to collect accident causaldata on a consistent basis world-wide to support risk management andpreventative programmes. Some 30% of accidents are manual handling cutsand abrasions and a further 16% aremusculoskeletal related.

Health and Safety RegulatoryCompliance

The Group received 12 enforcement or improvement notices in relation tohealth and safety issues. Correctiveactions are underway to comply withthese notices at the relevant facilities.There were no reported prosecutionsrelating to health and safety mattersduring the year.

MORGAN TECHNICAL CERAMICS TARGETS OHSAS18001 IN EUROPEAll six of the Technical Ceramics sites in Europe are certified to ISO9001 and ISO14001.Over the next two years, four sites are committed to implement OHSAS18001 as this is complementary to their existing managementsystems and will help to drive further andcontinuous performance improvements. The first certification was achieved in February2008 and the others are planned to follow later in 2008 and through 2009.


In addition to Group targets, our businesses set targets and undertakeinitiatives appropriate to their specific opportunities for improvement,as is highlighted in a number of the case studies in this report.

GROUP EHS TARGETS

Undertake 24 EHS audits during2007

Continue to extend EMScoverage. Progress ISO14001coverage with 7 newcertificates to achieve target of doubling the number of siteswith ISO14001 from 16 at end2005 to 32 by end 2007.

Continue to extend reportingto cover all productionlocations and select* nonproduction locations and to further integrate ourmanagement andenvironmental informationmanagement systems.

5% reduction in emissionsintensity due to energy useover two years (2007-2008).

Electricity from renewablesources: >4% by end 2008.**

Waste intensity: 5% reductionover two years (haz & nonhaz); % recycling: increase to 35% over two years.

Water intensity: 10% down over two years.

Extend coverage to includenon-production locations and to further integrate ourmanagement and health and safety informationmanagement systems.

10% reduction in lost timeaccident frequencies(major+minor) by end 2007.

10% reduction in lost time per lost time accident by end 2007.

Achieved: 24 EHS audits completed during the year.

Achieved/ in progress:84% of capacity across 61 major sites nowcovered by an EMS. However, only 4 furthersites were certified to ISO14001 during the year, total now 27 sites covering 48% of capacity.

Achieved:Environmental data is now collectedthrough our management informationsystems from all production sites worldwide.Data in this report covers the 98% ofproduction site sales for which comparativedata for 2006 is available.

On track:Emissions intensity due to energy useimproved by 2.5%

Behind plan:The % of electricity from renewable sourcesfell from 2.6% to 1.9% due to uneconomicpricing in the market for renewableelectricity.

Behind plan: Waste intensity was down 1% in the year and recycling was down. The behind planperformance was largely due to improvedwaste management reporting at a numberof sites.

Ahead of plan:Water intensity was reduced by 19%.Increased awareness, improvedmeasurement and a number of reductionprogrammes have driven this ahead of plan.

Achieved: 99% of headcount now covered. H&S reporting integrated with financial reporting.

Achieved:Lost time accident frequencies(major+minor) were down by 20% in the year.

Not achieved: Average lost time per lost time accident was up by 28% to 16.7 days per LTA.

Undertake a total of 31 EHSaudits, including the 9 sitesacquired from Carpenter.

Continue to extend EMS coverage. 10 furtherISO14001 certifications areplanned for 2008 which willexceed our 2007 target.

To include 100% ofproduction and select*non production sites whichhave been part of theGroup for the full year.

Continue to work towardstargeted reduction by end 2008.

Continue to targetincreases in our use ofrenewable energy whereeconomically viable.

Continue to work towardstargeted reduction.

Continue to progressfurther reductions/ savingsin water use.

Extend coverage to 100%of employees and toinclude newly acquiredcompanies/ sites.

Continue to make progresstowards our long term goalof zero accidents.

Increase focus onunderperforming sites andon reducing the averagetime lost per LTA.

Area 2007 Target/Objective 2007 Progress Future objective

EHS ComplianceAudit Programme

EnvironmentalManagementSystems

Environmental data reporting

Reduction inemissions intensity

Increase use ofelectricity fromrenewable sources

Reduction in waste intensity

Reduction in wateruse intensity

Health and Safetydata Reporting

Reduction in losttime accidentfrequency

Reduction in lost time

* i.e. generally non production sites where the utilities are not included in the lease costs ** In addition to renewables included in the standard generation capacity


NOTES

1. Data gathering and comparisons.Historically, across Morgan Crucible,EHS performance data was gathered in different ways and to differing extents.

In the past year we have focussedour EHS reporting processes on datathat is of EHS and commercial valueand have integrated these processeswith our financial reporting systems.Our reporting processes areincreasingly accurate andimprovements in environmental and health & safety performancemeasurement and reporting mayincrease some reported figures.Where possible, we will ensuremeaningful comparisons betweenannual performance indicators are available. Where necessary, 2006 figures have been restatedaccordingly.

2. Verification. All Morgan Cruciblebusinesses are regularly reviewedunder the Group’s Compliance AuditProgramme and those sites certifiedto ISO9001, ISO14001, OHSAS18001and other standards have regularexternal audits. In addition, the headof internal audit works with externalindependent consultants to reviewand where appropriate verify ourenvironmental and health and safetyrelated non-financial key performanceindicators. The Group also usesexternal professional advisers inrelation to specific health and safety and environmental matters as required.

The Board considers that theseprocedures provide a reasonablelevel of assurance that the Group’sESG disclosures are free from materialmisstatement whether caused byfraud or other irregularity or error.

3. Guidelines. A variety of guidelines,reports, standards and otherauthorities have been consulted and utilised in the compilation of this report. These include the UK Government’s Department forEnvironment, Food and Rural Affairsenvironmental reporting guidelines,the Global Reporting Initiative’sSustainability Reporting Guidelines2006, the International Organizationfor Standardization’s ISO14001standards, and the FTSE4GoodEnvironmental Criteria.

4. External Assistance. Morgan Crucibleutilised the assistance of CSRConsulting Ltd. in the compilationand production of this report.

5. FeedbackWe welcome your feedback on this EHS report and your commentson ways we could further developreporting at Morgan Crucible. You can contact us by e-mail [email protected] or write to The Morgan Crucible Company plc,Quadrant, 55-57 High Street, Windsor,Berkshire SL4 1LP, United Kingdom.

Employees who have concerns which cannot be satisfactorilyresolved locally may also use the Morgan Crucible Ethics andCompliance Helpline, details of which are on the Companies Website and on the intranet.

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