The Investment Column: Steelmaker Corus keeps its shine

Lastminute has plenty of time to disappoint afresh - Own-label success makes McBride a good safe bet
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The Independent Online

Occasionally, a company that had appeared so troubled that it looked as if it was about to go bust can transform its fortunes. Such is the case with Corus, the Anglo-Dutch steel-maker.

Yesterday there was a little more good news when the Competition Commission cleared its deal to sell its UK hot rolled steel business to Arcelor.

Basically, the answer to the rebound at Corus lies not so much in the steel mills of Britain and the Netherlands but in the booming industrial cities of China. A surge in global demand, largely from China, has a put a rocket under steel prices, which doubled last year.

The point was underlined yesterday in results from Mittal Steel, which has just announced a deal to make it the world leader. Mittal reported that 2004 net profits had jumped to $4.7bn (£2.5bn), from $1.2bn in 2003, as revenues more than doubled. The company said the strong demand would continue this year.

This bodes well for Corus, which is yet to report on 2004. In December, the company said it expected to report earnings before interest and tax of more than £600m. Morgan Stanley, the broker, is forecasting a pre-tax profit of £561m. Given the losses seen in previous years, that will represent a spectacular turnaround.

While Corus has been lucky with the steel market, it has also made some of its own luck. Much credit goes to chief executive Philippe Varin, who took the helm in May 2003, just after the lowest point in its recent history -- the Dutch arm of the business had refused to allow the planned sell-off of the aluminium operations.

Mr Varin's "Restoring Success Programme" has cut £220m of costs. Corus shares sank as low as 3.75p in early 2003. At 57.5p, the shares are still worth holding, given the good trading conditions and the likelihood of more consolidation in the steel sector.

Lastminute has plenty of time to disappoint afresh was doing a roaring trade in candy-flavoured G-strings yesterday as true romantics prepared for Valentine's day. And the online travel retailer itself raised a few eyebrows with quarterly results which were not only in line with City expectations, but actually beat them.

After spending most of 2004 buying companies, including Holiday Autos, and missing targets while sending its shares into steep decline, yesterday's first quarter results were a welcome relief.

The value of transactions was up 80.4 per cent to £264.4m and gross profit was £43.7m, up from £25m a year ago. The City was expecting a lot worse than the £1.8m loss Lastminute announced on earnings before interest, tax, depreciation and amortisation even though it was still wider than last year's comparable £1.1m.

However, one decent quarter proves nothing. The shares were up 5.85 per cent yesterday at 113p but there is still plenty of takeover speculation helping to buoy the price. In fact, the prospect of a bid seems the only reason for buying the shares right now. Otherwise avoid.

Own-label success makes McBride a good safe bet

Although the big guns of the fast-moving consumer goods world had their sights firmly trained on Unilever yesterday, interim results from the decidedly lower-key McBride did not go totally unnoticed.

The Buckinghamshire-based households goods group is behind the supermarket own-label products that are boring a hole in the bottom lines of just such companies as Unilever. McBride may shy away from the battle of the megabrands in dishwashing or air freshening, but all the while it is preparing an offensive on the shop floor.

It is the manufacturer behind supermarket own-label products such as Asda toothpaste, Tesco washing powder and Sainsbury's bleach. This position affords McBride some protection against the competitive onslaught from the likes of Proctor & Gamble that has caught Unilever on the hop, but it cannot shield the group from the ravages of a challenging trading environment.

Yesterday the group, which makes more than half its sales outside the UK, duly cautioned that it needed to increase prices to compensate for rising raw material costs while improving efficiency. It knows its customers, the mighty supermarkets, will not take kindly to paying more for own-label goods. Analysts took note and trimmed operating profit forecasts.

The 6 per cent increase in half-year profits to £17.5m on sales also up 6 per cent at £268m that McBride achieved suggests it is more than capable of squaring up to its customers. But the market, which marked the shares 7p lower at 160p, may need more convincing. On a forward p/e ratio of 11.4 times, the stock, which recently hit an all-time high, looks fairly valued.