Corus aims for greater cost savings as losses rise to £96m

Corus, the Anglo-Dutch steelmaker, yesterday unveiled nine-month results savaged by the strength of sterling and a series of costly production glitches, while also raising the target for benefits expected to flow from its recent merger.

Corus, the Anglo-Dutch steelmaker, yesterday unveiled nine-month results savaged by the strength of sterling and a series of costly production glitches, while also raising the target for benefits expected to flow from its recent merger.

The company - formed last October from the union of British Steel and Hoogovens - said it was now seeking savings of more than £300m a year, up from the previous target of £200m by the end of 2002.

Corus said that in the nine months to 1 July, it posted an operating loss of £96m. The figures were worse than most analysts' forecasts, which had looked for modest profits in the just-completed quarter, when Corus lost £26m. "The situation for Corus is difficult, and it is going to remain so," one analyst said.

All the red-ink stemmed from Corus' carbon steel operations, which lost £301m over the nine months, while aluminium production contributed operating profits of £80m, and stainless steel turned in gains of £125m.

The company said that it would pay an interim dividend of 1p a share, suggesting a full-year payout of about 3p. Analysts had pencilled in a full-year payout of 5p.

The results knocked Corus' shares 0.75p lower to 68.5p, taking their fall since their year-high in January to more than 60 per cent. The slide is set to cost the company its blue-chip status when the revised FTSE 100 line-up is confirmed today.

John Bryant, joint chief executive, noting that British Steel had moved in and out of equities' most prominent index, said: "Generally the stock market is not valuing manufacturing as it had been.... Over time I would expect the valuation of our business to come back into line with our expectations."

Weighing on yesterday's figures were provisions of £44m, most of which were set aside to cover the company's redundancy programme. The company has announced that around 4,000 jobs will be lost in Britain this year, laying the blame for the cuts on the appreciation of sterling against the euro.

"In the UK, it's been the relative weakness of sterling against the euro: we've seen our revenues under pressure and not seen our earnings come through as expected," Mr Bryant said, adding that conditions were "extremely difficult".

Corus executives were unable to give assurances that the round of job-cutting was at an end but suggested that no further reductions were imminent, either in Britain or the Netherlands.

Corus said the problems at the carbon steel division were compounded by a run of breakdowns, including a serious fault at its Teeside plant, that lowered overall production by 1 million tonnes.