Corus crashes after new chief warns recovery a long way off

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The Independent Online

The new chief executive of Corus, the ailing Anglo-Dutch steel maker, warned yesterday that its recovery could take three years to achieve.

The warning, coupled with a downbeat trading statement and continuing fears that the loss-making group may be forced to ask its shareholders to stump up more cash, sent Corus shares tumbling 15 per cent.

Making his first public appearance since taking the helm in May, the Frenchman Philippe Varin refused to rule out a rights issue to pay for the cutbacks in the company's UK steel operations and said the recovery plan, "Restoring Success", would take two to three years to complete.

Despite a big reduction in first-half losses, Corus said raw material prices had begun to rise sharply and sounded a warning note over trading, saying the immediate outlook was difficult with demand expected to remain weak in its key European markets. The warning overshadowed slightly better-than-expected results and the announcement of a £90m investment to restructure the company's Sheffield-based engineering steels business, where 800 jobs are going as part of 1,150 redundancies across the group as a whole.

M Varin also indicated that there would be a sweeping shake-up in the top echelons of the Corus management as part of a move to usher in a new "can do" culture into the company and eradicate what he called its "silo mentality".

The company's top 50 managers have in effect been made to reapply for their jobs and soundings have been taken from focus groups made up of 400 employees to help Corus understand where it has been going wrong.

M Varin said he was enjoying what was the huge challenge of turning Corus around despite receiving his first taste of British tabloid journalism. A reporter and photographer from the Daily Mirror "doorstepped" M Varin on his way home to Belgravia on Tuesday and challenged him over the £3,000 it is costing to rent the house when steel workers paid £300 a week are facing the axe.

M Varin said a break-up of Corus back into its constituent British and Dutch parts was "absolutely not on the agenda" but he admitted it will "not be an easy trick" to return the loss-making UK operations to profit.

Pre-tax losses fell from £234m to £89m for the six months to the end of June with a £127m loss in the UK steel division being offset by a £76m profit from Corus's Dutch steel plants and a £15m contribution from the aluminium division.

M Varin said the "medium to long-term" aim was to dispose of the aluminium business.