Corus makes first profit as UK steel plants return to the black

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The Independent Online

Corus, the Anglo-Dutch steel maker, celebrated its first ever profit yesterday and said its UK plants had contributed to the turnaround.

The company, created five years ago through the merger of British Steel and Hoogovens of the Netherlands, recorded a £147m operating profit for the first six months of the year, £23m of which came from its UK arm. In the same period last year, Corus made a £57m loss and since its formation in 1999 it has run up total losses of £2.4bn.

Half of the £200m turnaround in profitability was due to the sharp increase in world steel prices, driven by booming demand from China. The other half was put down to the company's "Restoring Success" programme of cost cuts, plant closures and measures to improve revenues.

The aim of the programme is to close the gap in financial performance between Corus and its rival steel makers by adding £680m to the group's bottom line by 2006. Improvements achieved so far amount to £220m a year and Corus expects to benefit by a further £120m from the restructuring of its UK steel-making operations on to three sites instead of five.

Philippe Varin, the chief executive, said he expected a further improvement in profits in the second half. He also said he was much more confident of keeping the group's Teesside steel mill open by finding a joint venture partner. An 11 per cent increase in revenues to £4.48bn for the six-month period, helped by a 20 per cent rise in selling prices, more than offset a 6 per cent increase in operating costs, caused mainly by higher raw material prices.

Together with further price rises announced since July, Corus is raising the cost of its steel by 50 per cent this year and it is now looking for a further 20 per cent price rise from the start of next year. Much will depend on whether world steel demand continues to rise at the same rate as it has been doing over the past two years. Corus said it expected demand to rise by about 8 per cent this year.

M. Varin said Corus was in discussions with a number of interested parties about selling a 75 per cent stake in Teesside. One of the potential buyers is Bruno Bolfo, an Italian businessman who owns the Swiss steel trading company Duferco.