Corus, the Anglo-Dutch steelmaker, set the scene for more job cuts yesterday as it launched a £307m share issue to pay for the restructuring of its loss-making UK steels business.
The share offer, a hybrid between a placing and a rights issue, could also pave the way for Corus to resurrect the sale of its aluminium business which was blocked earlier this year by its Dutch supervisory board.
The proceeds from the share offer will be used to fund the £250m rationalisation of Corus's UK operations from five down to three plants and cut steel production from 12 to 10 million tonnes.
The restructuring will lead to 1,150 job losses and save Corus £120m. In addition, the company announced it was seeking a further £350m of cost reductions through the rationalisation of white-collar departments such as finance, IT and personnel and through savings in manufacturing and supplies. Corus also warned that its Teesside plant could close in two years unless it found a joint venture partner for the plant.
Philippe Varin, who took over as its chief executive in May, refused to comment on the level of potential job reductions but other Corus executives pointed out that the company lost about 1,500 staff a year anyway through natural wastage.
The new cost-saving initiatives are part of an ambitious plan to improve Corus's performance by £680m over the next three years and close the "competitive gap" with rival steelmakers.
Corus has announced 10,000 job cuts since 2001 and when the latest UK restructuring is complete in a year's time, the workforce will have fallen to about 48,000.
Under the terms of the share offer, Corus is raising £291m net of expenses by issuing 1.3 billion new shares - five for every 12 in issue - at a price of 23.5p, a 10 per cent discount to Tuesday's closing price.
Corus's joint brokers Lazard and Cazenove had provisionally placed all 1.3 billion shares by 9am yesterday but existing shareholders will be able to claw back those shares in proportion to their current holdings, which makes the offer akin to a rights issue.
Corus shares rose 23 per cent, ending 6p up at a two-month high of 32p.
It was the refusal of the Dutch arm of Corus to sanction the £543m sale of the aluminium division to Pechiney earlier this year which precipitated the group's financial crisis. But yesterday Leo Berndsen, the chairman of the supervisory board of Corus Nederland, said it was "willing to enter into a constructive and open-minded dialogue with the group as to the future of its remaining aluminium activities at the appropriate time".