Corus sticks to UK jobs pledge as interim steel losses reach £230m

Corus yesterday unveiled a £230m interim loss and warned that the tough conditions in the steel industry would not improve until next year.

Although the Anglo-Dutch steel maker conceded that further job losses are likely to hit its operations in the Netherlands, it indicated that it did not see any need to add to the 6,000 UK redundancies announced in February this year.

Tony Pedder, the newly appointed chief executive, said: "I am hopeful that we can hold to what we have already said on [UK] job losses and we can draw a line in the sand."

The company's losses ballooned to £230m in the six months to 30 June, up from £27m in the first half of last year, as its carbon steel operations ran up a loss of £239m. Aluminium showed an operating profit of £36m.

Corus said it had been hit by falling demand as a result of the global economic slowdown, and rising raw material and energy costs. There is no interim dividend. Underlying turnover dropped 2 per cent to £3.96bn, whereas costs rose slightly from £4.14bn to £4.16bn. Corus said the benefits of its vicious cost-cutting measures were yet to kick in.

It added: "Sterling remains significantly overvalued against the euro and continues to offer no relief for UK companies competing in international markets."

Corus said that it would like to see sterling settle at 2.70 German marks. The current exchange rate is well over DM3 to the pound. The company said that each pfennig gain in the value of the pound cost it £6m to £8m in profit.

Mr Pedder said however, that the general environment was improving, as global capacity was cut and a better supply and demand balance emerges. This could mean a recovery in the depressed prices for steel but he said this was not likely until next year. "We can't control the exchange rate but we can make ourselves more competitive. We're now in a position where the worst of the difficulties are behind us, unless something unforeseen happens," he said.

Analysts said that a full-year loss of around £350m was expected and any improvement next year was dependent on broad economic factors.

Peter Dupont of Commerzbank, said that given that Corus had taken £300m to £400m out of costs, break-even was possible next year. "The background is difficult so these [interim] numbers are not too bad," he said.