THE INVESTMENT COLUMN: Steelmaker Corus keeps its shine

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The Independent Online
OCCASIONALLY, A company that had appeared so troubled that it looked as if it was about to go bust can transform its fortunes. Such is the case with Corus, the Anglo-Dutch steel-maker.

Yesterday there was a little more good news when the Competition Commission cleared its deal to sell its UK hot rolled steel business to Arcelor.

Basically, the answer to the rebound at Corus lies not so much in the steel mills of Britain and the Netherlands but in the booming industrial cities of China. A surge in global demand, largely from China, has a put a rocket under steel prices, which doubled last year.

The point was underlined yesterday in results from Mittal Steel, which has just announced a deal to make it the world leader. Mittal reported that 2004 net profits had jumped to $4.7bn (pounds 2.5bn), from $1.2bn in 2003, as revenues more than doubled. The company said the strong demand would continue this year.

This bodes well for Corus, which is yet to report on 2004. In December, the company said it expected to report earnings before interest and tax of more than pounds 600m. Morgan Stanley, the broker, is forecasting a pre-tax profit of pounds 561m. Given the losses seen in previous years, that will represent a spectacular turnaround.

While Corus has been lucky with the steel market, it has also made some of its own luck. Much credit goes to chief executive Philippe Varin, who took the helm in May 2003, just after the lowest point in its recent history - the Dutch arm of the business had refused to allow the planned sell- off of the aluminium operations.

Mr Varin's "Restoring Success Programme" has cut pounds 220m of costs. Corus shares sank as low as 3.75p in early 2003. At 57.5p, the shares are still worth holding, given the good trading conditions and the likelihood of more consolidation in the steel sector.