Solid comeback for steel maker

ANGLO-DUTCH steel giant Corus roared back into the black last year, cut debt, set up a return of the dividend and has promised more to come in 2005.

The Asian economic miracle led by major expansion in China has led to an equally miraculous performance at the steelmaker.

Formed in 1999 from the merger of British Steel and its Dutch counterpart Hoogovens, it has spent much time since then in the red.

In its darkest days in early 2003 the shares slumped to 3¾p. Today they opened at 57½p, having doubled over the past year.

However, with soaring steel prices fired by the apparently insatiable demand in the Far East, Corus returned its first profit of the millennium, posting £627m at the operating level and representing a near-£700m turnaround from 2003.

Chief executive Philippe Varin, the Frenchman brought in to shake up the company, claimed it was not all the benevolence of the global economic climate. He said almost a third of the turnaround was due to his 'Restoring Success' restructuring programme aimed at cutting costs, getting the British and Dutch sides of the business working in harmony and catching up with the performance of its European rivals.

'Our 2004 performance is a clear indication that we are delivering on our commitment to close the competitive gap with our European peers by the end of 2006,' said Varin. 'With regard to the outlook, global growth remains relatively strong and the demand-supply balance is tight by historical standards, generally supportive of a positive outlook for 2005.

'Stock building in European and North American markets has softened demand in the the first half of 2005 but the resumption of demand from China is expected to progressively restore balance.

'We expect the first-half trading environment to be broadly in line with the second half of last year [when operating profits of £435m dwarfed the first six months' £147m].

'As the year progresses we see conditions as more uncertain. We will look to recover the significant raw material cost increases through higher selling prices and we expect further benefits from 'Restoring Success'.'

Despite the soaring costs of its raw materials such as coking coal and iron ore, and also of scrap, Varin said Corus had been able to more than recover its costs by cranking up steel prices.

That inflow of cash during the year saw it reduce net debt by about 15% to £854m, bringing its gearing down to 27%. With 2004 earnings at 10p a share, Varin indicated the time is right in 2005 to reinstate dividend payments.