Corus rides price surge, Q3 net almost trebles to $275m

LONDON: Corus Group, the subject of a takeover battle between India’s Tata Steel and Brazil’s Companhia Siderurgica Nacional, said its third-quarter profit rose because of a jump in steel prices and sales. Net income rose to £141 million ($275 million), or 15.76 pence a share, from £50 million, or 5.5 pence, a year earlier, London-based Corus said on Wednesday. Sales climbed to £2.5 billion from £2.1 billion.

Corus, the UK’s largest steelmaker, increased prices in the quarter by as much as 12% as Europe’s economy recovered. European cold-rolled steel, used in cars and construction, gained 11% in the quarter. Tata and CSN both want Corus, formerly British Steel, to add mills in Europe that supply carmakers including Ford Motor. “Steel prices were higher and energy prices stabilised,” during the third quarter, Tom Muller, an analyst at Theodoor Gilissen in Amsterdam, said in an interview on Wednesday. “It’s a good set of results.”

Corus is vulnerable to a possible economic slowdown in Europe, said Muller, who doesn’t have rating on the company. “We are seeing a slowdown in the US now. Should that come over to Europe, no doubt we will see lower sales for steelmakers,” he said. “But the big question with Corus is, who will buy them and for how much?” CSN offered Corus shareholders 475 pence a share on November 17, subject to due diligence.

Tata Steel bid 455 pence on October 20. A deal would create the world’s fifth-biggest steelmaker and be the industry’s second-largest deal this year after Mittal Steel’s $38.3 billion takeover of Arcelor. Corus on Wednesday said it hadn’t received a formal offer from CSN and that it would postpone shareholder meetings set for December 4 to December 20 to allow CSN more time.

Shares of Corus were little changed, dropping 0.5 pence, or 0.1%, to 497.5 pence in London. They have risen 69% this year, valuing the company at £4.47 billion. The gain is less than the 77% increase posted by the Bloomberg Europe Steel Index, which tracks Corus and shares of nine other European steelmakers. “The outlook for global demand remains strong” while Europe is “stable,” the company’s chief executive officer Philippe Varin said on Wednesday in a conference call with journalists. Corus’s profitability in the fourth quarter “will reflect seasonal production shutdowns and the blast furnace reline at Ijmuiden,” he added.

Prices for European rolled steel climbed to $600 a metric tonne in the third quarter. Prices dropped 5.5% to $515 a tonne during the same period last year, according to data from London-based magazine Metal Bulletin. They have more than doubled since the end of 2001. “Strong” demand for steel in Europe, combined with falling stockpiles, enabled the company to push through price increases of between 7 and 12%, Corus said on Wednesday. Blast furnace 7 at its Ijmuiden plant in the Netherlands, which was shut for maintenance, will be back on line on December 1, Varin said.

“That is earlier than I thought,” Richard Brakenhoff, an analyst at Rabo Securities in Amsterdam, said in an interview on Wednesday. “Corus has lived up to expectations.” Corus was created in 1999 through the combination of British Steel and the Netherlands’ Royal Hoogovens. Varin, who took over in 2003, returned Corus to profit after job cuts and plant closings. He also sold the group’s aluminium business and reported record earnings last year. —