Corus cuts over 6,000 jobs in UK overhaul

Anglo-Dutch steel giant Corus Group said today it was cutting more than 6,000 jobs in a major overhaul of its British operations…

Anglo-Dutch steel giant Corus Group said today it was cutting more than 6,000 jobs in a major overhaul of its British operations, aimed at reviving profits amid falling demand and a strong pound.

The measures, which include the closure of two Welsh plants and cutbacks throughout the loss-making British business, will lead to a cut in capacity of more than three million tonnes, Corus said in a statement.

Corus's shares, which have underperformed the London mid-cap market by 55 percent over the past year, were sent over seven percent higher in London and euro 1.25 in Amsterdam.

JP Morgan analyst Mr Brett Olsher said investors had taken heart at an estimated 500 million pounds sterling ($735 million) in cost savings by 2003.

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A sizeable chunk of the latest round of cuts will be at Llanwern, one of Corus's two big integrated steel complexes in South Wales, where mainstream steelmaking will be halted with the loss of 1,340 jobs. Ebbw Vale and Bryngwyn will close.

The cuts come on top of a previous 4,700 reductions made by the group since it was formed in 1999 from the merger of British Steel and Dutch steelmaker Hoogovens.

They hit Labour Party heartlands a few months before an expected general election. Corus's UK workforce will fall to 22,000.

Corus said the restructuring plan would be implemented by 2003 and would lead to pre-tax benefits of 180 million pounds ($264.6 million) a year by the end of the period. This would be offset by a net cash cost of around 220 million, the company added.

"The radical measures announced today will significantly improve the group's competitiveness and are crucial to the future of Corus's employees, customers and shareholders", it said.

"It is with deep regret that further significant job reductions have to take place. Because of its high level of export earnings, Corus is one of the UK firms most sensitive to currency fluctuations."

Corus said its British carbon steel operations lost 301 million pounds in the nine months to July 1st, 2000 and that the group's preliminary operating loss for 2000 was 1.050 billion pounds.

It announced it would pay no dividend for 2000 and said it had concluded a new euro 2.4 billion syndicated loan facility to replace existing bank facilities and improve its financial flexibility.

Corus said carbon steel prices continued to weaken in early 2001 but forecast some price recovery in the second half of this year.

Mr Olsher said his earnings per share estimate for Corus would treble to 13.8 pence in 2002 and added the restructuring looked to set to wipe out around 75 per cent of Corus's UK steel losses.

Reuters