Europe’s third largest steel manufacturer, Corus, blamed the strength of the pound for pre-tax losses of £113m in the six months to April this year and said more job cuts were likely.
The company – formed from last year’s merger of British Steel and Hoogovens of the Netherlands – said the only hope for a return to profitability in the next two quarters would be if the recent slide in the pound’s value against the euro continued.
The weakness of the euro means UK-produced steel costs £20 per tonne more than that produced in the Netherlands, Corus said. Two thirds of the group’s production is based in the UK and its exposure to the fluctuating exchange rate has seen its share price almost halved since the end of last year.
Further job cuts in addition to the 1,400 losses announced earlier this month can be expected. Chairman Sir Brian Moffat said: `Difficult decisions will have to be taken in order to improve our competitive position’.
Joint chief executive John Bryant said any closures would be decided on a `business by business, location by location’ basis.
The losses stemmed largely from the carbon steel division, while aluminium and stainless steel continued to make profits.
Sector analyst at stockbroker Credit Lyonnais, Ken Hughes, said the steel industry was facing a critical drop in demand: `Decreased levels of investment in manufacturing are leading to long-term structural concerns regarding the future steel market in the UK.’
Corus said it would continue to remove duplication in logistics and other non-production areas, with more redundancies expected over the next 6-12 months.
l Crude steel production in the UK dropped again in May, despite a global increase in output. Since May 1999, steel production fell by 13.1% in the UK, but rose 3.6% in the EU and 9.1% worldwide.
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