Shares in Corus, the Anglo-Dutch steel group, jumped almost 7 per cent in early trade on Thursday after it announced plans to sell its aluminium business for €826m ($993m) as full-year earnings met forecasts.

Corus said it had signed a letter of intent with Aleris International of the US involving the disposal of its downstream aluminium rolled products and extrusions business. Smelting operations would remain within Corus.

Philippe Varin, chief executive of Corus, said: “The proposed sale…to Aleris secures a strong future for these businesses, represents good value for Corus and is an important step in the group’s strategy.”

Mr Varin said the company would use the proceeds from the deal to invest in its steel business in western Europe, but also to access low-cost production outside of the UK and the Netherlands.

Corus had tried to sell the aluminium business to Pechiney of France in 2003, but the sale was blocked by the group’s Dutch workers council, who were concerned that the profitable Dutch business was being sold to subsidise lossmaking UK steel plants.

Corus, which last week was re-admitted to the FTSE 100 index after an absence of just over three years, said that from the second quarter, growth in the steel market, driven by China, would remain strong, with selling prices expected to increase.

“Recovery in European demand continues and inventories are at or below normal levels,” the company said, however, energy costs in Britain would be £20m higher in the first quarter of 2006.

Costs remain an issue for Corus, which are a lot higher than its rivals because of its production taking place in expensive sites in the UK and the Netherlands. In addition, the costs of raw materials such as iron ore and coke have soared in the past two years.

“2005 saw further, significant increases in costs. In total, our raw material and energy cost base increased by the order of £500m. That’s something like a 25 per cent overall increase. The main components of the increase were iron ore and coal, together with energy, particularly in the UK, “ said David Lloyd, Corus finance director, in an interview.

“If we project that forward into 2006, I think we can expect further cost increases, albeit not of the scale that we saw in 2005, further increases on energy costs, further increases on iron ore, but compensated by lower freight charges, and some relaxation in coal prices,” Mr Lloyd added.

Having struggled with heavy losses since its merger in 1999 between British Steel and Hoogovens of the Netherlands, the company has returned to profit in the last two years and on Thursday said full-year pre-tax profits rose to £580m from £567m a year earlier. Turnover rose 8.7 per cent to £10.14bn.

Corus said its recovery plan, dubbed “Restoring Success”, delivered benefits of £555m and was on track to achieve the target of £680m by the end of 2006.

The sale of the aluminium business could attract further interest in the steelmaker, which is seen as a bid target as the steel industry goes through another round of consolidation after Mittal Steel’s €18.6bn hostile bid for rival Arcelor.

Corus will pay a final dividend of 1p a share.

Corus shares were trading up 8.2 per cent at 82 1/2p in afternoon trade in London.

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