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Corus Group plc

2004 Preliminary Results Presentation17 March 2005

1

Agenda

Welcome & introduction

Financial performance

Priorities, Restoring Success & outlook

Conclusions

Jim Leng

David Lloyd

Philippe Varin

Jim Leng

2

Jim Leng

3

David Lloyd

Group financial results

Segmental analysis

Financing

4

2004

Group financial summary

(9.25)p10.05p7.80p2.25pEarnings per share (p)

(2.3)%19.0%--Return on net assets (%)(142)(45)(32)(13)Restructuring & impairment costs

(66)627467160Group operating profit/(loss) (before restructuring & impairment costs)

250934620314EBITDA (before restructuring & impairment costs)

3.1%10.0%12.8%7.0%EBITDA margin (%)

(1,013)

(305)

(255)

(208)

7,953

2003

(854)

446

559

582

9,332

(854)

346

396

435

4,855

H22004

(1,203)

100

163

147

4,477

H12004

Profit/(loss) before taxation

Net debt

Retained profit/(loss)

Group operating profit/(loss)

Turnover

£ million

5

Segmental analysisExternal Turnover - £9,332m

Aluminium

CORUS METAL TRADING

CORUS ALUMINIUM EXTRUSIONS

CORUS ALUMINIUM ROLLED PRODUCTS

CORUS PRIMARY ALUMINIUM

CORUS METAL SERVICES NORTH

AMERICA

Distribution & Building Systems

DISTRIBUTION & BUILDING SYSTEMS

CORUS INTERNATIONAL

CORUS CONSULTING

Strip Products

CORUS STRIP PRODUCTS IJMUIDEN

CORUS STRIPPRODUCTS UK

CORUS PACKAGING PLUS

CORUS TUBES

CORUS COLORS

CORUS SPECIAL STRIP

COGENTPOWER

CORUS TUSCALOOSA

TEESSIDE CAST PRODUCTS

Long Products

CORUS CONSTRUCTION & INDUSTRIAL

CORUSENGINEERING STEELS

LONG PRODUCTS DOWNSTREAM BUSINESSES

CORUS RAIL

Main components

* Before restructuring & impairment costs

Completed transactions

Operating Profit*- £627m

Quarterly Reporting from June 2005

25%

56%

12%

7%

20%

42%

27%

11%

6

2004

SegmentationStrip products

(*) before restructuring & impairment costs

£392/t£424/t£360/tAverage revenue (£/t)

14.4%

361

276

5,896

2,502

H22004

9.0%

201

110

6,164

2,222

H12004

386Operating result (*)

11.9%Margin

562EBITDA (*)

12,060

4,724

Deliveries (kt)

Gross turnover

£ million

6.1%

239

47

£338/t

11,592

3,916

2003

+16%

+4%

+21%

%movement

7

2004

SegmentationLong products

9.2% 0.7%

15

(47)

£262/t

8,194

2,149

2003

+22%

-

+21%

%movement


13.2%

175

146

3,991

1,330

H22004

5.1%

65

31

4,181

1,275

H12004


Margin

240EBITDA (*)

8,172

2,605

Deliveries (kt)

Gross turnover

£ million


8

2004

1.0%

22

(1)

£327/t

6,942

2,272

2003

+25%

(9)%

+15%

%movement


6.2%

85

72

3,138

1,381

H22004

1.8%

22

11

3,210

1,225

H12004


4.1%Margin

107EBITDA (*)

6,348

2,606

Deliveries (kt)

Gross turnover

£ million

SegmentationDistribution & building systems


9

2004

7.2%

74

31

£1,719/t

598

1,028

2003

(3)%

+10%

+6%

%movement

£1,665/t £1,702/t£1,627/tAverage revenue (£/t)

7.4%

41

23

326

555

H22004

8.9%

48

27

330

537

H12004


8.2%Margin

89EBITDA (*)

656

1,092

Deliveries (kt)

Gross turnover

£ million

SegmentationAluminium


10

Group operating resultOperating Bridge 2004 vs 2003

£693m year on year improvement

Before restructuring & impairment costs$ exchange rate impact= net c.£80m gain

(200)

0

200

400

600

800

1,000

1,200

1,400

2003 2004

£ millionSales Price/

Mix

Other

Inputcosts

Volume/Manufacturing Aluminium

€ exchange rate impact = net c.£20m gain

11

Group operating result£693m improvement 2004 vs 2003

Approximately 30% of improvement is due to ‘Restoring Success’

Before restructuring & impairment costs

2003 2004

£ million

Sales Price/Mix

OtherVolume/

Manufacturing Aluminium

(200)

0

200

400

600

800

1,000

1,200

1,400£ million

Inputcosts

impact of Restoring Success= c.£215m

12

EBITDA analysis

(*) excluding corporate costs

27

-142

103

-74

135

5

113

10

189

100

336315Corus UK (*)Corus Netherlands

Carbon

Before restructuring & impairment costs£ million

H1 2002

H2 2002

H1 2003

H2 2003

H1 2004

H2 2004

13

2004

Profit and loss account

(9.25)p10.05p7.80p2.25pEarnings per share (p)

(305)446346100Retained profit

5

(55)

(72)

15

18

435

1

(64)

(49)

53

12

147

(53)(119)Tax

3

(101)

45

9

(208)

6Minority interests

(121)

68

30

582

JVs and associates

Group operating profit/(loss)

Net interest

Disposals

H22004

H12004 2003£ million

14

2004

Cash flow from operations & net borrowings

18(340)

308

582

(12)

159

-

(854)

118(312)(203)

568

(1,013)

78171Other operational movements (net)(10)(12)(328)Working Capital364163145

Depreciation (inc. accelerated depreciation)

(208)435147Operating profit

(854)

349

(29)-

60(187)(98)

603

(1,203)

H22004

(1,203)

(190)

17-

58(125)(105)

(35)

(1,013)

H12004

(1,013)

223

(22)29162

(163)(169)

224

(1,236)2003

Other movements (net)

Movement in net debt

Equity issue (net proceeds)

Closing net debt

Disposals & acquisitions

Operating cash flow

Opening net debt

Capital expenditureInterest and Tax

£ million

15

Total working capital % Turnover*

Stocks - £m

Trade Debtors and Creditors - £m

38953665 3621

30003200340036003800

2002 2003 2004

Carbon steel stocks kt

18.218.318.3

17.5

18.0

18.5

2002 2003 2004

13371404

1732

1300

1500

1700

2002 2003 2004

995 970 1201

11881047 986

-1800

-800

200

1200

2002 2003 2004Debtors Creditors

* Last 3 months turnover annualised

Working capital

16

2004

Balance sheet

355341Other debtors & creditors

(2)%19%Return on Net Assets (%)

37%

2,843

(1,013)

(673)

1,190

2,984

2003

27%Gearing (%) (Net debt/net tangible worth)

3,300Net assets

(854)

(679)

1,433

3,059

Net working capital

Fixed assets

Net borrowings

Provisions, accruals, etc.

£ million

17

Rebuilding our financial position

* Normalised interest excluding one-off new debt issue costs

1236

1013854

500700900

11001300

2002 2003 2004

-0.6

9.3

2.5

-5

0

5

10

2002 2003 2004

2797 2836

3258

2500

3000

3500

2002 2003 2004

27%

37%

20%25%30%35%40%

2002 2003 2004

46%

Shareholders’ Funds - equity interests £m

Net debt £m

EBITDA/Interest*

Gearing %

18

Financing

• Debtor Securitisation programme increased by £60m to £275m and maturity extended from 2007 to 2009

• New €800m 7.5% 2011 bond/tender for €400m 2006 bond

• €800m replacement bank facility until 2008

• No significant maturities until 2007

19

Summary

• Underlying operating profit £627m

• 30% of the improvement attributed to Restoring Success

• Retained profit £446m (EPS: 10p)

• Net debt reduced to £854m (27% Gearing)

• Debt maturities extended

• Quarterly reporting – June 2005 onwards

• IFRS restatement – May 2005

20

Philippe Varin

‘Restoring Success’

‘The Corus Way’

Market outlook and trading update

21

Our priorities

2004… 2006: ‘Closing the competitive gap’

• Deliver ‘Restoring Success’

• Improve our commercial performance

• Dispose non core assets

• Refinance 2006 - 2008 bond maturities

Next steps – ‘The Corus Way’

• Becoming a value player in steel

22

The competitive gap

-5%

0%

5%

10%

15%

20%

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004H1

2004H2

Corus6%

EU average*(excl. Corus)

2.6%4.5%

(*) EU Average consists of Arcelor, ThyssenKrupp Steel, Salzgitter, Voestalpine, Rautaruukki and SSABPre-October 1999 figures based on pro-forma average of British Steel and Hoogovens. Saltzgitter Q4 2004 result estimate

EBITDA margin on sales

23

Restoring Success programme

0

200

400

600

800

Net downside impact of external factors: exchange rates & trend price/cost squeeze

2003 competitive gap c.£400m

Sum of annualised expected benefits from end H1 2003

Existing plans£210m

UK Restructuring£120m

New initiatives£350m

Cumulative gross: £680m

Full implementation of all initiatives is designed to close the competitive gap by end of 2006

EBITDA impact

£m

24

Restoring SuccessProgress to date

0100200300400500600700800

H2 2003 H1 2004 H2 2004 Target

£350m

£120m

£210m

£680m

£52m

£220m£335m

UK Restructuring benefits start H2 2005

Existing plans

New initiatives

Annualised exit rate benefits

UK Restructuring£m

25

Restoring SuccessExisting plans

Savings on track

• 1,200 Manning reductions secured

• World Class IJmuiden (£50m p.a.) completed

– DSP output increased to 1.1mt

• High Performance Strip UK (£120m p.a.)

– £70m p.a. exit rate savings secured since June 2003

Annualised exit rate benefits – £210m target by end 2005

0

50

100

150

200

250

H22003

H12004

H22004

H22005

£52m

£126m

£210m

£m

£165m

26

Key objectives• £120m p.a. EBITDA improvement

• Maximum cash cost of £250m

• Strip Products based at Port Talbot:Scale raised from 3.8 to 4.7mt p.a.

• Engineering Steels based at Rotherham:Scale raised from 0.9 to 1.1mt p.a., process improvements and closure of Stocksbridge steel making

• Long Products based at Scunthorpe:Scale raised from 3.8 to 4.5mt p.a.

Current status• £160m capital investment

nearing completion

• Investments progressing on time & within budget

• Commissioning underway

• Teesside resolution –long-term offtake agreements

• Initial benefits in H2 2005 & full benefits end 2006

Restoring SuccessUK Restructuring update

27

Restoring SuccessUK Restructuring update

New caster installationat Port Talbot

Commissioning of new small bloom caster at Rotherham

28

Objectives from June 2003£350m p.a. EBITDA improvement

Manufacturing & supplies - £200m p.a.• ‘Manufacturing excellence’,

purchase savings and supply chain optimisation

Support function review - £70m p.a.• Support function rationalisation,

including IT and financial shared services

Volume & mix opportunities - £80m p.a.• Specific developments towards

premium end markets

Progress to December 2004Exit rate benefits of £170m

• Significantly ahead of original target• Substantial improvement in

manufacturing KPI’s• Tangible purchasing savings

• IT benefits are re-phasedbeyond 2006

• Key investments to enrich product mix nearing completion

£350m p.a. improvement by H2 2006 remains on track

Restoring SuccessNew initiatives

29

12,000

71%74%79%%On time in full deliveries

10.27.53.8Per million hours worked

Lost time injuries

18,00016,000No.No of suppliers

376372361Kg/thmAverage coke consumption rate (Group)

479532582TonnesLiquid steel per employee(Strip & Long divisions only)

51,60050,30048,600‘000Average number of employees

19.4MtsLiquid steel production 19.5 17.1

20032004 2002

Operational improvements fromRestoring Success

60% of new initiative benefits to date secured from manufacturing & supplies

30

Restoring SuccessProgress on Disposals/Alliances

Achieved to date• North American Distribution – completed H1 2004 • Piling – completed April 2004• Tuscaloosa – completed July 2004• Surplus assets/land – ongoing• Teesside – completed December 2004

Work in progress• Aluminium

31

0

200

400

600

800

Trend CapitalExpenditure

TaxationInterest

Free cash flow

EBITDA after

Restoring Success benefits

2003EBITDA

£m

Cash positive under 2003 market conditions

Structural improvement in cash generationRestoring Success

32

Beyond Restoring SuccessThe Corus Way

Best supplier tothe best customers

The Corus Way

ExistingInitiatives

UKRestructuring

NewInitiatives

World Classprocesses

Selective growth

Passionate people

The Corus Way

Restoring Success

Restoring Success

33

The Corus WayBest supplier to best customers

Best supplier to best customersSharper commercial focus

• ‘One Corus’ pricing policy

• Improved delivery performance

• Better customer, product & market selection

Turnover £m

Construction 30%

Engineering 20%

Automotive 16%

Metal Goods 13%

Packaging 15%

Other 6%

34

The Corus WayBest supplier to best customers

PRODUCTS – increase steel penetration in UK High rise market

SYSTEMS – target residential construction

SOLUTIONS – align offer to further up the value chain

‘Living Solutions’ Modular buildings

Heathrow Terminal 5

35

The Corus WayWorld Class processes

• Strip products at IJmuiden– achieved

• Strip products at Port Talbot– being achieved for UK deliveries

• Engineering steels at Rotherham– being achieved

• Long products at Scunthorpe– being achieved

Structurally competitive cost position: 1st quartile*

• Benchmarking

• ‘Lean Thinking’ principles

• 250 specialist coaches being trained

* CRU & Corus - 2003 European cash cost on a delivered basis into core markets

Continuous improvement

36

Structural improvement

The Corus WaySelective growth

£m

Selective growth

• Internal & external profitable growth

• Financial discipline

• Robust balance sheet

0

200

400

600

800

Trend CapitalExpenditure

Taxation

Interest

Free cash flow

EBITDA after

RestoringSuccessbenefits

2003EBITDA

37

Market outlook and trading update

• Steel industry supply/demand

• Steel raw materials and selling prices

• Trading update

38

Global steel demand

Worldwide growth continues in 2005 albeit at lower levels

Estimate2005

Actual 2004

8%

6%

3%

5%

9%

13%

4%100950World

3%26248Rest of World

2%17164Europe (EU25)

2% 15145Developing Asia

3%14130N. America

8%28263China

Growth rates

2004mt

% oftotal

Source: IISI

39

Supply/demand balanceGlobal steel supply/demand balance (million tonnes)

Source: IISI / Corus

Surplus capacity (RHS)ProductionCapacity

500

600

700

800

900

1000

1100

1200

1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 200560

80

100

120

140

160

180

200

220

240

260

Global steel supply/demand balance forecast to remain tight in 2005

40

Raw materials and selling prices

100

200

300

400

500

2000 2001 2002 2003 2004 2005

($/t Index)

Note: Market pricesSource: Corus

Scrap

Iron Ore

Coal

Coke

Raw materials

YTD

Note: Hot rolled coil prices Source: Corus

($ per tonne)Steel

USA

EUPacific Rim

YTD

100

200

300

400

500

600

700

2000 2001 2002 2003 2004 2005

41

Trading updateOutlook

• Global growth remains relatively strong

• Stock build has softened H1 2005 demand

• H1 2005 trading environment expected to be broadly in line with H2 2004

• Conditions more uncertain as year progresses

• Look to recover significant raw material cost increases

• Further benefits from ‘Restoring Success’

42

Jim Leng

Conclusions

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