Steely determination

What are the key financial highlights of these full year results for
you personally?

Last year was another good one for Corus. I think the highlights are EBITDA
in excess of £1bn and operating profit, excluding any restructuring costs, of
£720m. That’s an improvement of around 14% over 2004.

Cash generation was also very strong. In fact, on an equivalent basis, net
debt was reduced by the order of 34% if we strip out the impact of the
accounting changes.

And that’s despite a very significant capital expenditure programme of over
£420m, or around 138% of depreciation.

But it has been another tough quarter for you on costs. Can you break
down the costs numbers and give us some insight as to where you see them

Last year 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% overall increase.

The main components of the increase were iron ore and coal, together with
energy, particularly in the UK.

If we project that forward into 2006, I think we can expect further cost
increases (albeit not on the same 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.

And you have improved your working capital as a percentage of sales.
Can you bring this down even further?

We have closed the year at 16% working capital ratio to turnover. I think you
will find that that’s by far the best ratio in the European steel industry.

We have been consistently at around 17%, 18% now for the last two years. I
think that 16% in the short term is probably as good as we can get. Longer term,
I think that there are further opportunities by improving supply chain

And as you say, the cash number is strong. Is it your intention to
continue to use cash to pay down debt?

Cash generation was indeed strong during 2005. In total, we generated £289m
of cash, albeit the impact of that cash generation on net debt was offset by the
adoption of new international accounting standards in January.

We used some of that cash balance to redeem debt in the first quarter of

If you look at the balance sheet at the end of the year, the gearing is 25%.

We have previously said that a ratio of 25-30% is where we are targeting over
the course of the economic cycle.

Now, clearly that means that at certain points of the cycle we’re going to be
below 25%, and we will continue to look at the balance sheet, and the efficiency
of the balance sheet, on an ongoing basis.

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