CORUS, the Anglo-Dutch steel company, has reported its first pre-tax profit since its formation through a controversial merger five years ago. First-half pre-tax profits came in at £163 million, exceeding a June trading update that forecast at least £125 million operating profit and representing a sharp turnaround from last year’s £89 million interim loss.

The dramatic improvement is partly a result of rising steel prices and soaring demand for steel in China, combined with shortages of raw materials, which have held back supply in the international market.

Corus claims that £100 million of the improvement arises from its Restoring Success programme, introduced by Philippe Varin, the chief executive, last year to put Corus back on track after years of debilitating losses.

M Varin cautioned that there was still some way to go to close the competitive gap on European rivals. He said: “We’re keeping our feet on the ground. We still have a long way to go to deliver our targets for the company.”

Although very high demand for steel may slip in 2005, raw materials were likely to stay in short supply, leading to continuing high prices, M Varin said.

Shares in Corus rose 2¾p to 52¼p, against a record low of 3½p in 2003. The revival of Corus has been helped by the prodigious growth of China’s economy, which accounts for more than a quarter of the world’s steel consumption.

Corus has cut 13,000 jobs and shut plants in Britain since its formation in 1999 in a merger of British Steel and the Dutch business Hoogovens. Big losses in Britain have been a source of tension between the two parts of the group, but Corus UK made a small operating profit this half, for the first time in five years, despite a £40 million impact from soaring coal prices.

Corus is restructuring its UK business to focus on three sites, rather than five and is investing heavily in improvements to the British operations that will not show any benefit until 2005.

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