Corus in a Nutshell: Corporate Responsibility Business Principles - Essay Example

Accounting Contents Corus in a nutshell: An Introduction .. 2 Corporate responsibility business principles .. 3 Financial Highlights 5 Competitive environment in the steel sector ... 6 HR Practices ... 7 Investor relations 8 Bibliography . 9 Introduction: Corus PLC, headquartered in London, is an international company, providing steel and aluminium products and services to customers worldwide. Corus was formed on 6th October 1999, with the merger of British Steel and Koninklijke Hoogovens. It is Europe's second largest steel producer with revenues in 2005 of GBP 9.2 billion, with a turnover of 10.1 billion. Its crude steel production was about 18.2 million tons primarily in U.K. and Netherlands. Corus is primarily engaged in the manufacture of semi-finished and finished carbon steel products. The company is comprised of four Divisions, Strip Products, Long Products, Aluminium and Distribution & Building Systems with a global network of sales offices and service centres. The company has manufacturing operations in many countries, with major plants in the UK, the Netherlands, Germany, France, Norway and the USA. In addition, there are a number of sales offices and service centres across the globe. Company's shares are listed on the London, New York and Amsterdam stock exchanges. At the end of December 2005 Corus had 47,300 employees. The stated strategy of Corus is focused around carbon steel, with the intention of: Ensuring that upstream steelmaking facilities are optimised. Pursuing selective growth of downstream businesses Seeking opportunities to participate in the ongoing consolidation of the world's steel industry. Corporate responsibility business principles Corus takes its corporate responsibility seriously with the following twelve Corporate responsibility business principles: i. Accountability: Towards establishing health, safety, social and environmental policies and standards for the Group. ii. Stakeholder engagement: The company considers customers and suppliers, investors, shareholders, employees, trade unions, local communities and the general public as its main stakeholders and tries to engage with all stakeholders in various ways. iii. Management systems: Company has management systems that cover quality, health, safety and environment. iv. Business integrity: All business transactions on behalf of Corus are reflected accurately and honestly its accounts in accordance with established practices with independent audit and review. v. Risk management: The management system tries to minimize and manage risks. Potential risks are identified through techniques such as auditing, near-miss reporting and risk assessments. vi. Policy and guidance: For each identified issue the company is working towards ensuring a clear policy and strategy. vii. Management and measurement: The management tries to set targets for itself for improvement, and then monitors, reviews and reports performances against these targets and other key performance indicators. viii. Assurance: Effective internal assurance, through internal audit, is an integral part of the company's approach. ix. Commercial and economic prosperity: The Company identifies the need of a strong financial base in order to be able to fulfil its social and environmental responsibilities and to ensure the sustainability and continuity of its business. x. An integrated approach: Company believes that the integration of environmental, social and economic factors within its business processes adds to the sustainability of its operations. Also the company has set an aim for itself for providing products and services which contribute positively to the society and to improve quality of life for its employees and the communities in which it operates. xi. Customers and suppliers: Company expects that its suppliers and contractors must operate to the same standards as Corus. xii. Political activities and contributions: The company does not contribute to political parties or funds, nor does it take part in party politics Financial Highlights: During the financial year 2005: the company posted operating profits of m 680 with a turnover of m 10,140. The company proved profitable for its shareholders as well as its basic earnings per ordinary share figure was 10.17p while diluted earnings per ordinary share were 9.74p. In the interest of its shareholders Corus started quarterly reporting since Nov. 30, 2005. Results for the Q2-2006: Corus Plc posted more encouraging results for the second quarter (ending August 2006), with equally impressive showing in the first quarter of 2006. Some of the highlights (as compared to the first quarter) are; Operating profit from continuing operations improved to 129m compared to 80m (excluding 96m non-recurring pension credit) in the first quarter Second quarter profit after tax of 82m (Q1 2006: 45m) EPS increased to 9.09 pence (Q1 2006: 4.60 pence) Net debt at 1,399m includes 145m due to the first time adoption of IFRIC 4 from January 2006 and 268m associated with the adoption of IAS 32 and 39 in 2005. H1 has seen a 374m increase in working capital requirements including slab to cover the IJmuiden blast furnace reline Interim dividend increased to 2.75 pence Its share price closed at 506.00p on Nov, 24, 2006 at London Stock Exchange, trading at its year's high of 507.75p. Competitive environment in the steel sector Combining global expertise with local customer service, Corus offers value, reliability and innovation. Corus, at 2nd position in Europe is at present world's 9th largest steel company. In order to strategically take on the competitors recently, Corus has been acquired by Tata Steel from India. Tata steel is one of the lowest cost producers of steel in the world, having strong retail and distribution network in India and South East Asia, the market still under-explored by Corus. This acquisition has given birth to the world 5th largest steel company and a powerful combination of high quality developed and low cost high growth markets. This has the potential of significant synergies and an opportunity for future growth and value creation. Brazilian steel maker Companhia Siderurgica Nacional (CSN) was also on the lookout for having Corus, but Tata Steel has been successful in its efforts. CSN made an abortive attempt for Corus four years ago. Tata steel initially offered 455p per share, but recent reports suggest that Tata steel has now raised it price to between 490 to 500p, thus increasing the offer price for Corus to $8.86 - $9.04. This sweetener is bound to make the shareholders like Pete happier enough to keep invested in the company. Corus has paid a dividend of 7.5 pence per share for the year 2005. The company is scheduled to hold an Extraordinary General Meeting (EGM) on December 4 to consider the Tata Steel offer. Both Corus and Tata Steel seem to agree on one common point that there are clear and compelling industrial logic for the combination to realize the potential of synergies. At present both the companies are busy in the formation of appropriate cross-functional teams to execute the integration plan under the overall guidance of the strategic and integration committee, and the transaction is to be completed by January 2007. HR practices: In fact after its acquisition by Tata Steel, many of its employees have started expressing concern that their days are numbered in the company, and they might be in the line of receiving the marching orders soon. But, as of now, all these rumours and apprehensions have been put to rest for now by the categorical statement of Ratan Tata, the chairman of Tata steel, who expressed his confidence the existing team and the current practices at Corus. The fact that Nikki has got an offer from Cours goes on to prove this. Corus believes that it is the people that are essential to its success. People development policies of Corus include; Its belief in recruiting people that have the potential to deliver. It offers development to allow people to reach their full potential. To ensure Corus personnel are developed, it has its own management training college, and also delivers many courses in-house to people on site. Corus also gives continued education for school leavers who join the company. Corus also aims for all managers to realise their potential, and offers a range of training and development opportunities to allow managers to do this. Corus emphasizes that its managers must have an understanding of the international business environment of which the company is a part. For this reason the company uses international business schools to impart training to its managers. In addition to residential and on-site training courses, Corus has also devloped e-learning courses in areas such as information technology, health & safety, engineering and processes. Investor relations "Sometimes two companies may be more valuable than a part". This statement reflects the reasoning behind Merger of Corus by Tata Steel. It signifies the newer trend of more and more inclination towards consolidation by way of Mergers and acquisitions (M&A). Tata group of India is a 139 year old brand with group revenue of approx US $22 Billion. It is the largest employer in the public sector in India with a total work force of more than 235,000, ranked as world number one steel maker by WSD. Its current consolidated EBITDA margin is 30-35%. Corus on the other hand, reported revenues of approximately 9.2 billion, EBITDA of 1027 million and profit after tax of (PAT) 720 million for the year ended 31 December 2005. This healthy trend has been continuing for this as well with the financial report of 2nd quarter (Aug 2006) stating PAT at m 326 and EBITDA at m 472. The company increased interim dividend to 2.75p. As on June 2006, 891,787,432 ordinary shares of Corus are in issue. The ordinary shares are traded on the London and Amsterdam Stock exchanges. Cours has around 158,000 registered shareholders. Institutional investors, account for around 90% of total shareholders. The remaining 10% mainly represents private individual investors. Corus ordinary shares are also listed on the New York Stock Exchange in the form of American Depositary Shares (ADS), evidenced by American Depositary Receipts (ADRs) each representing two ordinary shares. This was adjusted in May 2006 following the share consolidation. Previously an ADS represented 10 ordinary shares. The Bank of New York is the ADR depositary. References & Bibliography: 1. Corus Plc, available online at http://www.corusgroup.com/en/ 2. London Stock Exchange, available online at www.londonstockexchange.com 3. Tata steel, available online at http://www.corusgroup.com/en/ 4. Stakeholder Management, http://www.themanager.org/Resources/Stakeholder%20Management.htm 5. Drury, C. (2004), 'Management and Cost Accounting' (6th ed.) Thompson Learning. 6. Lev, B., (2001) 'Intangibles: Management, Measurement, and Reporting'. Washington: Brookings Institution. 7. Steely logic, the economist.com, http://www.economist.com/business/displaystory.cfmstory_id=8081780 Read More