STEELMAKER Corus recorded its first profits last night - but warned of uncertain trading conditions later this year.

The company - formed from the merger of British Steel and Dutch firm Hoogovens in 1999 - brought a halt to five years of losses with a surplus of £559m.

The improvement from losses of £255m in 2003 comes after Corus benefited from a sharp pick-up in steel prices and a major restructuring.

Chief executive Philippe Varin said the company was closing the gap on its European rivals, although he added a note of caution to the results.

He said: "Overall, we expect the first-half trading environment to be broadly in line with the second half of last year. As the year progresses we see conditions as more uncertain."

Corus employs about 3,000 in Teesside and 1,700 at its Teesside Cast Products division which last year secured a ten-year supply deal with a consortium of major steel firms, enabling it to operate as a stand-alone company from next year.

Hundreds of companies and thousands of jobs are dependant on TCP's survival in the region.

Tony Poynter, chairman of Teesside's multi-union steel committee, said: "We've gone from being a company on the brink of extinction to one that's turned out a superb performance."

Anthony Platts, assistant director at Tees Valley stockbrokers Wise Speke said: "This is an amazing turnaround story.

"Corus announcing profits, for the first time in five years, is testament to the highly-skilled and dedicated workforce.

"While demand for steel softened in Europe and North America, continued strong demand in China has more than made up any shortfall.

"The slight worry is that China will eventually move from a demand position to a supply position. On this basis, Corus is too far into the recovery stage for us to continue buying the shares."

But Bob Cuffe, chairman of the North East Chamber of Commerce's Tees Valley committee, was upbeat about the future.

"Steelmaking worldwide is enjoying a resurgence and Corus turning its first profit is testament to both the hard work of the group and the changing market," he said.

"This gives everyone renewed hope that Teesside Cast Products has a strong and vibrant future when it operates as a stand-alone merchant mill from next year."

Corus said yesterday that stock building in European and North American markets had softened demand in the first half of this year, although strong demand from China was expected to make up for this shortfall.

The company also faces significant rises in raw material costs, which it expects to recover through higher selling prices and further benefits from its Restoring Success programme.

Since the merger Corus has racked up bottom-line losses totalling more than £2bn and shed thousands of jobs across all its divisions.

The higher steel price allowed turnover to rise 17 per cent to £9.33bn last year, despite volumes remaining little changed.