SPECULATION was rife last night about a potential takeover of Corus' Teesside division as the Anglo-Dutch group reported its first profits.

The company, which employs nearly 3,000 people in the area, brought a halt to five years of losses with interim pre-tax profits of £163m, compared with a deficit of £89m last time.

The turnaround follows a traumatic start for the company - formed from British Steel and Dutch company Hoogovens in 1999.

Since the merger, the company has recorded losses totalling £1bn and shed thousands of jobs.

Corus' steelmaking division at Redcar, Teesside Cast Products (TCP), which will operate as a stand-alone company from 2006, is now the subject of takeover talks.

Colin Muncie, managing director of TCP, said: "As a major supplier to many of the Corus plants, we have obviously played our part in the results.

"We are bang on target this year on recruiting export customers for our business and we look forward to increasing these volumes next year towards our objective of becoming a slab exporter once UK restructuring is completed."

Corus wants to sell 80 per cent of the TCP business, which is currently experiencing a renaissance due to a worldwide shortage of the type of unfinished steel slab made at Redcar.

Phillippe Varin, Corus chief executive, is in talks with Bruno Bolfo. The Italian businessman is one of the leading players in the sector. Mr Bolfo is chairman and owner of Duferco, one of the biggest businesses involved in the trade of steel and raw material such as iron ore - one of the raw materials used in steel production.

Swiss company Duferco is hoping to lead a consortium of four companies, including Dongkuk, of South Korea, and two other firms in Mexico and Italy.

The consortium would use the raw material from Teesside in its operations - and the sale would also benefit Corus, which hopes to dispose of the plant as part of its restructuring plan.

Corus said discussions with a number of interested parties were taking place, but did not provide further details in yesterday's results announcement.

Mr Varin said Corus' profit had been helped by strong demand for steel from China and rising steel prices, as well as a £220m annual cost saving as a direct result of its restructing programme.

The company said the pace of improvement had accelerated sharply in the second quarter of the year and it expected progress to continue in the second half.

Michael Leahy, general secretary of steelworkers' union Community, welcomed the figures, which he said were a credit to the workforce.

He said: ''The results bode well for the remainder of the year and beyond, since the steel consumption and demand in the UK continue to expand rapidly with the boom in construction.

''With continuing high demand from China, Corus is well placed to recover market share in the UK and to increase profitable exports.''

The figures also kept Corus on track for a place in the FTSE 100 as shares jumped following the announcement.

Turnover rose 11 per cent to £4.47bn - helped by a 15 per cent rise in Chinese demand for steel - but operating costs were six per cent higher due to increases in raw material costs, particularly iron ore and coal.

Middlesbrough South and east Cleveland MP Ashok Kumar said: "The results show that the world demand is buoyant and this is good news in particular for the Teesside operations.

"There were many who doubted the strategy of making Teesside a bulk supplier for the export market, but it seems the judgement displayed by the Corus board has paid off.

"The news that a number of foreign companies are interested in a joint equity stake in Teesside has to be seen as a mark of confidence."