JEFFERSON Smurfit Corporation, the US associate of Smurfit Group, made a $25 million provision for unspecified problems with one of its products in the fourth quarter.
The provision depressed the US group's results for the year, but pre tax profits were still dramatically ahead of the previous year at $403 million before tax and extraordinary items. This compared with $28.7 million in the year to the end of December 1994.
Mr Ray Curran, the chief financial officer of Smurfit Group, which owns 46.5 per cent of Jefferson Smurfit Corporation (JSC), declined to expand on the brief reference to the provision in the results statement. The provision was "for certain problems related to product quality and failure to follow proper manufacturing procedures and internal policy in an immaterial, non core product line," according to the statement.
Mr Curran emphasised that the problem was not in the core areas of container board, box board, folding cartons and corrugated cartons. However, he declined to say whether JSC was facing litigation over the problem product.
Apart from the provision, JSC had an "outstanding year," said Mr Curran. Sales for the year grew from $3.3 billion to over $4 billion and earnings per share before the extraordinary item were $2.23 as against 12 cents previously.
JSC is optimistic about the coming year, despite the gloomy forecasts for the US paper sector which are depressing the company's share price. Wall Street analysts are predicting that supply will dramatically outstrip demand in the first half of the year. However, Mr Curran said the US operation had not experienced any violent pressure on prices. "The jury is still out," he added.
In the results statement, Mr James Terrill, the president and chief executive officer of JSC, said: "We recognise that the market climate for most of our business will be softer in the first part of the year. However, if the overall economy grows at even the moderate pace that many economists predict, we could see a firming in our business."
JSC temporarily closed down some of its containerboard and boxboard mills in the last quarter to adjust inventory but does not expect any close downs for reasons other than maintenance in the current quarter, said Mr Curran.
