The US market for boxes and container board is healthy but falls in containerboard exports to Asia are a concern, according to Jefferson Smurfit president and chief operations officer Mr Paddy Wright. Falls in exports from the US to Asia have resulted in an oversupply in the US market with consequent recent falls in product prices. Production cutbacks in July and August should bring the industry back into equilibrium and provide scope for a price increase in the autumn, Mr Wright suggested.
Announcing an improvement in after-tax profits at the group's 46.5 per cent US associate, Jefferson Smurfit Corporation, to $11 million for the three months to end June, Mr Wright defended the $25 per share price Smurfit has agreed to pay Morgan Stanley for its stake in the company. Agreed as part of the JS Corp Stone Container merger the $25 share price compares to a current market price of $14 to $14.5 for JS Corp shares. At current prices the deal would mean a loss of about £150 million for the group. But Mr Wright insisted that it was "not appropriate to look at the value of the shares in isolation or at a point in time". Smurfit will be vindicated over time, he said. JS Corp's second quarter $11 million profit compares with a loss of $4 million for the corresponding quarter of 1997. Sales rose to $844 million from $785 million. At a profit of 10 cents per share, up from a loss per share of 4 cents, the outcome was broadly in line with analysts forecasts.
On current market conditions JS Corp president and chief executive officer Mr Dick Graham said that domestic demand for packaging and newsprint "remained healthy". But he said weak export demand and increased newsprint imports have lead to an oversupply in some regions putting downward pressure on prices. Downtime taken to manage stocks will have a negative impact on profits in the current quarter. While global paper and packaging markets will continue to be affected by the ongoing weakness in Asia, Mr Graham expects US domestic demand to be "stable to improving, given the health of the economy".
The latest results show a first half 1998 profit of $22 million or 19 cents per share. But this profit was reduced to $9 million after an extraordinary charge of $13 million for the early repayment of bank debt. The first half outcome compares with a loss of $11 million or 10 cents per share for the first six months of 1997.
Sales in the first half rose to $1,688 million from $1,563 million. Costs increased to $1,406 million from $1,351 million.
The company recorded a profit before tax and extraordinary charges of $42 million compared with a first half 1997 loss of $11 million.
