The theme for the Jefferson Smurfit Group's 2000 annual report is its Irishness. The front page is adorned with a striking picture of Dublin's Ha'penny Bridge. Inside poet and playwright Samuel Beckett, U2, hurling, and the ancient Irish drum, the bodhran, are featured. There is no mention of Anna Livia, commonly known as the floozie in the jacuzzi, donated to Dublin by the group. Perhaps that is just as well, as she is being relocated. Perhaps this is also the time for investors to take a renewed look at Smurfit, whose annual general meeting takes place in less than four weeks' time.

The recent focus has been rightly on the €6.6 million (£5.2 million) remuneration - a bonus of €3.1 million was the main contributor - received by the chairman and chief executive, Dr Michael Smurfit, who resides in tax-conducive Monaco. But the cynics may well ask how a bonus be justified on the group's 2000 earnings, which are below 1995's.

The answer is that Dr Smurfit would have been entitled to a bonus based on short-term targets. Last year Smurfit did show a strong performance, with pre-tax profit up from €263 million to €442 million and adjusted earnings per share before exceptional items up from 7.6 cents to 25.4 cents.

While the 2000 annual report does admit that the latest results represented the group's "second-best year ever in terms of earnings", it does not highlight the negative aspects of that statement. It homes in on the "sustained dividend growth" over the past 10 years, which represented an annual 10 per cent growth.

Curiously, for a manufacturing company, it also highlights the net asset value, which has doubled, as it is "generally considered as a measure of true intrinsic business worth". Had it shown the earnings record over the past 10 years, the message would have been different. This would have clearly shown cyclical growth, with a peak in 1995, then down in 1996 and 1997, up in 1998, down in 1999 (this was predicted and due to exceptionals), and a doubling in 2000.

The 2000 annual report is also shy about a breakdown of directors' pay in 1999. It gives a breakdown of directors' remuneration for 2000 because it has had to, but keeps the comparable 1999 figures secret. Nevertheless, the group has come a long way in the past decade. The number of employees has risen from 36,600 to 72,500 worldwide, sales have quadrupled from €3.5 billion to €14.9 billion, and earnings before interest and tax have more than trebled from €0.6 billion to €2.2 billion.

Also, containerboard capacity soared from three million tonnes to 10 million tonnes, making it the world's market leader in paper-based packaging. Why then is it only ranked (by value) the ninth-largest Irish publicly quoted group - lagging behind Elan, AIB, Bank of Ireland, CRH, Eircom, Ryanair, Irish Life and Permanent, and Kerry Group - while it was the undisputed top dog 10 years ago?

First, some of these companies have almost consistently expanded real earnings. Second, they have not had the tag of being run by a number of family members with the perception that some of the activities (for example, the K Club) were being run for the personal benefit of the members.

Third, Smurfit has so often disappointed by false hopes of a revival in linerboard prices, the lynch pin for growth. And fourth, Smurfit appears destined to lose out most from the Irish institutions' policy of continuing to lighten their weighting in Irish shares.

However, compared with others in the industry, Smurfit has performed well and is in a good position to benefit from any upturn. There will be a slowdown in the first quarter of this year due to lower US linerboard prices and a slowdown in that economy, and signs of discounting in Europe.

International Paper Company, the world's largest wood and paper products company, has warned that first-quarter earnings would fall well below Wall Street estimates. This followed lowered earnings estimates from other companies such as Bowater, Smurfit-Stone Container Corp (SSCC) - Smurfit's US associate - Temple-Inland, Mead Corp, Louisiana-Pacific Corp and Potlatch.

Nevertheless some brokers are leaving their 2001 and 2002 estimates unchanged. Goodbody Stockbrokers, for example, is looking for an increase in pre-tax profit from €442 million in 2000 to €611 million in 2002, and significantly, a growth in adjusted earnings per share from 25.4 cent to 33.7 cents.

However, there is still a need for the capacity in the US to be reduced and the group's fate is very dependent on how the US economy performs; the sentiment about the US economy is becoming more negative by the day. Smurfit's share price at around 190 cents continues to trade at a substantial discount to the US and European industries, and indeed to SSCC. This has prompted a number of Irish and US brokers to recommend the shares as a buy.

But with Irish institutions - they own 26 per cent of the company - determined to reduce this significantly, there is a need for the group to further sell itself to investors in other geographical areas. Directors and management control 10 per cent of the company while other Irish investors own 10 per cent. These are unlikely to change much so the emphasis has to be on the UK (7 per cent) and North America (42 per cent compared with 14 per cent in 1995).

The Smurfit management is well regarded in the US and it appears inevitable that North American investors will increase their holding to more than 50 per cent within the next few years. Also, in time, SSCC and Smurfit are likely to merge. Smurfit has plenty of upside potential but investors' fingers will be crossed over the next six months to see if the flagging US economy, with its rising inflation, is a short-term irritant or is settling down for the longer haul.

Bill Murdoch's column appears on the first Friday of every month.

bmurdo@irish-times.ie