NEXT Tuesday, Smurfit's 46 per cent associate in the US, JS Corp, will report its results for the first quarter of 1996. These are expected to show that the group is facing into a difficult period.

Prices for the group's key product, linerboard, have fallen from a peak of $530 (£338) a ton last year to a current level of $400 a ton, although the fall in price of finished boxes has been less marked. Box prices peaked in the third quarter of 1995 at $873 a ton and have since fallen back to $820 a ton.

"Box prices have held up reasonably well," Smurfit finance director Mr Ray Curran said yesterday after the publication of the 1995 results.

He did sound a note of caution, however, and said: "People looking at linerboard prices are looking at prices as low as the cash cost of production ($300-350 a ton) before there is a rebound."

But, unlike some Wall Street analysts who have taken a particularly bearish - approach to the current downswing in the paper industry cycle, Mr Curran states emphatically: "We don't have a bleak view of the future."

He added that some analysts were forecasting a price recovery as early as the third quarter of the current year, although others believed that the cyclical upswing might not begin until the second half of 1997.

"Nobody here has a gloomy outlook," he said, adding: "This year will not be as good as last, but it will not be a bear year.

Mr Curran was critical of some of the current bearish Wall Street forecasts for the industry. "Some are taking an exceptionally pessimistic view for 1997, which we do not necessarily share."

"We believe there are reasonable prospects for a price recovery and we see a reappearance of demand from the Far East. We have positioned ourselves to able to take advantage of opportunities that arise hen e are out of the current downcycle."

Typically, the US packaging industry tends to grow at roughly the same rate as the economy, and this suggests that the industry might grow by around the forecast 2.5 per cent increase in US gross domestic product.

Mr Curran warned, however, that even growth of this scale "would not alone be sufficient to counter the current supply/demand imbalance". He said: "A combination of US growth and increased demand from the Far East could bring the supply/demand equation more into equilibrium."

Forecasts from Irish analysts for Smurfit's 1996 and 1997 results vary wildly, mainly due to different assumptions made on the price of linerboard and boxes over the next couple of years. Analysts warned yesterday that making assumptions about prices was fraught with difficulty and one said: "Every manufacturer in the US seems to have a different view about how low prices may go before they rebound."

Currently, 1996 profit forecasts vary from £250 million to £340 million and 1997 profit forecasts vary from £190 million to £260 million.

Whichever way prices go, it seems certain that the current year and possibly next year will be periods of retrenchment for Smurfit, with the group battening down the hatches to get through the current cyclical downswing in the industry. No major acquisitions are expected, despite the comfort of a balance sheet with a gearing of just 40 per cent.

Similarly, there seems little likelihood of Smurfit making any move in the current environment to acquire Morgan Stanley's 36 per cent stake in JS. This stake has been on the block for some time and there is speculation that a revamped Morgan Stanley management, following the retirement of Mr Don Brennan, may move to divest itself quickly of the JS Corp stake.

Sources said that "there is no question of Smurfit taking it".