JEFFERSON Smurfit Corporation (JSC) has recorded a drop in pretax profit from $106 million to $25 million in the fourth quarter of 1996. No recovery is anticipated until the second half of this year when growth should resume.
Mr Richard Graham, president and chief executive officer of JSC, said, with the debt reduced to $2 billion, the company is no longer inhibited from making acquisitions. The focus, he added will be on companies manufacturing containers or cartons.
JSC made a small acquisition last October. It purchased a corrugated box plant from Tropicana Dole Beverages North America, a unit of Seagram. The consideration was not disclosed.
JSC, which is 46.5 per cent owned by Jefferson Smurfit Group, had a target of reducing costs by $70 million in 1996 and this was achieved. The target this year is $84 million and Mr Graham conceded that this will be "very difficult to achieve".
This helped the group reduce its debts by $256 million, representing a big improvement on the target of $200 million.
The latest results are in line with expectations. The full 12 months results show a fall in earnings per share from $2.23 to $1.05, in line with the forecast made by NCB Stockbrokers.
The decline is attributed to declining prices in corrugated containers, containerboard grades and newsprint. Profits were also affected by over production in the market which led to the curtailment of production at some of its plants.
Mr Graham noted that, while container prices were well below the levels a year ago, the market climate improved during the last quarter. Demand for containers was strong and prices remained fairly stable. The company's container shipments in the fourth quarter increased by 7.5 per cent.
On the full year results, he stressed that, despite the fall off in container prices and the consequent decline in earnings, there were a number of accomplishments which helped soften the impact of the downturn.
Sales fell from $4.09 billion in 1995 to $3.41 billion in 1996. Interest costs have been reduced further, from $156 million to $77 million, reflecting the reduction in the debt burden. Sales in the third quarter fell from $973 million to $816 million.
On the future, Mr Graham said product prices are expected to remain "low during the first several months of 1997 which will negatively affect earnings" However, stocks in containerboard and newsprint have declined steadily in the past few months while the rate of growth of new containerboard capacity has moderated.
