Smurfit Stone, the US packaging group 33 per cent-owned by Jefferson Smurfit, has reported a quarterly profit for the first time since the company was created from the merger of Jefferson Smurfit Corporation and Stone Container 15 months ago.
In the fourth quarter of 1999 the company reported net income (after-tax profits) of $286 million (€286.80 million), although $245 million of this was down to the sale of non-core assets during the year. This compares with a loss of $214 million in the fourth quarter of 1998 while the fourth quarter earnings per share of 20 cents was comfortably ahead of market forecasts.
For the full year, Smurfit Stone had net income of $157 million or 71 cents per share while sales for the merged company in the 12-month period totalled $7.2 billion against $3.5 billion in 1998. The 1998 sales figure included all of the JSC sales but only a small contribution from Stone, as the merger between the two groups was not completed until November that year.
But while the Smurfit Stone results came in ahead of most forecasts, neither Smurfit Stone nor Jefferson Smurfit benefited. Smurfit Stone traded 44 cents lower in early trading on New York to $20 while Smurfit shares in Dublin, which hit a high of €3.35 earlier this month, were five cents lower on €3.10. "People are probably waiting to see if the $50 price rise from February 1st holds. If it does hold - and it should given the level of inventories, then the shares should benefit," commented one analyst.
Smurfit Stone - which began life as a merged company with debts of $6.8 billion - has ended the year with much reduced debt of $4.8 billion. This was achieved mainly through asset disposals - including the sale of its timberlands for $725 million, its 22 per cent of Abitibi Consolidated for $414 million and one of its new Oregon newsprint mills for $200 million. Since year-end, a second Oregon newsprint mill has been sold for an undisclosed sum.
Smurfit Stone president Mr Ray Curran said: "We achieved 90 per cent of our asset divestiture target by November, enabling us to reduce debt by $1.8 billion for the year. We eliminated overlapping activities and continued rationalisation of our converting operations enabling us to further streamline our business.
"The impact of the 1999 initiatives has left us with a substantially strengthened company. We will continue the integration of our container and containerboard system and work to achieve full potential in all of our businesses," said Mr Curran.
He added that demand in the US for packaging remains healthy "and we are experiencing a pick-up in demand in export markets for containerboard", he added. In line with the rest of the industry, Smurfit Stone plans to increase its linerboard price by $50 a ton to $475 and increase the corrugated price by $60 a ton to $460. These price increases, if they are held, will flow directly through to the Smurfit Stone bottom line and significantly improve prospects for the group.
