Earnings at JSC are to remain under pressure

EARNINGS will remain under pressure in coming months, according to the Jefferson Smurfit Corporation (JSC), the US associate of the Jefferson Smurfit Group. The company blamed "negative pricing trends in corrugated containers" for worse than expected first-quarter results.

JS Corp reported a loss of six cents per share for the first quarter, compared with earnings per share of 4.8 cents for the corresponding quarter of 1996. Losses after tax rose to $7 million (£4.54 million) compared with a profit of $53 million.

Sales revenue was 15 per cent lower at $778 million, reflecting the sharp fall in product prices in the volatile US paper and packaging market. With only a 5 per cent saving on costs - down to $739 million - operating profits slumped 72 per cent to $39 million. Despite lower interest costs, down from $51 million to $47 million, the company recorded a loss before tax of $8 million compared with a previous profit of $87 million.

The company, in which the group has a 46.5 per cent stake, warned that earnings would be under pressure in the coming months". JS Corp president and chief executive officer, Mr Richard Graham, said the poor results reflected price discounting in the corrugated containers and news print markets. Average newsprint prices were more than $250 per ton below the previous year's levels, he said, adding that a price rise which took effect on April 1st should benefit JS Corp.

A build-up of industry stocks meant that the linerboard market was in "disarray" in the first quarter, he said. This stock build-up led to steep discounting of containerboard prices, which in turn depressed the price of corrugated containers. On a positive note, demand for packaging was strong the folding cartons, industrial and consumer businesses had performed "within expectations" and" pricing in non-container products was relatively stable.

In the quarter, JS Corp closed an unprofitable uncoated board mill in Missouri and completed, two acquisitions - a corrugated-container plant in Florida and three recycling plants in the Chicago area.

Jefferson Smurfit Group president and chief operating officer, Mr Paddy Wright, said the US results were weak against a background of good demand and, a strengthening economy. An increase in downtime this quarter should help to bring prices up, he said, though improvements in prices are not expected until the third quarter. Prices in Europe should rise before US prices, he forecast.

The group is currently looking at acquisition opportunities in Britain, France, Germany and Italy. It wants to add sheet and corrugated plants to its existing European operations.