Smurfit-Stone loses €83m in first quarter

Smurfit-Stone Container Corporation's first quarter results which showed a net loss of $88 million (€83 million) "should represent a bottoming" for the company, according to Mr Ray Curran, president and chief executive officer. If the demand remains strong, the company should see the benefits from the recent price increases in the second quarter, he said. "An improving market and price trend will position us well to further our agenda of strengthening our balance sheet."

Smurfit-Stone which is 33 per cent owned by Jefferson Smurfit Group, was formed as a result of the merger of Jefferson Smurfit Corporation and Stone Container Corporation. However, the first quarter results include only the results of Jefferson Smurfit Corporation. The results show a net loss per share of $0.41 compared with a net loss of $0.04 in the first quarter of 1998. This included a charge of $0.02 per share for the shutdown of the former Jefferson Smurfit Corporation packaging plants under the company's restructuring programme. The comparable quarter in 1998 had an extraordinary charge of $0.11 per share on the early extinguishment of the company's bank debt. Sales rose from $764 million to $1.7 billion. Mr Curran said the average prices for corrugated containers, containerboard and newsprint were down compared to the levels in the first quarter and fourth quarter last year. Also the company "took market-related downtime in newsprint". These factors, he added, had a negative impact on operating income. However, the demand for packaging products was "very strong". This led to increased shipment volumes of corrugated containers, folding cartons and industrial bags. "More important, the strong demand for corrugated enabled us to stabilise prices and begin to implement a price increase in March." He noted that the company gained minimal benefit from the increase in the first quarter but expected to implement the bulk of the increase in April and May.

Its ability to generate positive cash flow from working capital reductions and asset sales is cited as one of the most important accomplishments of the first quarter, leading to a $130 million reduction in debt. He noted the sale of the remaining shares in Abitibi-Consolidated netted $414 million and this will be used in debt reduction.