JEFFERSON Smurfit Corporation (JS Corp) has recorded a slump in pre-tax profit from $126 million to $38 million in the third quarter of 1996. Although not quite as bad as feared, a further downturn is predicted for the fourth quarter.

The fall is attributed to declining prices in corrugated containers, container board grades and newsprint. Also, profits were adversely affected by over-production in the market which led to the curtailment of production at some of its plants.

NCB is not changing its earnings predictions for the group. Analyst, Mr John Conroy, has forecast earnings per share of $1.01 for 1996. This would represent a sharp fall on the $1.65 generated in 1995. He does not expect any recovery tint in the second or third quarter of 1997 and is looking for earnings per share of 58 cents in 1997.

Jefferson Smurfit Group's finance director, Mr Ray Curran, commenting on JS Corp's results, noted it is "very much a supply problem" but the US affiliate (Smurfit has a 46.5 per cent stake) is a lot happier than a year ago. There should be a "much better balance between supply and demand" by next spring, he added, with a potential growth in 1997 of 5 per cent. "It is all yet to happen."

Asked about the possibility that the Jefferson Smurfit Group might make a bid for the 53.5 per cent in JS Corp it does not own, he said this was a "very sensitive" issue because of Morgan Stanley's involvement and he could not comment. While he conceded a bid was always a longterm possibility, there are "no plans today".

Reviewing the latest results, JS Corp chief executive officer, Mr James Terrill, noted that several of the group's other packaging businesses posted healthy profits in spite of the downward pressure on prices. "These results," he added, "helped buffer the impact of the steep decline in container prices, and our earnings, though unfavourable when compared to last year's record quarter, were stronger than most analysts expected".

Mr Terrill stressed that the company's corrugated container shipments were significantly up on the third quarter of 1995. The company's paperboard and newsprint mill operations benefitted from lower recovered fibre costs compared to a year ago. "Healthy demand enabled the industrial packaging and consumer packaging businesses to post strong profits."

Contrary to some market expectations, JS Corp continued to use its free cash flow to reduce debt, repaying $78 million. Mr Curran attributed this to good working capital management and good management. "We don't produce for inventories."

One of the JS Corp's objectives is to trim debt, its aim being to reduce borrowings by $200 million this year. However, it has already reduced debt by $250 million, to $1.95 billion. But with interest payments becoming due in the fourth quarter, he conceded that there is no scope for further reductions this year.

The latest results show a fall in sales from $1.05 billion to $0.83 billion in the third quarter. Interest costs decline from $59 million to $49 million. Net income dropped from $74 million to $22 million. The net income per share fell from 67 cents to 20 cents, somewhat above brokers' predictions.

Sales fell from $3.12 billion to $2.59 million in the nine months to September 30th, 1996. Income before tax declined from $297 million to $169 million and earnings per share dropped from $1.65 to 92 cents.