JS Corp upbeat on second-half

Jefferson Smurfit Corporation (JSC), the 46.5 per cent associate of the Jefferson Smurfit Group, is looking for better results in the second half of this year, following reduced losses in the second quarter. It has already announced paperboard and packaging price increases to take effect in the third quarter.

"We should benefit from an improving market climate, strong volume and higher product prices, offset in part by higher fibre costs," Mr Richard Graham, president and chief executive officer, said.

The $3 million (£2 million) loss before tax in the second quarter of 1997, announced yesterday - down from the $8 million loss in the previous quarter - was lower than expected.

This better underlying trend is attributed partly to the contribution of its non-container businesses. Folding carton shipments increased significantly, demand for coated recycled boxboard on the open market was strong, and the mills "ran well", according to Mr Graham. The newsprint business recorded better-than-expected profits as a result of the implementation of a newsprint price increase. Corrugated container shipments also increased substantially. Also, the market trends had been favourable, he said. "Demand for packaging was healthy across our customer base and prices began to stabilise. Recovered fibre prices were firm to improving for most grades, reflecting healthy global demand. Inventories declined through the quarter." These conditions led to the price increases.

Jefferson Smurfit Group president and chief operating officer, Mr Paddy Wright, would not speculate on the out-turn in the second six months but noted that market conditions were better than they have been for a long time.

"Demand is strong, inventories are reduced, capacity growth looks modest. Conditions are as good as they have been," he said. Noting that the anticipated recovery was dependent on the price increases sticking, he stressed: "We are keeping our fingers crossed."

While the benefits from price increases will come through in the middle of the third quarter, they will not be fully felt until the last quarter. And it will be 1998 before there is any material impact.

Borrowings at JSC amounted to $2 billion at the end of the second quarter. This represented an increase of $37 million. Sales fell from $844 million to $785 million in the second quarter. The loss per share amounted to four cents, down from a loss of six cents in the first quarter. The losses are mainly attributed to the substantial drop in corrugated container prices. Asked about the recent UBS report which suggested that JSC might merge with another paper and packaging company in the US, allowing Morgan Stanley, a major shareholders in JSC, to offload some of its shares, Mr Wright said: "We don't comment on speculation." However, he added, the group would want to participate in any restructuring of the industry when it was opportune to do so.