Record results at Smurfit usher in era of consolidation

 

JEFFERSON Smurfit has produced a record set of financial results, but has warned that weakness in the final quarter of 1995 has continued into the first quarter of 1996. The £420 million pre tax profits for 1995 were the highest ever reported by an Irish company although Smurfit is facing a substantial contraction in its profits this year and next.

The results for 1995 show clearly the substantial shift in the group's business towards Continental Europe following the £683 million acquisition of Cellulose du Pin in 1993. European sales trebled from £628 million to almost £1.8 billion while profits increased from £34.6 million to £195.4 million. This reflected the acquisition of Cellulose du Pin and Papeteries de Limousin, and the substantial shareholdings acquired in the Austrian group, Nettingsdorfer and the Swedish group, Munskjo.

In the US and Canada, sales increased grew from £174.1 million to £200.8 million, while profits increased from just £13.9 million to £146.8 million. This includes Smurfit's 46 per cent share of the profits from the JS Corp associate company in the US.

In Ireland and Britain, which Smurfit treats as one unit, the group benefited from strong prices in paper and board, and a recovery in box prices. Sales were up from £517.7 million to £628.1 million with profits up from £29.1 million to £48.2 million.

Smurfit director Mr Paddy Wright declined to give a breakdown of the Irish and British operations, apart from stating that all the various operations were profitable.

Mr Wright added that Smurfit had put plans for a £50 million paper mill to be located either in the Republic or Northern Ireland "on the backburner". Smurfit had discussions with both IDA Ireland and the IDB in Northern Ireland on the project. "We haven't given up on the idea," added Mr Wright.

In the Latin American operations, sales grew from £390.3 million to £425.5 million with very strong rise in profits from £50.9 million to £80.5 million.

Smurfit said that there were "excellent results from Mexico and Venezuela, despite tough economic environments" and there were record exports from the region.

Overall, there was little in the results to cause much excitement with most of the key figures coming in close to market expectations. Most observers focused their attention on the comments on current trading, and even here there were few pointers to how the current year and next year will pan out.

Finance director, Mr Ray Curran was giving little away when he commented: "What we're looking at in 1996 is not as good as 1995 but we're certainly not, looking at a bad year."

Group sales jumped 77 per cent to just over £3 billion, while operating profits were up from £128 million to £471 million. A slightly lower than expected interest charge meant that pre tax profits were up from £119 million to £420 million with earnings per share rising from 8.4p to 28p.

Gearing rose during the year but, at 40 per cent, is still comfortable.

Smurfit's move from a low yielding company to one which rewards its shareholders more generously continued and there is a 32 per cent rise in the final dividend to 2.6p, bringing the total dividend to 4p, a rise of 50 per cent on last year.