Smurfit tip proves on the money as company pushes price per ton

Current Account is accustomed to analysts and economists getting carried away with their own hyperbole - after all where would the State be if Kevin Gardiner hadn't coined the appalling "Celtic Tiger" phrase all of four years ago.

But how Credit Lyonnais Securities analyst Christian Georges can apply the term "Darwin Revisited" to Jefferson Smurfit is a mystery. A missing link?

Still the CL man seems to have got his timing right when he told his clients just before Christmas to go buying Smurfit shares at 116p. Now Smurfit shares are trading at around 180 or just over 140p.

There is little doubt that Smurfit's US associate Smurfit Stone has taken a courageous move with its effort to impose a $50 (42) a ton rise in the linerboard price, but there are few who believe that the price rise will take effect from February 1st as SSCC has proposed. But there is now every indication that the price increase will stick from March or April after Georgia Pacific joined SSCC in announcing a $50 a ton rise. What is significant about the Georgia Pacific move is that GP is the biggest manufacturer of linerboard for the open market and seems to be reasonably confident of making the increase stick. Unlike GP, most of Smurfit Stone's linerboard output goes to its own box plants.

A $50 rise would bring the linerboard price to $380 a ton and would have a major impact on Smurfit Stone's finances. The CL report estimates that if a price of $400 a ton can be reached by 2000, it would benefit Smurfit Stone by $385 million and the Smurfit group by $40 million.

The CL analyst also gushed about what he describes as Smurfit's "refusal to succumb to the drabness that has engulfed the industry in the quest to reduce costs".

Many investors find Michael Smurfit's preoccupation with the K Club inexplicable but CL's Christian Georges has no time for such begrudgery, commenting: "The K Club in Ireland has given a sense of style attractive to managers, customers and the like, as well as being a successful investment in its own right."

Current Account is not wholly convinced about the K Club comments but he certainly agrees with Christian George's comment that Smurfit rewards "its key managers more generously than is usual in conventionally run companies".