JEFFERSON Smurfit Corporation, the US company which is 46.5 per cent owned by the Jefferson Smurfit Group, is expected to announce break even or a small loss for the first quarter of 1997.
In very difficult US market conditions, consensus forecasts on the results due on Thursday indicate a loss of 3 cents per share. Forecasts from US analysts range from a earnings of 4 cents per share to losses of 7 cents per share.
JSC reported earnings per share of 48 cents for the corresponding quarter of 1995. The company last reported a quarterly loss in the second quarter of 1994.
Excess production in the US linerboard market has resulted in very weak product prices despite good growth in demand and strong export sales. With US companies now taking downtime excess supplies are expected to be reduced by the end of the current quarter.
Industry inventory figures for March due next week are not expected to show reductions in stocks because most manufacturers have only recently started to take downtime, while others have just announced their intention to do so.
However, monthly figures for April due in May should show stocks falling. Figures for May, due on June 15th, are expected to give the first real confirmation that manufacturers are dealing with the inventory problem.
JSC is taking about 28,000 tons out of production through scheduled maintenance downtime at its Fernandina mill in Florida. Other large industry players, including Georgoia Pacific, Stone Containers and Tenneco Packaging have announced downtime.
However, a June confirmation of inventory reductions would coincide with the normal seasonal fall off in demand for linerboard as corrugated plants (which buy linerboard to make boxes) close for summer holidays. Market analysts forecast that it will be September before linerboard manufactures can realistically expect to announce a crucial price increase.
The Jefferson Smurfit Group is expected to be involved in the ultimate resolution of the Morgan Stanley stake by buying some or all of Morgan Stanley's.
The key issue for the group is the timing of any move. MorganStanley is understood to be looking for about $20 per share for its stake.
While Morgan Stanley wants to get the best price for its stake, the Jefferson Smurfit Group will want to be convinced that the industry is at, or close to, the bottom of its cyclical downturn and that the US market is receptive to any attempt to raise funds through a share issue or the floating off of a division of JSC.
An acquisition would require the consolidation of the heavily indebted JSC - its has debts of nearly $2 billion - into group accounts, so any deal will involve moves to reduce JSC's net debts.
