Higher paper prices helped Smurfit-Stone Container Corporation produce a strong improvement in profits for the three months to end September. But cutting its mill output will curtail growth in the current quarter.

Smurfit-Stone shares rose about 7 per cent to just $11 1/2 after third quarter results in line with market expectations. The US firm is 33 per cent owned by the Jefferson Smurfit Group.

Profits after tax and extraordinary charges rose to $79 million (€94.45 million) from a loss of $16 million in the corresponding quarter of 1999. Earnings per share improved to 32 cents from a loss of seven cents.

President and chief executive Mr Ray Curran said the latest results reflected year-over-year product price increases for containerboard, market pulp and packaging, synergy savings and improved efficiencies in its mills.

An improved performance on second quarter earnings per share of 24 cents reflected firm prices for packaging, reduced recycled fibre costs, efficiency improvements and the inclusion of the St Laurent acquisition, he said.

But he warned that growth was more difficult in the current quarter. "We must continue to manage inventory and working capital by curtailing mill production indefinitely. We may see little sequential improvement in fourth quarter performance as a result," he said. Production cutbacks to control inventory levels in the current quarter are not unexpected. But analysts said the most important issue for the company this quarter would be the behaviour of paper prices.

ABN Amro analyst Mr John Clarke said that while the fourth quarter outcome would be flat on quarter three he was not adjusting his full-year forecasts for the Jefferson Smurfit Group.

Lower growth would be offset by the positive impact of translating Smurfit-Stone dollar earnings into Irish pounds, he said.

Net sales for the three months at $2.2 billion were 25 per cent up on the third quarter of 1999 while costs were 18 per cent higher at $1.96 billion. Over the nine month period net sales were 20 per cent ahead at $6.3 billion while costs were 12 per cent higher at $6.6 billion.

During the quarter the firm repaid debts of $223 million reducing its outstanding debt to $5.5 billion at the end of September. "Debt reduction remains our top financial priority, and our goal is to bring total debt down to about $5.3 billion by year's end," he said.