JEFFERSON Smurfit Corporation, the US associate company of the Jefferson Smurfit Group, is carrying out a major strategic review of its operations which could lead to the sale of its newsprint business and its forests.

The review of the company's portfolio and direction could lead to asset sales of up to $1.4 billion (£927 million), according to a leading US paper industry analyst. It is being led by Mr Dick Graham, the chief executive of the St Louis based company which is 46.5 per cent owned by the Jefferson Smurfit Group.

Confirming that a strategic review was underway, a company spokesman said the main thrust "is to get the maximum value out of the resources we own". It would be "premature" to talk about asset sales, he said.

"No decision has been taken on the sale of anything," he said, adding that the review should be completed by the autumn.

J S Corp is looking at ways to market products and services across divisions and to make the company "a one stop shop" for major customers. Part of the review process is an full examination of all the assets and businesses the company owns. "We are asking what are our core businesses for the future," the spokesman said. He declined to comment on what business might not fit the core profile of the future.

The review appeared to be aimed at achieving better utilisation of the company's assets and deciding whether the current mix of businesses was appropriate, according to US paper analyst, Mr Richard Schneider.

J S Corp's review of its portfolio could result in a decision to sell its newsprint business, he said, valuing the operation at around $650 million. Another asset which could be put on the market was the company's timberland base, with an estimated value of $800 million. But the Paine Webber analyst considered the sale of the forests less likely.

The proceeds of any sales could be used to make strategic acquisitions in the packaging market, he said.

The examination of asset utilisation would concentrate on positioning J S Corp as a "value added" packaging company, according to Mr Schneider. J S Corp produces corrugated containers, folding cartons and labels.

While the company's decentralised structure has been a strength in the past, Mr Schneider said the drawback of this structure was that three salespeople could call to sell to each account. The company could restructure so that one salesperson, representing all three products, called on each account, he said.

Such a restructuring could eventually generate more customers for the company's contract packaging business. It could lead to new related business such as taking over the packaging design or the entire packaging function for client companies, according to Mr Schneider.

This approach would boost company returns through more efficient use of assets and it would reduce the cyclical nature of business by forging more value added relationships with customers, he said.

"As part of this approach, J S Corp is upgrading its printing capability, moving the company into the more high value graphic market. Over the next two years $57 million will be spent in this direction. Also, it appears that the company's label capacity would be expanded. However, much of the overall effort does not involve spending capital. It involves retraining, marketing he said.

In difficult US markets, earnings at J S Corp have been under pressure. In April, the company reported worse than expected first quarter results with a loss of six cents a share, down from earnings of 4.8 cents in the previous period. The company blamed "negative pricing trends in corrugated containers" for the slump.

In May the executive vice president and chief operating officer of J S Corp, Mr Eric Priestley left the company because of disagreements with Mr Graham about his roles and responsibilities.

Earnings in the sector remain under pressure, according to Mr Schneider. He has forecast a loss per share of 11 cents for the current quarter compared with earnings per share of 24 cents in the corresponding quarter of 1996. Box prices would be $30 a ton lower on average than in the first quarter, he forecast. But he suggested that box prices had now stabilised and the next move should be upwards.

Mr Schnieder has rated J S Corp as "attractive, with its market beginning to turn".