Smurfit Stone Container Corporation, the US company 33 per cent owned by the Jefferson Smurfit group, expects its operating results this year to benefit from forecast increases in product prices. But debt reduction remains a priority for the paper and packaging group, which has reported improved first-quarter profits despite rising debt levels during the period.
The sell-off of non-strategic assets continues with an agreement after the end of the quarter to sell its Port Wentworth pulp facility for $63 million (€68 million). The net cash proceeds will be used to pay down debt. A deal to transfer its last newsprint mill to a group of investors, management and mill employees is close to completion.
Benefiting from a $50 per tonne liner-board price increase during the period, the group has reported first-quarter profits after tax from continuing operations of $40 million or 18 cents per share, a turnaround from a loss of $92 million or 43 cents per share for the corresponding quarter last year. Earnings per share were reduced by restructuring charges costing $6 million or 2 cents per share. President and chief executive officer Mr Ray Curran said the results reflected "the substantial progress made over the past year".
Net sales were 9.4 per cent ahead at $1.87 billion. Since the first quarter of 1999, the group has made debt repayments of $1.6 billion, reduced quarterly interest costs by $32 million, implemented efficiencies at its mills and achieved annualised cost savings of $350 million through synergies, he said.
Demand for corrugated containers, folding cartons and industrial bags increased, particularly towards the end of the quarter, said Mr Curran.
Despite the debt repayment, group debt increased by $98 million to $4.9 billion. Mr Curran attributed this to "a temporary increase" in working capital requirements and a $123 million payment to resolve bankruptcy reorganisation at Florida Coast Paper. The increase in working capital arose because of higher recycled fibre and container-board costs without any offsetting rise in container-board prices. The company took downtime at its container-board mills to adjust inventories and reduce working capital, he said.
On the outlook for the rest of the year, Mr Curran said: "Demand for recycled fibre continues to be strong, particularly in export markets. As a consequence we expect prices to remain firm. We also expect continued improvement in prices in containers, folding cartons and other packaging products. In addition with most of the first year restructuring behind us and the expected completion of the St Laurent transaction we can intensify our focus on delivering greater value to our packaging customers and improving our operating performance."
