JEFFERSON Smurfit shares came under selling pressure in Dublin and London after negative comments on current trading by chairman and chief executive Dr Michael Smurfit.
At yesterday's a.g.m. Dr Smurfit said weak economies in Europe in the first half of the year had led to a fall off in product prices. And the demand for products in the US in the first quarter had been weak, with most product prices showing sharp declines.
Profits held up well in Latin American operations despite low demand and low prices. In Ireland and Britain, results were mixed but the/group was looking ahead to a butter second half of the year, he said.
In London, over 800,000 Smurfit shares traded after the chairman's statement. The shares fell initially from an overnight price of 171p sterling to a low of 162p sterling before recovering to close down 4p on the day at 167p sterling.
In Dublin price movement was less dramatic. The shares closed down 1p on 163p but they were well offered at that level.
Dr Smurfit said there were indications that the worst may be behind the group, although he cautioned. "It is too early to make any real judgment. This cycle of late 1994 to mid 1996 has been one of unparalleled volatility for the world's paper and pulp industry.
"Due to the large market positions which we now hold, we are unable to buck the trends to the extent that we when we were a smaller.
Analysts in Dublin said they would be cutting their current profits and earnings forecast for the group. Riada analyst Mr John Clarke has cut his 1996 profits forecast from £250 million to £211 million.
If this proves to be accurate, it will mean Smurfit profits this year will be half of last year's record £420 million. Mr Clarke has cut his 1996 earnings per share forecast from 16p to 13.5p. Davy is reviewing its forecasts.
At the a.g.m. yesterday, Dr Smurfit told shareholders that he intended to retain the roles of chairman and chief executive. "I'll be here for a long time, so get used to it," he said.
The chairman of the group compensation committee, Mr Tom Reynolds, told shareholders about group policy on director remuneration, insisting that the group takes corporate governance seriously. "It is an evolving situation," he said.
He confirmed that the group had reached a "compromise" with fund managers on the long term bonus for Dr Smurfit.
The initial scheme tied the bonus to growth in total shareholder value. The new terms add conditions about profit performance in relation to the group's peers in the paper and packaging industry.
