The Jefferson Smurfit Group has warned that sustainable recovery in the paper and packaging industry has been deferred by the Asian crisis. Reporting a 55 per cent rise in pre-tax profits to £94.7 million for the six months to the end of June, chairman Dr Michael Smurfit warned yesterday that the immediate prospects for the industry had deteriorated due to "general economic problems".

Commenting on the trading outlook, he said: "Estimates of global GDP [gross domestic product] have been reduced. The combination of a reduction in exports, an increase in imports and a reduction in US demand growth represents a decrease in total demand for the industry.

"As a result, product price increases announced for spring 1998 have been deferred, with list prices declining instead of rising. Expectations of earnings growth for 1998 have been reduced accordingly."

While the interim results, which were in line with expectations, included profits of £4 million from the sale of operations, they reflected better product prices in that period.

But the focus has now turned to the outlook for the rest of the year with the prospect of lower product prices expected to depress profits in the current half.

Operating profits for the six months to the end of June rose by 31 per cent to £155 million on turnover which was 11 per cent ahead at £1.4 billion. Margins improved to 11.03 per cent from 9.3 per cent. Earnings per share were 55 per cent ahead at 6.2p while the interim dividend has been increased by 10 per cent to 1.815p per share. In the European division, net sales were 10 per cent higher to £1.08 billion while profits rose by 17 per cent to £91 million. But profits in Ireland fell because of weaker corrugated prices and higher paper costs though the print, carton and publishing operations performed well. Profits at the recycled paper mill were unchanged.

In a difficult British market, profits from printing and writing paper fell, containerboard profits were unchanged but print and carton operations produced better results.

In a competitive French market, profits from corrugated cases increased, profits at the Facture kraftliner mill doubled - helped by price increases and cost cuts - while the Condat mill benefited from lower raw material costs. Results from other mills in Europe improved with volume and price increases.

Nettingsdorfer in Austria produced a 73 per cent rise in first-half profits while profits at Munksjo in Sweden were up 4 per cent. In Latin America, profits were 21 per cent ahead at £27 million on sales which rose by 21 per cent to £231 million.

Mexico had a strong first half while there was a marginal increase in containerboard and corrugated profits in Venezuela but boxboard and carton profits were down.

In a depressed Colombia, profits were marginally lower and operations in Argentina were described as "profitable".

In the US, Jefferson Smurfit Corporation produced a turnaround with a profit of $42 million (£29.3 million), pushed by price improvements, against a loss of $11 million in the same period last year. But profits from reclamation, consumer packaging and industrial packaging were lower.

At the group's wholly-owned US operation, Smurfit Packaging Corporation, sales were down 1 per cent to £92 million mainly because of the disposal of its plastics operation.