Full-year results ahead of market forecasts have helped to boost demand for shares in packaging group Jefferson Smurfit, although analysts have warned that the group is facing another difficult year.
Smurfit shares rose as high as €2.58 before closing just two cents higher on €2.48.
Pre-tax profits fell 20 per cent to €386 million (£304 million) but this was significantly better than Dublin analysts' profit forecasts of €340-€350 million. Earnings per share were also 20 per cent lower on 20.5 cents. Analysts had been expecting earnings for the year as low as 15 cents, so the figures gave Smurfit's long-suffering shareholder some badly-needed cheer. The final dividend was 4.662 cents, bringing the total payout to 7.287 cents.
At the operating level, profits were down fractionally from €342 million to €334 million and it was the slump in profits at the 33-per cent owned Smurfit Stone Container Corp that did most damage to the group results. Smurfit did, however, benefit to the tune of about two cents a share from once-off items. If these are excluded, the fall in earnings per share is closer to 27 per cent rather than the reported 20 per cent.
Merrion analyst Mr John Mattimoe said the results showed a marked contrast between the group's subsidiaries, which are performing reasonably well, and Smurfit Stone. He suggested the disparity between the performance of Smurfit Stone and the group subsidiaries increased the prospect of some major corporate move involving Smurfit and its US associate.
Mr Mattimoe said Smurfit could either consider merging with Smurfit Stone or it could even consider selling the 33 per cent stake in the company. This would highlight the relative undervaluation of Smurfit against Smurfit Stone, he said, adding that some corporate move involving the two entities was likely in the current year. "The Munskjo bid is part of a strategy of simplifying the group structure," said Mr Mattimoe.
In Europe, Smurfit's sales fell fractionally to just over €3 billion but profit before interest, tax and depreciation rose from €279 million to €292 million. The European containerboard industry continued to benefit from lower US exports - US linerboard exports have fallen 50 per cent since 1997, mainly because of the strength of the dollar against the euro. Latin America also performed well for Smurfit, with sales up 6 per cent to €834 million, while profits before interest, tax and depreciation rose 35 per cent to €127 million. Trading in Latin America benefited from a once-off gain in Mexico, equivalent to 2 cents per share.
The wholly-owned North American operations produced sales of €666 million, a fall of 9 per cent, with profits down 47 per cent to €208 million. Smurfit Stone profits are included in the overall North American profit figure.
Interest charges for the year were $86 million, a fall of €14 million from 2000 and about €10 million lower than analysts had expected. Net debt was €53 million lower at €1.11 billion, and the balance sheet is in good shape with gearing of 42 per cent (down from 47 per cent) and interest covered 4.5 times by operating profits compared to interest cover of 3.6 at end-2000.
