Despite producing a set of results for 2001 which comfortably beat market expectations, analysts expect another difficult year for packaging group Jefferson Smurfit, mainly due to the continued weakness of its American operations.

While newly-appointed chief executive Mr Gary McGann said "we believe that the prospect of a second-quarter recovery is best case and not base case", analysts in Dublin warned that, even if there was an early recovery in the US economy, it could be some time before this feeds through to the manufacturing sector on which Smurfit and its Smurfit Stone Container Corp associate depends. "We might get a V-shape recovery in the economy but this doesn't mean there will be a V-shape recovery in manufacturing," said Goodbody analyst Mr Liam Igoe who expects to increase his 2002 earnings forecast of 12.6 cents by no more than one or two cents.

In the US last year, demand for corrugated packaging suffered its worst decline since the oil crisis of the mid-1970s. This means the industry has been in decline for two consecutive years.

Smurfit also warned that the US industry would have to learn to live with a strong dollar and stated that American producers were becoming less competitive. "It is increasingly probable that Asia will produce for Asia. Europe for Europe and the Americas for the Americas," said Mr McGann, who said that American packaging exports to Europe had fallen 50 per cent since 1997. "US tonnage is today, quite simply, less competitive in an international context."

The weakness in the US operations is reflected in the dramatic fall in pre-tax profits at Smurfit Stone, where Smurfit has a 33 per cent stake. Profits at Smurfit Stone last year fell from $434 million (€498 million) to $192 million, partly due to the economic slowdown but also because of higher energy costs and declining containerboard prices.