Investment: Smurfit shows how to survive

ALL THINGS being equal, yesterday's results from Jefferson Smurfit, the Dublin-based packaging group, were impressive. Unfortunately, upsets such as Asia and the rouble crisis mean all is not equal.

For years, the packaging industry has suffered from over- capacity. The problem has been aggravated by US firms building further paper and packaging mills, endangering the whole industry with weaker prices.

That has caused markets to trade packaging companies at a heavy discount. Smurfit has gone the other way, building profits by buying competitors and even closing mills (one example being the current merger of its US operations with Stone Container Corp).

At last packaging firms in the US and elsewhere have begun to follow suit. Alas, says Smurfit, it may be too late. The Asian crisis has reduced orders from US rivals for packaging materials such as kraftline, depressing world prices. Demand for linerboard has also fallen. In the UK, exports of packaged goods have dwindled against imports because of the exchange rate, which disadvantages Smurfit.

On the positive side, the group enjoyed a 55 per cent jump in first-half profits on the back of surging demand in Europe. Food and drink companies, more than half of Smurfit's customer base, have benefited from a jump in consumer spending. That had handsome knock-on effects. Smurfit also boosted profits by increasing its stake in Nettingsdorfer, a packaging group based in eastern Europe.

Consensus forecasts put Smurfit's full-year 1998 earnings at about Irpounds 13.5p per share. But in the light of its comments on Asia, that now looks optimistic. A more realistic figure is Irpounds 11.9p. That gives a forward multiple of 11 times yesterday's closing price of 114p, up 1.5p. Smurfit shares have halved in value in the past few months. But in the current uncertain climate, they are high enough.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Graduate Recruitment Resourcer

£20000 per annum + commission: SThree: Sthree have an exciting opportunity for...

Recruitment Genius: Telesales Executive - OTE £32,000+

£18000 - £32000 per annum: Recruitment Genius: A Telesales Executive is requir...

Ashdown Group: Marketing Manager - B2B, Corporate - City, London

£45000 - £50000 per annum + benefits : Ashdown Group: A highly successful, glo...

Neil Pavier: Commercial Analyst

£50,000 - £55,000: Neil Pavier: Are you a professionally qualified commercial ...

Day In a Page

General Election 2015: The masterminds behind the scenes

The masterminds behind the election

How do you get your party leader to embrace a message and then stick to it? By employing these people
Machine Gun America: The amusement park where teenagers go to shoot a huge range of automatic weapons

Machine Gun America

The amusement park where teenagers go to shoot a huge range of automatic weapons
The ethics of pet food: Why are we are so selective in how we show animals our love?

The ethics of pet food

Why are we are so selective in how we show animals our love?
How Tansy Davies turned 9/11 into her opera 'Between Worlds'

How a composer turned 9/11 into her opera 'Between Worlds'

Tansy Davies makes her operatic debut with a work about the attack on the Twin Towers. Despite the topic, she says it is a life-affirming piece
11 best bedside tables

11 best bedside tables

It could be the first thing you see in the morning, so make it work for you. We find night stands, tables and cabinets to wake up to
Italy vs England player ratings: Did Andros Townsend's goal see him beat Harry Kane and Wayne Rooney to top marks?

Italy vs England player ratings

Did Townsend's goal see him beat Kane and Rooney to top marks?
Danny Higginbotham: An underdog's tale of making the most of it

An underdog's tale of making the most of it

Danny Higginbotham on being let go by Manchester United, annoying Gordon Strachan, utilising his talents to the full at Stoke and plunging into the world of analysis
Audley Harrison's abusers forget the debt he's due, but Errol Christie will always remember what he owes the police

Steve Bunce: Inside Boxing

Audley Harrison's abusers forget the debt he's due, but Errol Christie will always remember what he owes the police
No postcode? No vote

Floating voters

How living on a houseboat meant I didn't officially 'exist'
Louis Theroux's affable Englishman routine begins to wear thin

By Reason of Insanity

Louis Theroux's affable Englishman routine begins to wear thin
Power dressing is back – but no shoulderpads!

Power dressing is back

But banish all thoughts of Eighties shoulderpads
Spanish stone-age cave paintings 'under threat' after being re-opened to the public

Spanish stone-age cave paintings in Altamira 'under threat'

Caves were re-opened to the public
'I was the bookies’ favourite to be first to leave the Cabinet'

Vince Cable interview

'I was the bookies’ favourite to be first to leave the Cabinet'
Election 2015: How many of the Government's coalition agreement promises have been kept?

Promises, promises

But how many coalition agreement pledges have been kept?
The Gaza fisherman who built his own reef - and was shot dead there by an Israeli gunboat

The death of a Gaza fisherman

He built his own reef, and was fatally shot there by an Israeli gunboat