Smurfit set to recover despite 27% setback

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JEFFERSON SMURFIT, the Irish packaging group run by industrialist Michael Smurfit, said it was poised for recovery despite a 27 per cent drop in profits. Although pre- tax profits fell from Ir pounds 66m ( pounds 65.3m) to Ir pounds 48m in the year to 31 January, the group raised its dividend 10 per cent to 4p.

Ray Curran, chief financial officer, said: 'Last year was the nadir. We have reached the end of a long and gruelling cycle.' Prices had moved up during the past few months after five years of decline.

The group also completed the recapitalisation of its US associate, Jefferson Smurfit Corporation, yesterday through the listing of a 17.4 per cent stake in New York, a dollars 150m ( pounds 103m) investment, and new bond issues.

Group turnover rose 17 per cent to Ir pounds 1.5bn, largely a result of fully consolidating two UK businesses previously treated as associates. The consolidation also added Ir pounds 1m to pre-tax profits. Profits in Ireland and the UK rose to Ir pounds 28m from Ir pounds 25m, but other areas produced weaker results than in the previous year. Continental profits slid from Ir pounds 21m to Ir pounds 8m, mainly because of fierce competition in the corrugated board market in Spain and Italy.

In the US and Canada losses climbed from Ir pounds 1m to Ir pounds 15m. Mr Curran said: 'Overcapacity in that market meant that it suffered from suicidal pricing.' US demand had revived since the year-end, with the container board industry operating at 97 per cent capacity.

Latin America made the biggest contribution to profits, though at Ir pounds 54m they were down 14 per cent.

John Clarke, an analyst at Dublin broker Riada, said: 'One of the most important features was the Latin American contribution holding up despite political instability and slow economic growth.'

The shares rose 1p to 313p.