Jefferson sees profits jump 464 per cent

Jefferson Smurfit, the world's biggest paper-based packaging group, yesterday said it was looking forward to a period of sustained growth after restructuring its US operations to cope with overcapacity in cardboard boxes and weak demand.

Jefferson Smurfit, the world's biggest paper-based packaging group, yesterday said it was looking forward to a period of sustained growth after restructuring its US operations to cope with overcapacity in cardboard boxes and weak demand.

The Dublin-based company unveiled a 464 per cent leap in first half profits, boosted by a turnaround at the group's US associate, Smurfit-Stone Container Corporation. Gary McGann, Jefferson's president and chief operating officer, said: "The quality and sustainability of the business is continuing to improve. We think that the structure of the containerboard industry is generally becoming more stable." The board is used to make cardboard packaging.

Pre-tax profit before exceptional items was 186.1m euros (£111.66m) in the six months to 30 June, compared with 33m euros the previous year. Net turnover rose 31 per cent to 2.2bn. The improvements came after Jefferson drastically reduced capacity in the US to help combat weak demand and stabilise prices. The group also benefited from "buoyant" market conditions in Europe and a recovery in Latin America.

Lars Kjellberg, an analyst at Credit Suisse First Boston, said: "Things look positive for the near-term outlook. The only worry is that there is a lag in seeing paper price increases translate to box price rises in the UK and Europe." Mr Kjellberg said that whilst Jefferson's strategy of driving efficiencies in the US had paid off, the group should now be looking to make further acquisitions. He said: "They have to embark on somewhat more aggressive growth, particularly in Europe." But Mr McGann said: "Clearly consolidation is not a panacea in its own right. What has been important is successful rationalisation on the back of consolidation."

Jefferson shares closed down 5p at 131.5p.