Smurfit-Stone: Chairman of the Board

Because of its focus on the economically sensitive and capital-intensive packaging industry, Smurfit-Stone Container (SSCC; recent price: $13.25) has a cyclical pattern of profits. We at Standard & Poor’s Equity Research believe the company is in the early stages of a strong upswing in earnings.

We expect demand to outstrip supply for at least the next year, as linerboard manufacturers have cut capacity. At the same time, inventories in recent months have fallen to very low levels, despite a seasonal dropoff in demand. A price increase in October is now fully in place, and another one is being implemented this month. We expect Smurfit-Stone (0409.HK – news) to post a loss in the first quarter of 2006, but to regain profitability for the balance of 2006. In 2007, we anticipate profits of $1 per share.

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One strategy is to invest in high-speed corrugators in certain strategic geographic markets that are capable of producing large volumes of linerboard. This move will allow the company to eliminate 10 to 15 corrugated-container plants, and help focus its production on maximizing machine utilization.

By Stuart Benway

Full Story: http://uk.biz.yahoo.com/060124/244/g20yc.html