Land sale helps boost Smurfit profits

PAPER and packaging group Jefferson Smurfit has reported quarterly profits of €20 million, helped by the sale of land in Dublin and its magazine division.

The company, which is now called JSG Funding, said profits for the three months to end June had risen by 22% on last year.

They were boosted by an €18 million gain on the sale of land adjacent to the K Club golf course, which the company owns.

It has also finalised a deal to sell its Smurfit Communications magazine publishing division to a management buyout team. It is not known how much this division will fetch, though the business is quite small.

It was embroiled in controversy two years ago when it was found to have overstated its sales figures by up to 30%.

JSG Funding said sales between April and June rose by 1% to €1.22 billion. Earnings before interest, tax, depreciation and amortisation of goodwill were 10% down at €158 million.

For the six months to end June, sales grew to €2.42 billion from €2.3bn in 2003. However, pre-tax profits fell 46% to €17 million.

The paper market has been hit in recent years by overcapacity and price cuts, but Smurfit boss Gary McGann said the results were a reasonable performance in a difficult operating environment.

"As we consistently maintain, our objective is to continue to actively manage the factors we can control which will, in time, deliver improved performance at each point of the industry cycle.

"Business conditions in Europe continue to necessitate strong, active management of the factors we can control," Mr McGann said.

Mr McGann said Smurfit was continuing to look at selling off non-core businesses. In June Smurfit said it was in talks that could lead to a sale of its Swedish speciality paper business, Munksjö, in a deal that could be worth up to €500 million.

The company said the Swiss investment bank UBS had been appointed to lead the talks.

The company said the outlook for the business was better.

It had been able to raise its prices in Europe and was seeing good growth in its Latin American business.

"The expected economic recovery should translate into an improved financial performance towards the end of the financial year. This, together with other initiatives, will enhance our stated financial priority of progressive debt paydown," Mr McGann said.

Smurfit was taken over by US private equity group Madison Dearborn for nearly €3 billion more than two years ago. That deal was backed by the Smurfit family and some of senior executives, including Mr McGann.

Since the takeover, the company has been addled with substantial debts and has made a number of disposals of non-core businesses.