Smurfit Stone shares regain some after hitting 10-year low

Oct 09, 2008 (Chicago Tribune - McClatchy-Tribune Information Services via COMTEX) -- SSCC | Quote | Chart | News | PowerRating -- Shares of Smurfit-Stone Container Corp., which tumbled yesterday to the lowest point in the forest-products company's 10-year history, have moved up smartly today after officials reassured investors about the debt-heavy company's access to credit.

In early-afternoon Nasdaq trading, Smurfit-Stone shares were up 34 cents, or 13 percent at $2.91. Even after that rebound, however, the stock of the nation's leading cardboard-box manufacturer is down 76 percent from its year-ago price of $12.10.

Smurfit-Stone was formed in late 1998 when Jefferson Smurfit Corp. of St. Louis acquired its heavily-leveraged industry rival, Stone Container Corp of Chicago. The company has wrestled with turbulent conditions in the packaging sector, which has been hit by higher energy and raw-material prices, and by the longterm decline in the U.S. manufacturing: as more and more production moves offshore, stateside producers need fewer cardboard boxes to ship their goods -- weakening U.S. demand for Smurfit- Stone's product.

Smurfit has adapted to the changes (and lowered its debt load somewhat) by selling assets, cutting its workforce and closing plants to help eliminate the excess capacity that holds down industry pricing. Despite such efforts, however, the company still had $3.56 billion in longterm debt as of June 30, and its interest payments are a hefty corporate expense.

On Wednesday, investors grew increasingly concerned about the company's ability to stay current, and to refinance debt that is slated to come due; the result was a 21 percent drop that sent Smurfit shares to $2.57.

Following the market's close, however, Smurfit issued a statement in which it reaffirmed its financial flexibility in ths period of "uncertain economic conditions."

"We are in compliance with all financial covenants in our credit facilities and presently expect to remain in compliance into the fourth quarter of 2009," said Chairman and Chief Executive Officer Patrick J. Moore. Smurfit's revolving-credit facility expires on Nov. 1, 2009.

Smurfit also disclosed Wednesday evening that Canadian tax authorities, who have been examining the company's tax returns for the years 1999 through 2005 in connection with Smurfit's purchase of a Canadian company, have decided to resolve the issue in Smufit-Stone's favor.

As a result of that decision, the Chicago company said, Smurfit-Stone will record a third-quarter income-tax benefit of about $84 million, which will help per-share earnings by 33 cents.

jpmiller@tribune.com

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