Smurfit-Stone Reports Q4 Loss; Widens from Same Time Last Year

CHICAGO, IL, USA—Smurfit-Stone Container Corp. reports a net loss available to common stockholders (“net loss”) of $92 million, or $.37 per diluted share, for the fourth quarter of 2003, compared to a net loss of $15 million, or $.06 per diluted share, for the fourth quarter of 2002. Sales for the fourth quarter were $1.9 billion, roughly flat with sales in the fourth quarter of 2002. For the full year 2003, the company reported a net loss of $208 million, or $.85 per diluted share, compared to net income available to common stockholders of $54 million, or $.22 per diluted share, in 2002. Sales for the full year were $7.7 billion, compared to $7.5 billion in 2002.

Fourth quarter results include a pretax restructuring charge of $107 million, or $.27 per diluted share, related to previously announced rationalization and cost reduction initiatives. The rationalization process will result in a total workforce reduction of approximately 1,400 employees and projected savings of $140 million on an annualized basis.

Fourth quarter results also include a pretax charge of $12 million, or $.03 per diluted share, for a non-cash foreign currency translation loss related to the strengthening of the Canadian dollar.

Says Smurfit-Stone chair, president and CEO Patrick J. Moore, “Although board and packaging prices continued to trend downward, demand for packaging improved compared to the third quarter. In what is seasonally a softer period, the company’s U.S. corrugated shipments improved 1.7 percent on a per day basis, compared to the third quarter.”

According to SSCC, shipments were flat compared to the year-ago quarter. The company’s operating rate for the containerboard mills was 88.5 percent, an improvement from the third quarter rate of 85.9 percent. In the fourth quarter, U.S. corrugated container prices declined 1.2 percent, and linerboard prices declined 1.5 percent, compared to the third quarter.

In the consumer packaging business, operating profits declined compared to the third quarter of 2003, and fourth quarter of 2002. Both major businesses—folding carton and multiwall bag—contended with price pressures in the quarter. In addition, higher employee benefit and energy costs, and boxboard mill downtime, had a negative effect on earnings versus the prior year. Folding carton volume rose 1.8 percent and multiwall bag volumes increased 3.1 percent as compared to the fourth quarter of 2002.

The company’s energy costs in the fourth quarter remained relatively flat sequentially, but were up $3 million compared to the year-ago quarter. For all of 2003, energy costs were up by $69 million over 2002 levels, driven largely by higher natural gas pricing.

Interest expense was $85 million in the quarter: flat sequentially, but down $3 million from the year-ago quarter. For the year, interest expense was $341 million, down $14 million from the prior year, primarily due to lower interest rates and refinancing activities. Capital spending in the fourth quarter of 2003 was $55 million, compared with $41 million in the third quarter and $64 million in the fourth quarter of 2002. Total debt at the end of 2003 was $4,807 million, down $20 million compared to the end of the third quarter, and down $195 million compared to year end 2002.

Reflecting on the year, Moore reports, “Despite a difficult climate in 2003, we completed transactions to focus the company on the North American paper-based packaging market. We introduced a number of crucial cost-cutting initiatives and began taking additional steps to rebuild market share and shift marketing resources to more lucrative, value-added segments."

He continues, "As we enter 2004, we continue to contend with escalated energy costs and higher employee benefit expenses. In addition, we anticipate higher recycled fiber costs. However, we are encouraged by signs of economic recovery and a better outlook for manufacturing, which should lead to improved demand for packaging.

“While containerboard and corrugated container pricing will be lower in the first quarter, we recently communicated price increases to our customers. These increases will be implemented in the first quarter with the full benefit realized in the second half. Our focus for 2004 will be on improving our sales, marketing, and production efforts to respond to a changing environment, achieving the benefits of cost-cutting initiatives, and maximizing cash flow to reduce debt.”

Smurfit-Stone discusses its quarterly financial performance on conference calls broadcast live and archived on its website

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