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| This Week in Paper by Joe Masters (MF Master) Charleston, SC (Mar. 7, 1997) -- Just as Alan Greenspan's words soured the market last week, this week his words were sweet. This, in combination with some favorable economic figures, created a stir on Wall Street with both the Dow and the S&P 500 indices rising by 1.79%. Gains in the paper/forest sector were not quite as impressive, but still very respectable, with our index rising 0.75% on the week. Leading the charge, rebounding from last week's unexplainable selloff, was JEFFERSON-SMURFIT <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: JJSC)") else Response.Write("(Nasdaq: JJSC)") end if %>, up 8.26%. Also on the forefront were FORT HOWARD <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: FORT)") else Response.Write("(Nasdaq: FORT)") end if %>, rising 6.72%, CONSOLIDATED PAPER <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CDP)") else Response.Write("(NYSE: CDP)") end if %>, gaining 4.44%, and GAYLORD CONTAINER <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: GCR)") else Response.Write("(AMEX: GCR)") end if %>, up 3.92%. The losers column was led by WILLAMETTE INDUSTRIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WLL)") else Response.Write("(NYSE: WLL)") end if %>, down 4.88%, WESTVACO <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: W)") else Response.Write("(NYSE: W)") end if %>, dropping 3.39% and BOWATER <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BOW)") else Response.Write("(NYSE: BOW)") end if %>, losing 1.77%. Of our 20 index stocks there were 11 advances, 8 declines and 1 unchanged this week. Taking a quick peek at the year thus far, we see that our paper/forest index has risen by 4.72%, compared with gains of 8.57% for the Dow and 8.67% for the S&P500. Leading our group of 20 are Fort Howard, up 14.67%, KIMBERLY-CLARK <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: KMB)") else Response.Write("(NYSE: KMB)") end if %>, gaining 11.81% and Bowater, tacking on 10.63%. Bringing up the rear are STONE CONTAINER <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: STO)") else Response.Write("(NYSE: STO)") end if %>, down 12.61%, Willamette Industries, off 12.57% and Jefferson-Smurfit, declining 8.17%. Kimberly-Clark has influenced the performance of our capitalization-weighted index the most. Discounting the gain in this stock, our index would have been up only 1.81% so far this year. All the News that's Fit to Print: On Monday, Suomen Optioporssi, a Finnish options exchange, put the value of northern bleached softwood pulp at $539.34 per ton, down from $540.85 last week. In February, the PIX mean was $546.59, down from $556.86 in January and $559.05 in December. Also Monday, AVENOR INC. (AVR.TO) lowered its all-stock offer for financially troubled REPAP ENTERPRISES INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: RPAPF, RPP.TO)") else Response.Write("(Nasdaq: RPAPF, RPP.TO)") end if %> after Avenor shareholders complained the original C$3.3 billion ($2.4 billion) bid was too high. The two Montreal-based pulp and paper companies said their boards agreed to the amended offer, under which Avenor is offering one newly issued share of Avenor for every eight shares of Repap. Avenor's original bid, made Dec. 18, offered one Avenor share for every 4.25 shares of Repap. Under the original offer, Avenor also planned to assume Repap's C$2.4 billion ($1.78 billion) of debt. But Repap's operations in the west coast province of British Columbia, which carried C$480 million ($355 million) of debt, will be exluded from the revised offer. Avenor shareholders will vote on the new offer on March 26. Avenor's stock will be listed on the NYSE sometime in the near future. On Tuesday, FIBREBOARD CORP <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FBD)") else Response.Write("(NYSE: FBD)") end if %> said it has agreed to purchase Fabwel Inc. for about $120 million, adding that the acquisition is expected to contribute $.20-$.30 a share for the remainder of 1997. Fibreboard said the expected incremental contribution of this acquisition on an annualized basis is $.30-$.40 per share. Privately-held Fabwel, headquartered in Elkhart, Indiana, is a major producer and supplier of customized exterior components for the manufactured housing, recreational vehicle, building and construction, and transportation/cargo industries with annual revenues of approximately $200 million. The substantial addition of Fabwel increases the size of Fibreboard's annual revenues by approximately 40%. Also Tuesday, SCOTT PAPER LTD. (SPL.TO) said it entered into an agreement with Kruger Inc. and a subsidiary of Kimberly-Clark Corp whereby Kruger would acquire 100% of the outstanding common shares of Scott for consideration of over C$351 million, or C$23 a share. Scott said Kruger will be assuming, on a consolidated basis, Scott's debt of about C$100 million for a total enterprise price to Kruger of about C$450 million. The C$23 value is comprised of C$15.50 in cash and C$7.50 principal amount of 10-year 10-percent senior subordinated notes. A shareholders meeting will be held as soon as possible and no later than May 31 to vote on the deal, which is to be implemented by way of a statutory court-approved arrangement. Scott said in August it would seek a buyer for the entire company, following the news earlier in the year that Kimberly-Clark planned to sell its 50.1% stake in Scott. On Wednesday, Fidelity Management & Research Co. (FMR) said certain open-end investment companies, of which it serves as investment manager, have in public transactions purchased Scott Paper common stock. Fidelity said it now holds 10.38% of Scott Paper's common shares. In addition on Tuesday, UPM-KYMMENE (UPM1V.HE) said it hopes to raise fine paper and LWC prices in the first quarter. Economic growth was expected to increase gradually in Europe, the company's main market, and this would increase paper consumption, UPM said. On Friday, HONEYWELL INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HON)") else Response.Write("(NYSE: HON)") end if %> said it completed its previously announced acquisition of MEASUREX CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MX)") else Response.Write("(NYSE: MX)") end if %>. Honeywell's existing pulp-and-paper business will be merged into Measurex, based in Cupertino, California, and the new business will be renamed Honeywell-Measurex. Also Friday, BADGER PAPER MILLS INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq:VBPMI)") else Response.Write("(Nasdaq:VBPMI)") end if %> announced preliminary results for the year ending Dec. 31, 1996, compared to the same period in 1995. Net sales for the year totaled $76,276,000 compared to $92,648,000 reported in 1995. A net loss of $2,212,000, or $1.14 per share for the year ending Dec. 31, 1996, compares to net income of $2,748,000, or $1.41 per share for the same period in 1995. For the fourth quarter ended Dec. 31, 1996, net sales totaled $17,586,000 compared to $21,748,000 reported a year earlier. A net loss of $811,000, or $.42 a share, for the fourth quarter of 1996, compares to net earnings reported for the fourth quarter of 1995 of $350,000 or $4.18 a share. Though inventories for newsprint traditionally increase during the month of January, the 15.8% rise in mill inventories (to 603,000 tons) and 5.8% rise in publisher inventories (to 965,000 tons, or 39 days of supply) doesn't bode well for producers who are trying to secure a price increase within the next month. February figures have not yet been published but will be a determining factor. "Model Portfolio" Update: Consolidated Paper was continuing on a roll after being upgraded by Morgan Stanley last week. Brighter prospects for coated paper also probably helped the stock since this grade is Consolidated's forte. Speaking of FORT, tissue/towel maker Fort Howard was also on a roll this week after an equally spectacular performance the week prior.
Purchase: IP = $40.50, FORT = $27.69, CDP = $49.13, CSAR = $29.00
This Week: Year-to-Date: Model = + 2.76 % Model = + 18.37 % SP500 = + 1.79 % SP500 = + 8.67 % FSPFX = + 0.65 % FSPFX = + 1.92 %
Commentary: As I sit here hunched over my computer, thoughts come to mind of the long-range future of the paper industry as it attempts to compete with this electronic medium. Of course, certain grades such as tissue and containerboard will be largely unaffected as the world becomes more networked. People will still need to wipe their noses and will still purchase packaged goods. However; what about newsprint, stationery, book stock, uncoated advertising material and coated report cover stock? Will these grades be replaced by the Internet and e-mail? Will we become a society of Jetsons? When computers started to become generally accepted, I recall statistics showing an increase in the quantity of paper consumed which was directly attributable to this event since most users generated hardcopies of the information shown on their screens. Current statistics suggest this is still the case. In the future, though, increased sophistication could lead to decreased consumption. We here represent the future, whether we are reading this article over the AOL network or from the Internet. In that light, I would like to pose the question to you, our readers and our future. Do you find your usage of paper is less or more since you have been computerized, and where would you see this trend going in the future? Thoughtful responses to MF Master will be published, with your permission, in a coming edition of the weekly Paper/Forest article. Keep them presses rolling !!! |
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