 Weekly Paper Archive
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| This Week in Paper by Joe Masters (TMF Master) A special note! Due to some necessary reorganization of our area, we will no longer have a special "page" for Paper/Forest on AOL or the Fool website. However, I am still your host for this area, and I will continue with my weekly report. Starting next week, please look for industry update reports on the Paper/Forest message boards (in the Industry & Market Analysis folder) on either AOL or the web. I will post these on a weekly basis, typically between midnight on Friday and noon on Saturday (EST). As always, I am available to answer any questions you might care to post to the message boards. Thank you, and I look forward to your participation. Pamplona, Spain (east of Charleston, SC), July 11, 1997 -- The bulls are loose in the streets! Run for your lives! By a good margin, this was the best week for the sector in the two years I have been hosting the Paper/Forest area for The Motley Fool. With a gain of 7.25% in our index, we easily eclipsed the Dow (up 0.33%) and the S&P 500 (down 0.03%) this week. Positive earnings reports and good comments regarding the sector's outlook proved to be the catalysts for the move. Clicking on all cylinders this week, only one of our index companies went south: KIMBERLY-CLARK <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: KMB)") else Response.Write("(NYSE: KMB)") end if %>, which dropped 1.52%. Leading the all-stars were: JEFFERSON SMURFIT <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: JJSC)") else Response.Write("(Nasdaq: JJSC)") end if %>, up 22.66%, INTERNATIONAL PAPER <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IP)") else Response.Write("(NYSE: IP)") end if %>, rising 13.33%, GAYLORD CONTAINER <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: GCR)") else Response.Write("(AMEX: GCR)") end if %>, tacking on 13.19%, MEAD CORPORATION <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MEA)") else Response.Write("(NYSE: MEA)") end if %>, gaining 9.87%, and WEYERHAEUSER <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WY)") else Response.Write("(NYSE: WY)") end if %>, rising 9.32%. Simply amazing! Our Paper/Forest index is now close to matching the Dow's and S&P 500's performance for the year thus far. Quite a turnaround I would say. All the News that Fits the Print: Monday - Suomen Optioporssi put the value of northern bleached softwood pulp at $572.30 per ton, up from $569.70 last week. ASIA PULP AND PAPER COMPANY LTD. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PAP)") else Response.Write("(NYSE: PAP)") end if %> said it is contemplating a secondary offering of ordinary shares either through a global offering or a rights offering to raise additional equity capital, this in conjunction with their possible secondary in the Asian market. Celucat S.A., a subsidiary of Industrias Klabin de Papel e Celulose S.A., and Kimberly-Clark Worldwide, Inc., a subsidiary of Kimberly-Clark Corporation, announced they have formed a joint venture to manufacture and sell tissue products in Argentina. The new company will be called KCK Tissue. JAMES RIVER CORPORATION <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: JR)") else Response.Write("(NYSE: JR)") end if %> announced that both James River and FORT HOWARD CORPORATION <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: FORT)") else Response.Write("(Nasdaq: FORT)") end if %> certified their substantial compliance with the U.S. Department of Justice's request for additional information and other documentary materials. James River and Fort Howard have fixed August 12, 1997, as the date for their special meetings of shareholders to approve the merger. Tuesday - International Paper reported a second quarter loss of $419 million, or $1.39 per share (after two special after-tax charges totalling $478 million, or $1.59 per share). Before the charge, earnings were $59 million, or $0.20 per share, on sales of $5.034 billion. Earnings for the first quarter were $34 million, or $0.11 per share, on net sales of $4.9 billion. For the second quarter of 1996, earnings were $99 million, or $0.33 per share, on sales of $5.093 billion. Of special interest was that International Paper stated tit plans to sell a number of non-strategic assets which the company thinks will generate over $1 billion in proceeds, and will accordingly reduce their workforce by some 9,000 positions, or about 10%. These actions should begin to be accretive to earnings starting later this year. Weyerhaeuser Co. and Nippon Paper Industries Co. agreed to restructure their North Pacific Paper Corp. (Norpac) joint venture, where Nippon will acquire a portion of Weyerhaeuser's ownership sufficient to give equal claim to both organizations. Weyerhaeuser currently owns 80%. J.P. Morgan Investment Management said it has cut its stake in FLETCHER CHALLENGE LTD. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FLP)") else Response.Write("(NYSE: FLP)") end if %> to 4.53% from 6.31%. CHAMPION INTERNATIONAL CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CHA)") else Response.Write("(NYSE: CHA)") end if %> was raised to "buy" from "hold" at Prudential Securities. RAYONIER INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: RYN)") else Response.Write("(NYSE: RYN)") end if %> said the company will invest $12 million to upgrade technology at its Jesup, Georgia, specialty pulp mill, and expects the project to be completed in late 1998. FLETCHER CHALLENGE CANADA LTD. (FCC.TO) said the unions for workers at its three British Columbia operations broke off negotiations with the company and said the workers will strike beginning July 14. According to union officials, the strike will likely last months and be very costly to the company. The three mills have capacity to produce 930,000 tons of newsprint, 730,000 tons of market pulp and 90,000 tons of containerboard per year. Wednesday - REPAP ENTERPRISES INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: RPAPF)") else Response.Write("(Nasdaq: RPAPF)") end if %> signed a letter of intent with CONSOLIDATED PAPERS INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CDP)") else Response.Write("(NYSE: CDP)") end if %> to sell its Repap USA unit, which includes Repap Wisconsin, Inc. (coated-paper operations with an annual capacity of 508,000 tons) and Repap Sales Corp. (coated paper sales and marketing services). The price negotiated was $674 million, including $433 million in net debt, $14 million in post-retirement benefits and $227 million in equity. In addition, Repap reached an agreement to sell its kraft paper and lumber operations in The Pas, Manitoba, to Tolko Industries Ltd., British Columbia for an undisclosed amount. Net proceeds from the sale, expected to be completed in the third quarter, will be used primarily to reduce liabilities. Repap says it plans to continue operating its New Brunswick coated paper, market pulp and lumber operations. In the "Which way did he go?" category, we saw a number of changes to recommendations for International Paper Co. UBS Securities upgraded the company to "buy" from "hold", raised 1997 earnings estimate to $1.20 per share from $1.05 and raised 1998 earnings estimate to $3.15 from $2.60. Recently announced restructuring plans were cited as the primary motivation for the upgrade. Morgan Stanley said it cut its rating to neutral from outperform. No reasons were given. Brown Brothers Harriman & Co. analyst Kathryn McAuley downgraded it to "short-term avoid" from "hold", saying that she believes the restructuring program will be disappointing, especially in regards to being able to achieve the 12% ROI. McAuley maintained a long-term "market perform" rating for the company. SBC Warburg said analyst Frances Loo initiated coverage with a "buy" rating. Whew! And in the "not to be outdone" category, Oppenheimer & Co. analyst Peter Ruschmeier upgraded Gaylord Container Corp. to buy from outperform. The analyst also upgraded BOISE CASCADE CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BCC)") else Response.Write("(NYSE: BCC)") end if %>, LOUISIANA PACIFIC CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LPX)") else Response.Write("(NYSE: LPX)") end if %>, STONE CONTAINER CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: STO)") else Response.Write("(NYSE: STO)") end if %>, UNION CAMP CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: UCC)") else Response.Write("(NYSE: UCC)") end if %> and WESTVACO CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: W)") else Response.Write("(NYSE: W)") end if %> to outperform from market perform. WILLAMETTE INDUSTRIES INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WLL)") else Response.Write("(NYSE: WLL)") end if %>, TEMPLE-INLAND INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TIN)") else Response.Write("(NYSE: TIN)") end if %> and Mead Corp. were upgraded to buy from market perform. (What? No coverage of International Paper?) SCHWEITZER-MAUDUIT INTERNATIONAL INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SWM)") else Response.Write("(NYSE: SWM)") end if %> said the company expects second quarter earnings to exceed analysts' estimates of $0.70 to $0.73 a share, citing exports as contributing to volume gains. MOSINEE PAPER CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MOSI)") else Response.Write("(Nasdaq: MOSI)") end if %> said the company expects to report an about 12% increase in second-quarter net income, a performance that would be right in line with consensus estimates of $0.57 per share. ROCK-TENN CO. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: RKT)") else Response.Write("(NYSE: RKT)") end if %> said it had completed acquiring the assets of Davey Co. in exchange for about 863,500 shares of Rock-Tenn Class A common stock, subject to certain post-closing adjustments. The Davey Co. had annual sales of about $25 million in 1996. Thursday - Consolidated Papers, Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CDP)") else Response.Write("(NYSE: CDP)") end if %> reported second quarter earnings of $30,376,000, or $0.68 cents per share, compared with $28,056,000, or $0.63 cents per share, for the first quarter of this year and $49,062,000, or $1.10 per share, for the same period last year. Second quarter sales totaled $392,975,000, compared with $379,841,000 the prior quarter and $376,085,000 for the second quarter last year. Total shipments for the quarter were 447,438 tons, compared with 430,122 tons the previous quarter and 366,710 tons during the second quarter of 1996. GEORGIA-PACIFIC CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GP)") else Response.Write("(NYSE: GP)") end if %> reported second quarter net income of $27 million, or $0.30 per share, compared with 1996 second quarter income of $55 million, or $0.61 per share (before special charges). Sales for the quarter were $3.326 billion, which is comparable to the $3.324 billion of revenues for the second quarter of 1996. POTLATCH CORPORATION <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PCH)") else Response.Write("(NYSE: PCH)") end if %> reported earnings for the second quarter were $9.9 million, or $0.34 per share, compared to 1996's second quarter earnings of $18.1 million, or $0.63 per share, (before an extraordinary charge). Net sales were $394.2 million, compared with $386.1 million in 1996's second quarter. AVERY DENNISON CORPORATION <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AVY)") else Response.Write("(NYSE: AVY)") end if %> and B.T. OFFICE PRODUCTS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BTF)") else Response.Write("(NYSE: BTF)") end if %> have agreed to pay a total of $375,000 to settle civil charges that the companies sold paper tags and correction tape to the General Services Administration which they knew, or should have known, did not fully meet GSA's specifications. UNISOURCE WORLDWIDE INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: UWW)") else Response.Write("(NYSE: UWW)") end if %> said the company is in the process of buying several companies which would increase its annual revenues by about $100 million. The company said it already bought 10 companies in the last nine months, with total annualized revenues of more than $100 million. Weyerhaeuser Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WY)") else Response.Write("(NYSE: WY)") end if %> closed the sale of its Saskatoon Chemicals Ltd. unit to a unit of STERLING CHEMICALS HOLDINGS INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: STXX)") else Response.Write("(Nasdaq: STXX)") end if %> for about $65 million. Weyerhaeuser said it expects the gain on the sale to have a material effect on its third quarter earnings. "Model Portfolio" Update: Other than our THERMO FIBERTEK <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: TFT)") else Response.Write("(AMEX: TFT)") end if %> "holding", our port-faux-lio did very nicely this week. Thermo keeps slipping on light volume. However, there's still much promise in the equipment area, especially with their recently-acquired business from Black Clawson. As manufacturers of paper and wood products receive all the attention now, we believe others such as suppliers and distributors will benefit in the near future. Purchase: IP = $40.50, CDP = $49.13, CSAR = $29.00, TFT = $10.75 Last Trade: IP = $57.38, CDP = $59.38, CSAR = $33.38, TFT = $ 9.50 This Week: Year-to-Date: Model = + 3.20 % Model = + 40.51 % SP500 = - 0.03 % SP500 = + 23.75 % FSPFX = + 4.70 % FSPFX = + 14.65 % Upcoming Earnings as per First Call: Mon = TEMPLE-INLAND - Estimate $0.23, Last Q $0.24, Year Ago Q $0.63 Mon = WILLAMETTE - Estimate $0.25, Last Q $0.24, Year Ago Q $0.87 Tues = BOISE-CASCADE - Estimate ($0.52), Last Q ($0.51), Year Ago Q ($0.55) Tues = BOWATER - Estimate $0.14, Last Q ($0.03), Year Ago Q $1.00 Wed = MEAD CORP - Estimate $0.89, Last Q $0.38, Year Ago Q $1.26 Wed = PH GLATFELTER - Estimate $0.28, Last Q $0.30, Year Ago Q $0.38 Wed = WEYERHAEUSER - Estimate $0.31, Last Q $0.22, Year Ago Q $0.52 Thurs = CHAMPION INT'L - Estimate ($0.24), Last Q ($0.39), Year Ago Q $0.16 Thurs = JEFF. SMURFIT - Estimate ($0.11), Last Q ($0.06), Year Ago Q $0.24 Thurs = UNION CAMP - Estimate $0.14, Last Q $0.14, Year Ago Q $0.26 Commentary: Inventories are being consumed. Mills are running at decent capacity rates. Planned expansions, apart from the Asian market, are reasonable. All this would suggest a favorable outlook for the sector. However, I cannot help being somewhat skeptical. Retail sales have slowed. Projections for home sales show a negative trend. The Federal Reserve is being extremely cautious over a heated economy. Continued monitoring of inventory levels should provide the clue as to where the industry is headed. While I suspect some "hedge buying" ahead of pending price increases will further improve these levels, a reversal of this drawdown could spell trouble and warrants continued observation in my opinion. Though I cannot predict the future, I will be reporting on inventories in future issues. Keep them presses rolling !!! TMF Master |
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