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1998 Annual Report

MANAGE FOR RESULTS

Managing for results means setting aggressive financial targets; increasing sales; focusing on profit-margin performance; leveraging strengths and best practices; achieving full potential in every business unit; creating a strong, balanced mill system; investing in operations; and selling the company's full line of products and services.
Manage for Results

In order to manage the company for results, Smurfit-Stone will leverage its strengths and best practices and seek to realize the full potential of every business unit. Operations will improve profitability by developing sales and marketing strategies to enhance mix and margins; improving processes and efficiencies to reduce costs; and taking advantage of the size and combined scale of the new company.
     Capacity issues are already being addressed. The mill closures and plant consolidation will enable the company to focus its capital-expenditure program and thereby limit future capital expenditures.
     The company plans to leverage past capital investments in the container business to take it to a new level of performance. By balancing the container/containerboard side of the business, Smurfit-Stone can lead the industry in a new direction and create an attractive investment vehicle.
     Smurfit-Stone has set clear targets in three critical financial areas — asset divestitures, synergy achievements, and debt reduction. These targets are viewed by the investment community as important to the success of the company, which will be singularly focused on achieving them over the next 18-24 months.
     Smurfit-Stone is projecting $350 million in annualized savings. It is seeking $50 million in SG&A savings by eliminating redundant corporate overhead and overlapping functions. A portion of those savings has been already realized.
     Manufacturing system optimization should yield more than $180 million, which will take more time as the packaging side of the business is rationalized. Purchasing and logistical leverage should produce another $80 million. In addition, Smurfit-Stone should obtain approximately $30 million in interest expense savings related to working capital reductions as financial disciplines are redefined and implemented.
     Headcount is expected to be reduced by 3,600 of the 38,000 combined employees; it has already been decreased by 1,500, including about 300 redundant corporate and administrative positions.

SMURFIT–STONE'S ST. LOUIS RECYCLING FACILITY PROCESSES ABOUT 9,000 TONS OF FIBER PER MONTH – ENOUGH TO CREATE A STACK TWICE AS HIGH AS THE GATEWAY ARCH.

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CORDECK® CORRUGATED PALLETS

Smurfit-Stone's Cordeck® corrugated pallets have proven to be the sound choice for the environment. Competing directly with insect-prone wood pallets, the corrugated pallet is quickly becoming the acceptable alternative to wood. With recent government regulations and the Asian Longhorn Beetle outbreak, the growth potential for this business is promising.
 
 
WASTE REDUCTION SERVICES

Helping customers manage their entire waste stream is a value-added benefit provided by Smurfit-Stone's Waste Reduction Services. This service saved customers millions of dollars in solid-waste removal costs in 1998. More than one-fifth of the 100,000 tons extracted was tonnage that previously went to landfills.