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Show mm ; Hip : PAPER PROSPECTS During the first half of last year most paper manufacturers experienced very favorable results, following on the heels of an excellent 1979 when the industry recorded its highest output volume in history. At the midpoint of 1980, however, as the recession became more pronounced, consumer demand for paper softened and inventories began to increase. Consequently, the profits of the majority of paper, firms, especially those involved in timber and wood products for the construction industry, stated to turn downward. So, profit comparisons for most of the important companies during the second half of 1980 were not particularly favorable. Final earnings for 1980 are now being reported by such leading paper companies com-panies as Boise Cascade, Champion International, Crown Zellerbach, International In-ternational Paper, and Scott. Not unexpectedly, they are lower than those of the preceding year. On the other hand, Great Northern Nekoosa, St. Regis, Union Camp, and Westvaco showed some degree of improvement in earnings. LOOKING AHEAD The fundamentals for the outstanding paper producers remain positive, in the opinion of the Research Staff of Bab-son's Bab-son's Reports. Although earnings may not recover rapidly, it is likely that they will enjoy a good upturn when the general economy improves and the construction industry again turns to the upside. The capital expansion and modernization moder-nization programs instituted by most producers along with the increased emphasis on cost efficiency should be t reflected in better intermediate-term results. SHOWING CONFIDENCE As an expression of its confidence in the future, captial expenditures by the $31-billion U.S. paper industry last year amounted to a record $5.9 billion, up from the previous year's $4.7 billion. In contrast to previous industry trends, however, capital investment last year exceeded cash flow by almost $1 billion. Traditionally, the paper industry keeps investment programs in line with cash flow. Because of the present economic slowdown, it is generally felt by the industry that there is a pent-up demand for its products, especially construction , items, that could explode when the economy takes a turn toward the upside. up-side. One industry insider feels that by late this year or early 1982 and running through 1985 the economic expansion rate (GNP) could range from 4 percent to 5 percent per year. This would, of course, augur well for the paper industry. in-dustry. CLOSER LOOK AT THE PAPER SECTORS According to a survey by the American Paper Institute, paper production last year increased about one-half of one percent, while paper-board paper-board declined two percent. In reflection of declining construction activity, building paper and board suffered a 31 percent drop last year from the 1979 level. There is a healthy demand for publication and computer papers, an increase in exports and a reduction in imports as more U.S. capapcity became available. Actually, exports increased by 43 percent to a new high of $4.7 billion. The major export market for the industry in 1980 was Western Europe. HOLD THE STOCKS The Research Department of Bab-son's Bab-son's Reports is recommending the retention of all the stocks of the leading paper firms because of the favorable prospecLs beyond the near term. This advice applies to Boise Cascade, Champion International, Crown Zellerback, Great Northern Nekoosc, International Paper, Kimberly-Clark, St. Regis, Scott Paper, Union Camp, and Westvaco. For those who would like to acquire a good stock in the paper group, Champion International is currently being recommended. It is a major producer of fine paper and paper packaging, lumber, plywood, and construction materials. |