Show BUSINESS t STOCK I MARKET PAPER INDUSTRY'S INDUSTRY PROFITS PROFIT ZOOM The best profits year ar ever has hu shaped up in lit 1973 1873 for far I paper makers maker topping ma's mas significant ernin earnings gains Sparked by the booming economy paper demand d mand has hu been extremely Itron causing mills to run flat out Profit margins have benefited from Irom the higher operating rates ratel as well as from price Increases Increases' preceding Phase As Asa a result net Income for lor the first nine months of 1873 1973 rose lOIe 46 48 percent above the year year- earlier level for far Great Northern Nekoosa 47 percent for lor Kim berly 57 percent for lor International Paper and 63 85 percent for lor St. St IRe Taper Paper r. r Other manufacturers manufacturers' performed performed per per- formed equally well These sharp profits gains gains' were not by the investment community As AI earnings earning rose rOle buying of 01 common stocks tocks of 01 paper companies picked nicked up and sent prices of 01 these issues issue to Ito new j 1973 highs Although tb the recent recent broad market marke decline ha has brought paper pape stocks tock down again they are still well above their former lormer lows JOWl Becoming Less Le Cyclical The question now is 11 whether paper firms will be be able to maintain their momentum IT II the economy turns down in 1974 or whether the Industry is' is entering a new era of or reduced cyclically The hope ope for lor a in more independent trend rests importantly on the prospect of I ian i an improved supply demand relationship in the paper in 1 t In the past palt new manufacturing capacity has hil been freely added when business boomed resulting g ia in iri overcapacity and a weak pricing structure in times oil oft i lessened demand N Now wj however because of 01 a a poor return on existing i investment I heavy heavy- debt loads lack of off i attractive sites i I for 11 mills ii UJ and ecological p problems C creases in paP paper mm a a th through r rat 1975 75 have v been pegged i at only a 2 percent annual rate down from Irom a historical expansion pace of 01 4 percent While the paper paper concerns have decreased sp spending on one on new plants the industry is being forced to layout Jay ut large amounts of at money in an effort to to solver solve tl three ree pollution problems that plague it involving water air and solid soUd waste Of 01 these the solid waste pollution is II the most mOlt vexing exing since lince solids area areso so hard to dispose of 01 The tc total J cost COlt tl cl controlling paper pollution Is II not known but it Is I. clear that the tM Industry is II forced to spend millions million annually for lor no nonproductive equipment I. I Influence lanance on Profit Margins It M. M Under today's controlled economy supply demand factors are are re not permitted to exert free play on prices This Is Isone Isone one reason realon why profits estimates for lor 1974 1971 are clouded Phase PhaH 4 price curbs have added another element dement of 01 uncertainty to the profit prof outlook for lor paper companies compares Furthermore the current ener energy y shortage has ba cast cat a pall over aver the entire economy It remains remains' to be seen Just Juat how bow severely this thi tightness will affect not only the paper industry industry in In- itself bu but also alo the the economy as a whole Although at present product demand is heavy and output at t ator ator or close to full lull capacity if II the energy crisis turns turn the anticipated 1974 business business' slowdown into a scale full caJe recession it is 11 unlikely that paper company profits will show any improvement over the 1973 level A Good LOII- LOII term Long m Bay Buy Since the prices es of 01 most mOlt equities in the pa paper papa field ned relied reflect reflect at least to some IOme extent a substantial part of of thee the e earnings improvement anticipated for Iw the final 1973 tally and the outlook for the new year Is ii made indistinct because became of d price controls the ener energy y difficulties and the generally uncertain economic prospects paper stocks tock should be held on all the ba basis of 01 expected longer range progress reu For a new commitment at this time the staff ataa of 01 Babson's Reports suggests purchase of 01 Champion International common common stock Champion is the third largest paper and lo forest est products company in the world deriving approximately 30 percent of d 01 total sales from paper and allied aWed products Atthe At present ent writing the common common is selling at an time all low times es earnings alt and yle yie yields ck 57 The CV Pf Pfd percent tAM and f Is also rec recommended for pur pur- chase Both of 01 these issues are graded as 81 average and are j listed on the New York Stock Exchange I |