Georgia Pacific Earnings Dip, Reflecting Costs of Great Northern Takeover
Jul. 20, 1990
ATLANTA (AP) _ Georgia-Pacific Corp. reported Thursday its second-quarter earnings declined 38 percent as costs from its takeover of Great Northern Nekoosa Corp. offset strong sales.
Other paper companies also reported steep drops in earnings. Bowater Inc., of Darien, Conn., reported 63 percent decline and Stamford, Conn.-based Champion International Corp.'s profit dropped 44 percent.
Georgia-Pacific said its net income fell to $107 million, or $1.25 a share, from $172 million, or $1.90 a share, in the same period of 1989.
The recent three-month period was the first full quarter in which the two corporations were combined. Georgia-Pacific and Connecticut-based Great Northern agreed in February to a $5 billion merger, creating the nation's largest paper and forest products company.
Georgia-Pacific's sales for the quarter totaled $3.5 billion, up from $2.6 billion a year earlier, but the increase was offset by takeover-relate d interest expenses, the company said.
Interest expenses rose to $185 million from $66 million a year ago.
Georgia-Pacific Chairman T. Marshall Hahn Jr., in a statement accompanying the earnings report, stressed the sales gains.
''The company's building products business has experienced a record second quarter,'' Hahn said, noting that despite a decline in housing starts the company has benefited from an increased demand for materials used in the remodeling and repair market.
Prices for the company's forestry products are up also because of a diminishing supply of timber in the Northwest, he said.
The company's pulp and paper divisions have shown gains mainly because of demand for communication papers, Hahn said.
For the six months ending June 30, Georgia-Pacific's net income was $208 million or $2.43 per share, down 36 percent from $326 million or $3.55 a share for the first six months of 1989.
First-half sales totaled $6.2 billion, up from $5.1 billion during the same period a year earlier. Champion International Corp.
Champion said its earnings drop was caused by production losses and higher taxes on a Brazilian subsidiary.
Champion's after-tax profit for the second quarter was $63 million, or 60 cents per share, compared with $114 million, or $1.16 per share, for the same period last year.
The company reported $81.8 million in income from operations for the second quarter, compared with $207.4 million for the second quarter of 1989.
The second-quarter figures include $43 million set aside to pay for costs incurred in cutbacks at its Canton, N.C., mill.
In addition, Champion had several one-time gains in the second quarter, including $11 million from the sale of a portion of its West Coast Timberlands division, $18 million from the disposal of fixed assets and divested operations and $39 million from the favorable resolution of issues related to the merger with St. Regis Corp.
Income dropped at the company's Brazilian subsidiary due to an economic reform package that included higher taxes, the company said. Bowater Inc.
Bowater Inc. blamed a continued slump in newsprint prices for its earnings drop. Bowater said another factor contributing to the drop was a $9 million, one-time charge to retire 12 3/8 percent interest rate bonds.
For the second quarter, after-tax profit totaled $14.2 million, or 36 cents per share, on revenue of $342.3 million. That compared to earnings of $38 million, or $1.01 per share, on revenue of $363.6 million for the same period last year.
A.P. Gammie, chairman and chief executive officer of Bowater, said he expected newsprint prices to rise in the second half of 1990.