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FTSE 350 outlook: Forestry & paper

Created:
21 January 2008
Written by:
Nathalie Olof-Ors

The pricing environment might have improved last year, but paper and packaging producers are not out of the woods yet. Indeed, the sector is heavily correlated to global economic activity, so fears of a recession do not bode well for this year's sales.

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The weak dollar won't help either, since it favours US exports in an already oversupplied market. And while consolidation is seen as inevitable in this sector, the credit crunch will seriously limit M&A activity. So, despite a modest share performance last year, DS Smith might not yet succumb to a takeover bid.

That said, the sector has scope to surprise on the upside. After a tough year in 2007, Rexam, for instance, will benefit from lower aluminium prices which have long weighed on the group's profitability. And while the group has a strong position in mature markets, its expansion in countries such as Russia will help to revive its top-line growth.

Company name Price (p) Mkt val. (£m) P/E ratio Div. yld (%) 12M price chng.(%) Last IC view
MONDI 383.25 1407.45 1.28 Buy, 428p, 9 Nov 2007
REXAM 406.75 2613.73 13.2 4.77 -25.09 Good Value, 503p, 01 Aug 2007
SMITH (DS) 188 739.51 10.2 4.57 -8.18 Fairly Priced, 213p 05 Dec 2007

MORE 350 OUTLOOK SECTORS :

See also:

Aerospace & defence

Housebuilding & construction

Engineering & diversified industrials

Chemicals

Mining

Oil & gas

For a full table of contents for the FTSE 350 Outlook series, click here.

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