Rock-Tenn Company F2Q08 (Qtr End 03/31/08) Earnings Call Transcript

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2008-04-29 08:59:25.0

Tags: Rock-Tenn Co.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions). Our first question does come from Claudia Hueston of JPMorgan. You may ask your question.

Claudia Hueston - JPMorgan

Hi, thanks very much. Good morning.

Jim Rubright

Good morning, Claudia.

Claudia Hueston - JPMorgan

Just a couple of questions, one was on just the Southern Container contribution. $0.05 a share was more than we had expected as well. Just wondered if you could talk a little bit more specifically about where the strength was, and how your expectations really track now going forward for that asset?

Jim Rubright

Yes. The strength was in two sources. The first was the contribution of income from the Solvay mill. And secondly, better performance from the graphics side of their packaging business than we had expected. The Solvay mill performed very well. It just operated great during the quarter, and its production was up a little bit over our expectations.

And then, we had expected a little higher recycled fiber cost than we actually saw. We had expected fiber pricing to really strengthen in the March quarter, and in fact, it really didn't, and at the end of the quarter in April, as you know we think the market is weakening, so that is the principal driver for the improvement.

But the trajectory of earnings of the Southern Container business all through the year improved, so actually the 12-month historical did not really reflect the full run-rate, so a little bit of the effect was that, Claudia, but the other was that the mill and graphics business performed ahead of expectations.

Claudia Hueston - JPMorgan

Okay. That is helpful. And how should we think about the outage that is happening at the Solvay mill? That's for the coming quarter, am I right, and can you quantify that?

Jim Rubright

It is. I think just on production tons lost, you've got a loss in earnings per share, and then with disruption and everything else going on in the mill, I think you could see $0.05 a share plus or minus. It might be a little bit less than that, but it might be a little more.

Claudia Hueston - JPMorgan

Okay, perfect. And then just on the Displays business. Can you comment a little bit on what you're seeing there in terms of the near-term outlook? Are there any signs of weakness, or how should we think about that business, which just has really done very well over last couple of quarters?

 

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