Smurfit sees €142m wiped off its assets

Venezuela’s first currency devaluation for two years will see €142m wiped off the value of Smurfit Kappa’s net assets in the country, the Dublin-headquartered paper and packaging giant has announced.

Venezuela announced its devaluing of the bolivar by 31.5% at the weekend. Smurfit Kappa said yesterday its net assets in the region would be reduced by 6% and cash balances in euro terms will fall €29m in the current quarter.

“The impact of the devaluation on the group’s 2013 pre-exceptional Ebitda is not expected to be material,” management added in a brief statement.

Last week, Smurfit published full-year 2012 data showing a slight fall in revenue to €7.33bn, but an 11% rise in pre-tax profits to €331mn.

Management said its operations in Venezuela endured “a challenging year” in 2012, with volumes down by 17% and earnings down by around 35%.

The group continues to see Latin America as vital to future growth, but noted that performance in the region last year varied “significantly” between countries, with overall Ebitda margin for the region decreasing to 15%.

“Political and social unrest, in both Venezuela and Argentina, led to a number of production interruptions during the year, and to an overall decrease in Latin American volume of 3% year-on-year,” said the company last week.

Profitability in Venezuela in particular saw a “significant decrease” last year.

Shares were down 2.7% yesterday to €10.77, but analyst reaction was not overly negative.

“The potential for such a devaluation was well flagged by management in the 2012 results, last week, and, thus, should not come as a great surprise to the market,” said David O’Brien of Goodbody Stockbrokers. “We continue to favour Smurfit Kappa, given its undemanding valuation and upside potential to forecasts from a favourable pricing cycle.”


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