Slowing pace of demand in Europe sees analysts cut Smurfit forecasts
Some analysts cut their forecasts for 2012 after Europe’s leading containerboard and corrugated packaging producer said the weaker trading environment had put downward pressure on paper prices.
“The underlying trend is that volume growth is moderating and the pricing environment is getting more difficult,” said Paraic Quinn, an analyst with Bloxham Stockbrokers, who cut his 2012 EBITDA (earnings before interest, taxes, depreciation and amortisation) estimate to €945 million from €1.09 billion.
A strong performance in Latin America and a tight grip on costs helped Smurfit beat expectations for third-quarter EBITDA, which rose 9% to €264m compared with a market consensus for a 4.5% rise.
The Dublin-based group, whose rivals include DS Smith, Stora Enso and Mondi, slashed costs when demand for its products started falling during the last global downturn, and chief executive Gary McGann said a continuing focus on debt paydown and cost-cutting would carry the company through and ensure it meets full-year forecasts for 2011.
“Despite softening demand, we expect to deliver a full-year 2011 EBITDA performance in line with current market expectations, and re-affirm our target to reduce net debt to €2.85bn by the year end,” McGann said in a statement.
Smurfit shares were down 6.7% at €4.66 in early trade but closed unchanged at €5. The company’s stock has halved in value since hitting a three-year high of €9.5 in April, as declining containerboard prices in Europe put the group’s ability to pass further price increases in doubt.
Smurfit said it was confident of exceeding targeted two-year cost savings of €150m by the end of next year after already meeting half that target.
The company’s profit margin fell to 14.1% in the third quarter from 14.2% in the first quarter and 14.3% a year ago.
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