Smurfit Kappa posts 11% rise in profit

Irish packaging group Smurfit Kappa posted an 11% rise in full-year pre-tax profit, buoyed by strong demand and increased exposure to high-growth markets such as Mexico.

Shares in the group, which designs and manufactures paper-based packaging for the likes of Unilever and Procter & Gamble, were up 2.5% in trading yesterday, not far short of a five-year high set last week.

Strong demand and a stable outlook also promoted Europe’s leading containerboard and corrugated packaging producer to increase its final dividend 37% to 20.5c per share.

Smurfit Kappa, formed through the 2005 merger of Jefferson Smurfit and Kappa Packaging, has for the last four years focused on paying down debt, which stood at €2.79bn at the end of 2012.

The company, which last month successfully refinanced some of its debts with a €400m note offering, said yearly pre-tax profit rose to €331m, boosted by cost controls, on revenue which was flat at €7.34bn.

“This is our second largest result since 2007 and this performance reflects the benefit of our continuing focus on operating efficiency,” said chief financial officer Ian Curley.

Mr Curley said the sharply increased dividend “reflects our confidence in the underlying performance [and] prospects for business and sustainable strength of our business model”.

The group’s earnings before interest, tax, depreciation, and amortisation (Ebitda) rose slightly to €1.02bn and its Ebitda margin widened to 13.9% from 13.8%.

Smurfit made its first major acquisition since 2005, when it bought Mexican business Orange County Container Group for $340m (€252m) in September.

The target, an integrated paper-based packaging company with significant corrugated and converting operations, reported Ebitda of about 13% ahead of plan, Smurfit said.

Mr Curley said the company would continue to lower its debt, aided by the proceeds of continued strong growth in sales to European customers.

“We’ve had good stability of demand with regard to the consumer through Europe for the past couple of years,” he said.

Analyst Barry Dixon at Davy Research said that the results should reassure investors that Smurfit would not pursue an aggressive acquisition strategy and would instead focus on its stated objective of following a “progressive dividend policy”.

— Reuters