Smurfit Kappa eyes international growth

Growth through acquisition in the Americas and Eastern Europe will be a priority focus of Dublin-based paper and packaging group Smurfit Kappa this year.

The company said yesterday, via the publication of its latest set of annual results, that if it doesn’t identify sufficient accretive acquisition targets, it will return capital to its shareholders.

While Smurfit Kappa’s 2013 figures show an 8% drop in pre-tax profits, to €294m, and a 23% decline in basic earnings per share to 82.2c; pre-exceptional item operating profit was up by 11% to €679m and EBITDA (again, before exceptionals were factored in) rose by 9% to just over €1.1bn. Group revenue, meanwhile, grew by 8% to €7.96bn.

Fourth-quarter performance was exceptionally strong; with profits up by 91% on a pre-tax basis (to €62m) and by 35% on an operating basis; with revenue rising by 11% to just over €2bn.

The group’s management expects the business to achieve continued earnings growth this year.

“This will be delivered in the context of the fundamental financial, strategic and differentiation initiatives commenced in 2013 and as the European packaging business progressively secures the recovery of input cost increases through higher box prices,” chief executive, Gary McGann said.

Smurfit Kappa has “a good pipeline” of capital projects with very attractive returns, management added.

Management’s intention is to invest in these projects, increasing capital expenditure to 120% of depreciation for three years.

Management said that once completed, these projects will deliver improved efficiencies and material earnings growth and are expected to deliver internal rates of return of at least 20%.

On a regional operating level, Smurfit Kappa said that the Americas proved to be a strong source of earnings growth last year and continues to provide the business with “geographic diversity and exposure to higher growth markets.”

Good growth was also seen in the European corrugated packaging operations.