Smurfit may return surplus

Paper and packaging giant Smurfit Kappa Group will return surplus cash to shareholders this year if it fails to land any target acquisitions.

The group yesterday forecast another year of growth in 2015 via earnings growth strengthened cash flows and improved shareholder returns on the back of a strong showing for the past 12 months.

“Looking to 2015, assuming no material disimprovement in European economic conditions, we expect to grow the business through continued superior operating performance, high return internal investments and targeted acquisitions,” management said.

“In the absence of accretive acquisitions, the group will evaluate alternative uses of capital, including returns of surplus capital to sharehoders.

“However, our stated preference is to build durable, long-term value through the continued delivery of accretive acquisitions in our target markets,” it added.

Shareholder returns continued last year, with Smurfit Kappa upping its final dividend by 30%, from 30.75c per share to 40c.

Yesterday’s annual figures showed that Smurfit Kappa generated pre-tax profits of €378m in 2014, an annual rise of 29%. Group revenue was up by 2% to almost €8.1bn, while operating profit before exceptional items rose 14% to €771m and basic earnings per share were up by almost 30% at 105.8c.

Last year’s performance was aided by more than €160m worth of acquisitions in the US, Dominican Republic and Colombia and were set against the backdrop of strong underlying growth in the Americas and higher earnings (earnings before interest, tax, depreciation and amortisation up by €25m in the fourth quarter) in the European operations.

“The group’s solid operating performance, through 2014, is strong evidence of the resilience of our integrated and geographically diverse business model,” said Smurfit Kappa chief executive Gary McGann who added that 2014 was driven by new business gains, a continued focus on costs, judicious capital investment and accretive acquisitions.

The company’s net debt stood at €2.76bn at the end of December, 5% up on the previous year. However, the group has announced via its Smurfit Kappa Acquisitions subsidiary, the raising of €250m via a senior notes/bond offering, with the proceeds set to go towards eliminating “a portion” of its outstanding senior debt.