Smurfit Kappa H1 profit climbs 28% to €312m

Shares in Irish packaging company Smurfit Kappa fell by more than 3% yesterday despite a significant uptick in profitability in the opening six months of the year.

Pre-tax profits surged by 28% to €312m in the six months to the end of June despite some headwinds.

Revenue increased 1% to €4.05 billion while the company’s basic earnings per share rose 24% or 90.8c.

“Against a backdrop of higher than expected input costs, more pronounced currency volatility and a greater degree of macroeconomic risk, we expect to have a good year with earnings growth for 2016,” Smurfit Kappa chief executive Tony Smurfit said.

The company also recorded growth in earnings before interest, tax, depreciation and amortisation (EBITDA) of 8% to €593m which Mr Smurfit said reflected its geographically diverse operations and integrated business model.

Its European operations delivered an improved earnings performance in H1 while the company again saw strong volume growth in the Americas despite a more challenging backdrop.

The company said pricing initiatives across the region helped offset some of the negative currency impact it experienced throughout the opening months of 2016.

It also indicated price increases in the region are set to be implemented in the second half of the year.

Davy Stockbrokers analyst Barry Dixon said he expects the balance sheet of the business to continue to improve as the year progresses.

“We continue to focus on operational efficiency and expanding our geographic reach. Our leverage multiple has reduced to 2.5 times net debt to EBITDA in advance of our more cash generative second half of the year,” Mr Smurfit added.