Smurfit Kappa buys Serbian business

By Geoff Percival

Smurfit Kappa shares gave away early gains to close slightly down yesterday, despite the Dublin-headquartered paper and packaging group showing strong growth for the year to date and expanding its presence in eastern Europe.

Management also said the business remains on track to deliver “a materially better outcome in 2018 [than 2017]”, with its key performance measures showing “significant and continuing improvement”.

“We see continued demand growth and further corrugated price recovery,” said group chief executive Tony Smurfit.

In a trading update, Smurfit Kappa said underlying group revenue grew by 7%, year on year, in the first nine months of the year. Ebitda earnings — before exceptional items are factored in — were up by 27% to €1.13bn. There was strong growth in Europe and the Americas, but a €66m writedown of net assets as a result of the deconsolidation of Smurfit Kappa’s Venezuelan operations.

The group also announced the €133m acquisition of Fabrika Hartije Beograd and Avala Ada Beograd, the largest integrated packaging business in Serbia.

The purchase marks a further strengthening of Smurfit’s continental European business. Smurfit bought Dutch paper and recycling company Reparenco in July. That deal was also formally completed during the third quarter.

Smurfit Kappa itself staved off a near €9bn takeover approach by US group International Paper earlier this year.

Smurfit’s share price is up 15.5% in the past 12 months. It initially rose by over 2% on the back of yesterday’s positive newsflow, but closed the day marginally down.

Despite this, the news was well received by analysts.

“On the outlook, management has reiterated that the 2018 outcome will be ‘materially better than 2017’,” said Goodbody’s David O’Brien.

“This is in line with our previously flagged upward bias to forecasts. With the stock having pulled back by over 20% from recent highs, these results are likely to steady the ship and be well received.”

Davy’s Barry Dixon said Smurfit’s update, combined with recent strong quarterly earnings from peers, illustrates “the continuing strength of the sector and the company”.

Meanwhile, Smurfit Kappa has appointed former Coca-Cola executive vice-president Irial Finan as its next chairperson.

Mr Finan will take over from Liam O’Mahony, who is set to retire from the group’s board following Smurfit’s annual shareholders’ meeting next May.