EAMON QUINN: On-aim Smurfit Kappa shares rise 4%

Shares in Smurfit Kappa rose almost 4% in Dublin trade, as the international packaging firm stayed on course to deliver continued earnings growth, despite currency challenges and an uncertain world economy.

Detailing results for the three months to the end of September, Smurfit said demand for its corrugated packaging grew 3%, in volume terms, in the latest quarter, and by 5% since the start of the year.

Earnings before interest, tax, depreciation, and amortisation — known as Ebitda — rose 6%, to €323m, in the quarter, from a year earlier. It posted an Ebitda margin of 15.7% in the quarter and a basic-earnings-per-share of 56.4 cent, up 22% from a year earlier.

Revenues of almost €2.05bn for the latest three months showed only a 1% increase in the year, but were up by a “strong” 6%, when currency translation movements are accounted for.

Smurfit Kappa shares were trading yesterday in Dublin at €20.30, valuing the international firm at €4.81bn. Amid continuing scares about the world economy, the shares are still down 13.6% this year.

In Europe, which accounted for €240m of the €323m in earnings, “corrugated prices were flat year on year, implying that the increase achieved towards the end of 2015 has effectively been eroded by the fall in recycled container-board prices in the first half,” said Davy Stockbrokers Barry Dixon.

With the firm generating cash of €164m in the latest three months, the broker has an ‘outperform’ target of €32 for the shares, based on that “attractive” cash engine.

“We feel the attractive valuations, relative underperformance, and management’s positive outlook for the rest of the year warrant a reiteration of our recommendation: ‘Buy’ with a €23.50 target price,” said analyst Darren McKinley, at Merrion Capital.

Chief executive officer, Tony Smurfit, said conditions indicated it would produce “continued earnings growth” and post Ebitda earnings for the full year which were “in line with market expectations. Today, the group is well-positioned”.


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