Smurfit Kappa had been in the wars ever since its return to the stock exchange in March 2007. Originally floated at €16.50 the share briefly hit €21 in May of that year before falling to less than €2 earlier this year.

As a paper and packaging company Smurfit Kappa is extremely exposed to the economic cycle. When activity slows down there is suddenly far less demand for its cardboard boxes and cartons.

This is what happened to Smurfit Kappa. In 2008 its sales fell by 3 per cent to just over €7bn. However due its extremely high level of fixed costs, its operating (pre-interest) profits halved to just €282m.

Smurfit Kappa's problems were compounded by its debt mountain, which stood at almost €3.2bn at the end of 2008.

With interest costs devouring all of its operating profits and then some Smurfit Kappa ended up losing €32m before tax last year.

This combination of extremely high debts and plunging operating costs forced Smurfit Kappa to make some tough, but necessary, decisions. Dividend payments were scrapped and the debt mountain was restructured with repayment dates pushed out. The company also raised €1bn from a bond issue.

Dividend scrapped

At the same time as Smurfit was scrapping its dividend McGann was jettisoning his extra-curricular activities. With shareholders having seen their investment fall in value by almost 90 per cent since the flotation it was widely felt that he should concentrate on the day job.

He resigned as a director of Anglo Irish Bank when it was nationalised in January and stepped down as chairman of the Dublin Airport Authority the following month.

However, the overall position of the European paper and packaging industry remains grim with corrugated packaging volumes down by 7 per cent in the third quarter of 2009 compared to the same period a year earlier. While this might sound terrible it compares with a 12 per cent decline in the first half.

Still, it's an ill wind that blows no good. Paper and packaging is an industry that has traditionally been plagued by chronic over-capacity. With the cost of a paper or packaging mill running into the tens or hundreds of millions of euro and no brand loyalty on the part of consumers, the market is very vulnerable to what economists call marginal cost pricing.

Paper and packaging mills are capital-intensive and so have very high fixed costs. This means that they need to sell a very high volume of product at relatively high prices just to meet these fixed costs and break even.

However, once they exceed break even point every additional or marginal euro of revenue is very profitable with most of it falling straight through to the bottom line.

This means that there is a huge temptation for producers to sell off this additional production cheaply. The problem, particularly when demand drops, is to prevent purchasers who had been paying full price from demanding the lower prices the producer had been charging for this additional production.

Collapse in prices

How does the producer prevent this from happening? It can't and the result is a collapse in prices and profits across the entire market. This is precisely what happened in the European paper and packaging market last year.

However, last year's bloodbath has squeezed a lot of less efficient capacity out of the market. This is in turn feeding through into lower inventory levels, containerboard stocks fell by 32 per cent between March and August. Smurfit Kappa has been able to take advantage of this combination of reduced capacity and lower stocks to push up its prices, putting €80 per tonne on containerboard prices and €50 per tonne on kraftliner prices from the beginning of September.

While it is still early days, the indications are that so far Smurfit Kappa has been able to make these price increases stick. Investors certainly seem to think so with the Smurfit share price more than trebling in value to its current level of €6.40 since April.

At the same time as he has been increasing its prices McGann has been ruthlessly pruning Smurfit Kappa's costs. This year it closed three corrugated plants in Europe, shut a fluting plant in Slovakia and "rationalised" its Cork plant. Smurfit cut its costs by €40m in the third quarter alone.

Unfortunately for Smurfit Kappa until the pace of economic activity begins to pick up and leads to an increase in the demand for its boxes and cartons, reduced costs, higher prices and lower capacity amount to little more than running faster in order to stand still.

There is also the risk that any recovery will result in at least some producers adding new capacity, something that has always happened in the past. This would restart the boom-bust cycle to which the paper and entire packaging industry appears to be incurably addicted.

Originally from the west Dublin suburb of Palmerston, McGann was educated at Colaiste Mhuire on Parnell Square. He joined the civil service at the age of 18 in 1968 and spent eight years with the Comptroller & Auditor General's Office. During his time at the C&AG's office he successfully studied for a BA by night at UCD, graduated with a masters degree in management science and qualified as an accountant.

Those who served with him in the civil service recall his formidable work ethic.

McGann moved to telecommunications company Ericsson's Irish subsidiary in 1976, becoming financial controller the following year.

After 12 years at Ericsson he was headhunted by drinks company Gilbey's as finance director. In 1991 he succeeded the late David Dand as Gilbey's chief executive.

In the early Nineties Gilbey's was part of British conglomerate GrandMet, which also owned Express Dairies. It was through the GrandMet connection that McGann came to the attention of Express Dairies formidable boss the late Bernie Cahill, who also served as chairman of Aer Lingus.

Cahill was impressed by the young McGann and hired him as Aer Lingus chief executive in 1994. At the fag end of the first decade of the 21st century, with the airline's stature now greatly diminished, it is difficult to recall just how prestigious a job being chief executive of Aer Lingus was in the mid-Nineties.

McGann stayed just four years at Aer Lingus and departed in somewhat acrimonious circumstances. After being recruited as finance director of the Smurfit group in May 1998 he gave Aer Lingus three months notice in order to facilitate an orderly transition.

His reward was to have the then Public Enterprise Minister Mary O'Rourke go on RTE radio and tell the nation that it would be best if McGann moved on quickly. McGann cleared his desk and left Aer Lingus the same day.

In 1999 McGann was promoted to Smurfit president and chief executive officer. Then in 2002 he was appointed chief executive, the first non-family member to head up the company, shortly after the €3.4bn leveraged buyout by US private equity firm Madison Dearborn. Three years later Smurfit acquired the Dutch paper and packaging company Kappa and was renamed Smurfit Kappa.

After more than seven years as Smurfit boss McGann's record is a mixed one.

While no one doubts his commitment to the job the company's performance has been weighed down by its extremely high level of debt, something which will tarnish his legacy when he retires, most likely when he reaches 60 next year.