No Trump worries as Smurfit booms in Mexico
Smurfit Kappa's Mexican operations had a record year in 2016 despite US President Donald Trump's threats to build a wall between the nations and to slap punitive tariffs on imports from its poorer neighbour.
But the Irish packaging group's ceo, Tony Smurfit, said he hopes the standoff between the two countries doesn't escalate.
"The Republican Congress is pro-trade, they should be pro-trade. The idea of trade wars has been proven to be really bad. So I would hope the reason will prevail and we won't see a trade war," he told CNBC in an interview.
Mr Trump has suggested that tariffs of 20pc could be levied on Mexican imports to the US to pay for the massive construction costs of a wall.
But such a move would see the price of many goods sold to US consumers and which are manufactured in Mexico, skyrocket.
Speaking to the Irish Independent, Smurfit Kappa chief financial officer Ken Bowles said that in the long-term, political shifts in Europe and the Americas have little impact on the group's overall business.
"We're not put off by those sorts of things," he said, adding that Mexico was one of Smurfit Kappa's "star performers" last year.
The company's corrugated volumes in Mexico rose 6pc last year, and it's completing an investment in a plant in Mexico City to support domestic demand.
Mr Bowles pointed out that Mexico has a population of 120 million.
"We've a large Mexican domestic business which has been performing really well," he said. "It's very early days in terms of anything around the border, so we haven't seen any impact yet."
He said trade flows between the US and Mexico have existed for "hundreds of years".
"They're not going to stop in the morning," he said.
Reporting full-year results yesterday, Smurfit Kappa said its earnings before interest, tax, depreciation and amortisation (EBITDA) rose 5pc to €1.23bn, and slipped 2pc in the fourth quarter to €320m.
Its EBITDA margin in 2016 was 15.1pc compared to 14.6pc in 2015. It raised its final dividend by 20pc to 57.6 cent a share.
Full-year revenue was up 1pc at €8.1bn, and 5pc higher on a constant currency basis. The company faced currency and input cost headwinds last year.
Mr Bowles also said that geopolitical events have little impact on where the company deploys capital or makes acquisitions, as long as it can generate a strong return for shareholders.
Smurfit Kappa, which joined the FTSE-100 in December, undertook four acquisitions last year, three of them in the United States and one in the UK. It operates in 34 countries.
Mr Bowles said the company will continue to deploy capital in a balanced manner and will probably make at least "a couple" of acquisitions this year.
"High multiples have been the barrier sometimes to getting a deal done," he said.
"But if we saw opportunities at attractive prices, with good synergies, a good plug into the overall Smurfit Kappa proposition and also be accretive for the shareholder, I don't think President Trump or anything that might happen in Europe will necessarily stall that."