Saturday 10 December 2016

Smurfit eyes US as ‘hunting ground’ for potential acquisitions

Michael Cogley and Gavin McLoughllin

Published 06/05/2016 | 07:19

Chief executive Tony Smurfit
Chief executive Tony Smurfit

Smurfit Kappa boss Tony Smurfit sees the US as a potential hunting ground for acquisitions.

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He said the company could spend between €200m and €400m on acquisitions per annum without overly stretching its balance sheet.

“We took a small position [in the US], we bought a number of assets over the last 18 months there, but it’s still a relatively small position for us. So we would see ourselves growing there if the values are correct.

 Mr Smurfit said a potential Brexit isn’t affecting the business “yet” and that demand cross most areas of the business is “good or strong”.

He said he was comfortable, based on the year so far and subject to any major macro-economic issues, with analysts’ projections that the company’s earnings before interest, depreciation, tax and amortisation would rise to between €1.25 and €1.3bn, up from €1.18bn last year. A potential Brexit hasn’t affected the business yet, he added.

 Operating profits at the paper-based packaging firm increased by 8pc to €179m in the first three months of the year.

 In a trading update issued to shareholders  on Friday the company posted improved year on year revenue of €2bn as well as increased earnings before interest, tax, depreciation, and amortisation (EBITDA) of €281m.

 Basic earnings per share at the firm increased by 26pc to 38.8c while return on capital employed remained flat at 15.3pc.

 Net debt at the end of March increased by 3pc to €3.03bn.

 Mr Smurfit said solid year on year growth was driven by improved operating performance and the positive impact of acquisitions made in 2015.

“Our well invested, geographically diversified and vertically integrated operations will continue to provide us with a resilient platform to drive earnings and free cash flows.

“During the quarter, currencies had a distorting effect which on a like-for-like basis had a negative translation effect of almost €10 million on EBITDA,” Mr Smurfit said.

 Shares at the company’s primary listing were up 2.63pc to £18.72 (€23.67).

 Smurfit Kappa changed its primary listing to London last month. The move cleared its path to enter the FTSE indices.

 Goodbody analyst David O’Brien said the company’s first quarter results represented a “solid start” to 2016.

“The reiteration of guidance will ease any potential concerns around full year forecasts and highlights the benefit of Smurfit Kappa’s integrated business model,” Mr O’Brien said.

 Davy analyst Barry Dixon said demand remains strong for the group and that the company remains strongly cash generative.

“It remains the cheapest stock in the sector which does not make sense given the quality of its earnings and the potential equity value enhancement from its cash flow,” Mr Dixon said.

 The Smurfit boss went on to say, following a €380m splurge on acquisitions last year, its intention for 2016 is to integrate the new businesses.

 Mr Smurfit took over the role of chief executive at the firm from Gary McCann last year.

 Over the course of the year executives at Smurfit Kappa were paid over €10m. The Smurfit chief executive was paid a total of €1.5m in 2015, with an additional total benefit of €1.8m under the group’s long-term incentive plan (LTIP).

 The firm splashed out €186m on two South American businesses in January as part of its first foray into Brazil.

Operating profits at paper-based packaging firm Smurfit Kappa increased by 8pc to €179m in the first three months of the year.

In a trading update issued to shareholders this morning the company posted improved year on year revenue of €2bn as well as increased earnings before interest, tax, depreciation, and amortisation (EBITDA) of €281m.

Basic earnings per share at the firm increased by 26pc to 38.8c while return on capital employed remained flat at 15.3pc.

Net debt at the end of March increased by 3pc to €3.03bn.

Smurfit Kappa chief executive Tony Smurfit said solid year on year growth was driven by improved operating performance and the positive impact of acquisitions made in 2015.

"Our well invested, geographically diversified and vertically integrated operations will continue to provide us with a resilient platform to drive earnings and free cash flows.

"We continue to see good levels of demand for packaging across almost all of the markets in which we operate. During the quarter, currencies had a distorting effect which on a like-for-like basis had a negative translation effect of almost €10 million on EBITDA," Mr Smurfit said.

The Smurfit boss went on to say following a €380m splurge on acquisitions last year, its intention for 2016 is to integrate the new businesses.

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