Friday 18 August 2017

Smurfit 'protected from local shocks' by global reach

John Mulligan

John Mulligan

Smurfit Kappa chief executive Gary McGann has said that "real nervousness" remains evident within wider European economies among consumers and manufacturers, but stressed the packaging giant's broad geographical footprint continued to protect it from localised shocks.

Mr McGann made the comments following the group's AGM in Dublin yesterday.

The company also released first-quarter results that fell short of analysts' expectations, with pre-exceptional earnings before interest, tax, depreciation and amortisation (EBITDA) climbing 32pc to €243m, while revenue rose 18pc year-on-year to €1.8bn. The consensus analysts' estimate for the quarter was €256m.

Input costs -- everything from energy to starch -- continued to rise for the group. Its raw-material costs climbed 10pc in the period, while Smurfit Kappa's energy bills were 5pc higher, with Mr McGann describing those increases as "sharper and more sustained than previously expected".

Pressure

The group warned that a time lag in raising prices as input costs continued an upward trend would cause some near-term margin pressure.

Asked if investors remained convinced of the investment case in the company after its stock fell almost 5pc at one stage yesterday, Mr McGann said that there was "clear evidence" that support for the company had been progressive since a trough in 2009.

"We have a very good track record of cost take-out, of operating efficiencies, pricing and price recovery and a discipline in terms of capital additions," he said.

Smurfit Kappa's EBITDA fell 6pc short of expectations at Davy, but it conceded that the €49m reduction in net debt to €3.06bn during the quarter was significantly better than the €25m reduction the broker had forecast.

Credit Suisse said that while EBITDA was below forecasts, volumes in Europe exceeded expectations, providing "solid evidence" of Smurfit Kappa's ability to pass on higher prices.

Shares in Smurfit Kappa closed down 4.5pc at €8.30.

Irish Independent

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