Smurfit shares gain on pledge to consider capital options
Published 13/02/2014 | 02:30
Shares in Irish packaging giant Smurfit Kappa soared over 6pc at one stage yesterday after it hiked its dividend payout and promised to return more capital to shareholders if it doesn't complete acquisitions.
The company also reported a 22pc year-on-year rise in fourth quarter earnings before interest, tax and depreciation (EBITDA) to €291m, as revenue in the period climbed 11pc to €2.03bn. On a full-year basis, EBITDA was 9pc higher at €1.1bn while revenue was up 8pc at €7.95bn.
The company increased its final dividend payment by 50pc.
Speaking to the Irish Independent, Smurfit Kappa chief executive Gary McGann, pictured, said his preference would be to make acquisitions rather than to return capital directly to shareholders.
Smurfit Kappa is targeting acquisitions in Eastern Europe and the Americas, and Mr McGann said it had the firepower to spend "at least" €300m a year on such activity without negatively impacting its debt metrics.
The packaging firm – which has operations across Europe as well as in Mexico, South and Latin America – has been steadily reducing its debt profile since its stock market flotation in 2007 in order to take it from a leveraged credit profile to a sub-investment grade corporate profile.
"The profile of the group has fundamentally changed and the progress made offers the company a wide range of strategic and financial options," said Mr McGann.
Full-year revenue at the group was boosted by €409m from net acquisitions, primarily its US-based Smurfit Kappa Orange County business that has a large footprint in northern Mexico. But the figure was reduced by net negative currency movements and hyperinflationary adjustments of €185m.
Smurfit Kappa has a significant operation in Venezuela, where the currency was devalued last year. The government in the oil-rich country has been probing foreign and domestic firms in an effort to blame them for its rampant inflation.
The chief executive said that the business environment across Europe remained mixed.
"It's hesitant and there's not a sense that we've turned a corner yet," he said.
He said tackling unemployment remains the key challenge to spurring recovery and growth.