Wednesday 22 November 2017

Moody's raises its outlook on Smurfit Kappa to 'positive'

Gary McGann: Smurfit Kappa CEO
Gary McGann: Smurfit Kappa CEO
John Mulligan

John Mulligan

The outlook on Smurfit Kappa's ratings has been raised to 'positive' by Moody's, putting its view of the company's prospects in line with that of Fitch and Standard & Poor's.

Moody's said that it has changed its outlook from stable to positive and reaffirmed the packaging giant's Ba2 corporate family rating.

The changed outlook had been anticipated as Smurfit Kappa continues to reduce and restructure debt, and control costs in what have been challenged markets over the past few years.

"Moody's also takes comfort from the group's resilient operating performance over the past quarters despite the challenging macroeconomic environment in its European stronghold, helped by fairly stable demand, a balanced market for paper-based packaging products and good cost control, which allowed Smurfit Kappa to keep its EBITDA margin at fairly stable levels in the mid-teen percentages," said the ratings agency.

It added that the company's rating could be upgraded if Smurfit Kappa were to realise improvements in leverage falling towards a ratio of 3.5 times debt to EBITDA "on a sustained basis", with its return on cash flow to debt improving towards 20pc.

Last week, Smurfit Kappa chief executive Gary McGann had told the Irish Independent that he couldn't predict when the Moody's ratings outlook would be raised.

He said the company, which generated €7.7bn in revenue in the 12 months to the end of September, would continue to pay down debt until such a time that the company has a sub-investment grade, or a BB+ rating, that would be just very slightly below investment grade.

Shares in Smurfit Kappa closed up slightly at €17.85 yesterday.

Irish Independent

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