Saturday 16 December 2017

Smurfit Kappa boss upbeat despite challenging economic backdrop

‘We have record results out of Italy right now, and difficult results out of France,’ says Smurfit Kappa boss Tony Smurfit
‘We have record results out of Italy right now, and difficult results out of France,’ says Smurfit Kappa boss Tony Smurfit
John Mulligan

John Mulligan

Smurfit Kappa chief executive Tony Smurfit has insisted he's not concerned that the group's share price is lagging that of its peers despite a strong performance by the business.

The company yesterday reported earnings before interest, tax, depreciation and amortisation of €593m during the first half of the year, an 8pc increase year-on-year. It also hiked its interim dividend by 10pc and said that despite concerns for global growth this year, the company is poised to deliver earnings growth in 2016.

But its shares fell over 3pc in early trading as investors digested the prospect of tighter margins and the impact of currency volatility.

"It's not my job to predict where the share price should be, but relative to others we seem to be undervalued," he told the Irish Independent. "We have to work on hard on ensuring that people understand the Smurfit Kappa story. When you come from a leveraged position that we have been in in the past, I think it takes a while to shake that off."

"When I see the opportunities that Smurfit Kappa has to grow, ultimately that will reflect itself."

He added that as a public company, Smurfit Kappa is always open to potential bids.

"We were a sitting duck at €2 a share, and at €10 and at €15. We can't always think about very short-term movements in the share price. You have to the right thing for the long-term."

Smurfit Kappa's revenue in the first half of the year edged 1pc higher to €4.04bn. Mr Smurfit said that the group's diverse geographic reach continues to benefit the firm, and pointed out that even within Europe, its fortunes differ in every country.

"What happens in Italy, for instance, is very different to what happens in France, but France has been doing pretty poorly economically, as has Italy. Yet, we have record results out of Italy right now, and difficult results out of France," he said.

Smurfit Kappa also said that any impact of Brexit on its business will be largely a result of the knock-on effect on UK and European GDP and confidence.

"It introduces uncertainty," said Mr Smurfit. "I think that one of the things that worries me for business is not the here and now, but the longer term issue of how politics will interrupt business in the future."

Smurfit Kappa has deepened its reach in the Americas over the past couple of years, having acquired businesses in the US that reach into Mexico, and also spending €186m earlier this year to buy two companies in Brazil.

Mr Smurfit said the group continues to remain committed to Venezuela despite its skyrocketing inflation and hugely challenging economic backdrop.

He insisted the group "will never draw a line" under its business there. "We are one of the few companies in the country that export anything. We export paper to ourselves and we consume it ourselves. That's a very big positive that others don't have."

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