Smurfit Kappa expects earnings to reach €900m mark this year
Cardboard packaging giant Smurfit Kappa expects full-year earnings for 2010 to be up 20pc to roughly €900m as it pushes through further price increases during the remainder of the year.
Releasing second-quarter results yesterday for the three months to the end of June, Smurfit Kappa posted a 20pc year-on-year rise in pre-exceptional earnings before interest, tax, depreciation and amortisation (EBITDA) to €221m.
That comfortably beat analyst estimates, with Davy Stockbrokers having predicted EBITDA of €198m. The analyst consensus forecast was €206m. Underlying EBITDA was 17pc, or €23m higher.
Smurfit Kappa's revenue for the quarter climbed 13pc to just under €1.7bn, with adjusted revenue (excluding a €15m positive currency impact and a further €2m associated with plant closures and an asset swap with rival Mondi earlier this year) rising by 12pc, or €186m.
Smurfit Kappa chief financial officer Ian Curley told the Irish Independent that the company had so far raised its prices across its corrugated product lines by 9.6pc since the beginning of the year and that it intended to have raised them by 15pc by the end of the year.
He said an additional 5pc increase would be required in the first quarter of 2011 in order to claw back further increases in input costs and to restore what Smurfit Kappa has described as "acceptable profitability and returns" in the business.
Corrugated packaging accounts for about 70pc of Smurfit Kappa's business.
Mr Curley added that while the company's volume output had been rising, it was off a low base and that volumes were still down on 2008 levels.
"We only saw volumes return in November and December last year, but it's been positive since then," he added.
He said that despite economic difficulties in many markets, the company's order books had held up well.
Chief executive Gary McCann said: "Although the concerns about the macro economic environment remain, Smurfit Kappa has not seen any sign of slowdown across its business to date."
Smurfit Kappa is on course to deliver €300m of cost savings by the end of this year as part of a programme that began in 2008.
About €50m in costs were taken out of the business in the first half of this year.
Davy stockbrokers' analyst Barry Dixon said that the company's results were "very positive" and has predicted full-year EBITDA of €1.2bn for 2011.
He added that an improving performance at the company would result in "an increase in cash generation and an acceleration in the rate of debt reduction".
"This in turn will mean a more significant accretion to the equity value of the business," he added.
Shares in Smurfit Kappa closed down 11 cent, or 1.4pc, at €7.73 on the Dublin market yesterday.