Business Irish

Sunday 19 November 2017

Smurfit Kappa hikes dividend on market turn

Smurfit Kappa chief Gary McGann.
Smurfit Kappa chief Gary McGann.
John Mulligan

John Mulligan

Packaging giant Smurfit Kappa has seen broad-based economic recovery across Europe despite continuing political tensions in the region, according to chief executive Gary McGann.

The company's shares jumped yesterday as second-quarter earnings before interest, tax, depreciation and amortisation (EBITDA) declined 3pc to €285m. The figure was slightly better than analyst expectations. The company also boosted its interim dividend by 30pc to 20 cent per share.

"We're beginning to get the benefits of some of the investments and actions we've taken. The markets are turning," Mr McGann told the Irish Independent.

"The general recovery in Europe is definitely under way," he said. "We've got a lot of positives at the moment."

"Clearly, there are pockets of pain all over the place," he added, referring to events such as those in Greece, "but we're definitely seeing recoveries. Obviously, one needs to be minded of the fact that the heart of the improvement in Europe is quantitative easing and the relative value of the currency. There's still a lot of work to be done to improve European competitiveness."

Revenue at Smurfit Kappa edged 1pc higher to €2.03bn during the second quarter, while earnings per share rose 26pc.

Mr McGann said markets in Spain and Italy have also improved, with the agricultural sector having picked up in Spain. Smurfit Kappa's second- quarter EBITDA was primarily dented by significantly lower earnings in Venezuela following the adoption of a new exchange rate for the country's Bolivar currency.

Smurfit Kappa has endured political and economic impacts on its Venezuelan operations over the past few years, but Mr McGann said the company remains committed to the business there.

"We have a fundamentally good business in Venezuela. It has known good times in the past. Politically, the country is in challenged mode, to put it mildly, and also economically. But we're making profits in local currency there. We don't exit countries," he insisted.

Smurfit Kappa has completed eight acquisitions over the past 14 months and remains open to more bolt-on deals and even larger acquisitions, according to Mr McGann.

The group's net debt rose by €170m during the last quarter to €3.1bn mainly as a result of the completion of over €160m in acquisitions, and higher dividends paid during the quarter. They were offset slightly by foreign exchange gains.

Mr McGann has headed Smurfit Kappa, and its previous incarnation Jefferson Smurfit, since 2002.

He joined the group in 1997 as chief financial officer from Aer Lingus, where he was chief executive.

He's resigning as Smurfit Kappa chief executive at the end of this month but will remain as a non-executive board member.

He's being succeeded by chief operations officer Tony Smurfit.

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