Business Irish

Saturday 21 September 2019

Smurfit to demand compensation from Venezuela for plant seizure

European target: Smurfit CEO Tony Smurfit said the company will expand its footprint with acquisitions in Serbia and noted that uncertainty in Italy had hit business there
European target: Smurfit CEO Tony Smurfit said the company will expand its footprint with acquisitions in Serbia and noted that uncertainty in Italy had hit business there
Gavin McLoughlin

Gavin McLoughlin

Cardboard box maker Smurfit Kappa will seek compensation from Venezuela for the seizure of its operations in that country.

The seizure meant Smurfit had to write down its net assets by €66m.

CEO Tony Smurfit told analysts yesterday that he was "deeply, deeply saddened for all of the employees and their families who have benefited from secure and gainful employment during our almost 65 years of operations in that country".

"The actions taken by the government are without precedent for the [company] and Smurfit Kappa will diligently pursue its international rights in this regard, including the right to claim compensation through international arbitration proceedings under the applicable Bilateral Investment Treaty."

The company released a trading update yesterday covering the first nine months of its financial year.

It said underlying revenue was up 7pc year-on-year while ebitda (earnings before interest, tax, depreciation and amortisation) before exceptional items was up 27pc year-on-year.

Chairman Liam O'Mahony, the former CRH CEO who has been in the role for 10 years, is to be replaced as chairman by Irial Finan next year, the company said.

Smurfit also announced an agreement to buy a Serbian plant and paper mill for a combined €133m, saying this would increase the company's European footprint and see it entering "a new, well-consolidated and growing market".

"We are very happy with the performance to date," Mr Smurfit said, adding that demand growth was continuing alongside recovery in corrugated prices.

He said 2018 would be "materially better" than 2017 for the company.

He said, however, that Europe had been "a little bit slower" in the third quarter.

"I think the two regions that we felt something more than normal were within Italy and the UK. And you obviously can figure out the reasons. In Italy, there's been a lot of uncertainty, and of course, there's the Brexit issue."

He added: "The heat of the summer certainly was positive for certain aspects of the business, like brewing and things like that.

"But on a large sector of the area that we covered like agri, we would see that that has been much weaker than we would have expected because the weather has been effectively hurting a lot of the crops, and so that has been an issue."

In the Americas, the company said it had seen "continued volume growth with further margin expansion on a year-on-year basis."

But hyperinflation in Argentina (where inflation is at 40pc) had negative effects, Mr Smurfit said.

"Our key countries of Colombia, Mexico, and the US, which represent over 80pc of the region for us, continue to deliver solid results.

Elsewhere, Brazil continues to perform strongly with Argentina negatively impacting ebitda by approximately €5m.

Shares in the business were up more than 1.5pc in afternoon trading in Dublin, having pared some of the gains seen earlier in the day.

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