Smurfit to benefit as Venezuela puts halt to currency devaluation
Packaging group Smurfit Kappa is set to benefit after the Venezuelan president told the country's parliament that the local currency won't be devalued this year.
President Nicolas Maduro, above, who succeeded Hugo Chavez following his death last year, said business profit margins would also be capped at 30pc.
Smurfit Kappa is the largest packaging firm in Venezuela. It confirmed last month that it had been the subject of an intervention by the government, which has been battling to curb inflation in the basketcase economy.
Smurfit Kappa's operations can now be targeted with additional inspections and audits covering areas such as tax, costs, pricing and employment practices.
Last year, Venezuela devalued its currency, the Bolivar. That resulted in Smurfit Kappa recording a €142m reduction in the value of its net assets and a €28m reduction in the euro value of its group cash balances.
It was widely expected that Venezuela would further devalue its currency early this year.
But with the Bolivar now not set for devaluation, and the profit margin cap of 30pc above that which Smurfit Kappa generates on its businesses in the country, Davy Stockbrokers has said that the company's earnings in Venezuela now look "more secure".
Davy said it had been assuming that a 40pc devaluation of the Bolivar would be implemented. However, it said if the current exchange rate was maintained, there was about a 2pc upside to its earnings forecasts for Smurfit Kappa.