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Sustainable packaging push is 'big positive' for Smurfit Kappa

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Tailwind: CEO Tony Smurfit believes his company can make the most of a move away from plastic packaging

Tailwind: CEO Tony Smurfit believes his company can make the most of a move away from plastic packaging

Tailwind: CEO Tony Smurfit believes his company can make the most of a move away from plastic packaging

Tony Smurfit, the boss of packaging giant Smurfit Kappa, believes that a push by consumers and businesses for sustainable packaging materials is a "very big positive tailwind" for the group as the environment, social and governance agenda become increasingly hot topics for corporations from airlines to food producers.

As the packaging firm yesterday reported record annual earnings of €1.65bn for 2019, a major focus in its presentation to analysts was the impact of the continuing sustainability initiatives within the group, as well as the surge in interest amongst its customers for packaging solutions that don't involve plastic.

As a paper-based packaging firm, Mr Smurfit said the company can play a key role in the shift from unsustainable solutions to greener products.

"It is a game-changer," he said, referring to cases such as one where the group worked with a beer producer to help eliminate plastic shrink-wrap around cans by using a new cardboard-based packaging solution.

Of Smurfit Kappa's 1.5pc organic increase in volume growth last year, a very small part was a result of customers replacing plastic with corrugated packaging, however.

"We did a launch with a medium-sized Belgian beer customer, which we had planned in 2018 and they're just launching their product in the last quarter," he said, adding that the customer wanted to eliminate all plastic packaging.

"It took 18 months to go from start to finish. Changing the packing lines and the filling lines takes a long time," Mr Smurfit said.

"We're working on tons and tons of projects all over the place and it's going to be a very big positive tailwind for us."

Smurfit Kappa chief financial officer Ken Bowles told the Irish Independent that the impact of the shift from plastic to sustainable packaging will probably become meaningful for the group within three to five years.

"A lot of the supermarkets have gone corrugated already," he said. "Some retailers have been quicker to move in this space than others, in terms of pushing back onto their suppliers."

However, he acknowledged that corrugated packaging is also slightly more expensive than plastic.

"In the initial stages of any push, it's probably the consumer who will end up paying, but it's not that they would notice," he insisted.

Smurfit Kappa's €1.65bn in earnings before interest, tax, depreciation and amortisation (Ebitda) last year was up 7pc on the figure for 2018. Its revenue for 2019, at €9.04bn, was just 1pc higher.

Despite lacklustre economic growth in Europe as a whole, the group said its Ebitda in the region rose 5pc to €1.33bn.

"Between 60pc and 70pc of our business is fast-moving consumer goods (FMCC) and while people might change price points and where they buy their packaging, they're still fundamentally buying packaging," said Mr Bowles.

"On congested retail shelves, where our boxes are really the marketing and merchandising medium, our customers are willing to invest in that to keep or gain market share," he said.

Indo Business