Packaging giant Smurfit Kappa has posted an "excellent" set of results in the first half of its financial year, according to CEO Tony Smurfit, with the group seeing revenue up 4% and EBITDA rise by 17%.
"The continued execution of our Medium-Term Plan together with our resilient business model allows us to continue to progress and deliver consistently excellent performance," Smurfit said.
Here's how leading industry analysts viewed its performance.
Pierce Byrne, Cantor Fitzgerald
"[These results] showed a strong start to H1 for Smurfit Kappa. Underlying operating trends are encouraging and management are delivering on its Medium-Term Plan. Management continue to invest across its business with opportunities in lightweight containerboard in Europe and alternative packaging in the US. Valuations continue to trend lower than historical averages at c. 6x EV to forward EBITDA.
"An economic slowdown, possibly induced by US-China trade negotiations, could see reductions in demand for packaging. We remain cautious on the outlook for Smurfit Kappa as we expect volatility ahead of the UK’s exit from the European Union to weigh on share price in the short time. We are advising clients to use this morning’s strength to reduce exposure ahead of an expected volatile period into the October Brexit deadline. We update our recommendation to market perform on Brexit risk."
Barry Dixon, Davy
"Smurfit Kappa Group’s 10% increase in its interim dividend is significant. Not only does it signal management’s confidence in the sustainability of profits and cash flow, it may also point to a more generous dividend policy in the future. At just over 6x EV/ EBITDA, the stock is ripe for a re-rating."
David O'Brien, Goodbody
"Smurfit Kappa has reported H119 EBITDA of €847m (+17% yoy, or 11% excl IFRS 16) which compares to our forecast of €866m. This implies Q219 EBITDA growth of 4% (excl IFRS 16) versus 19% in Q119. The key variances with our forecasts were a stronger outturn in the Americas offset by higher central costs and Europe being slightly behind forecast.
"Management has commented in the outlook that it is 'highly confident of another year of progress' which is reflected in the Board’s decision to recommend a 10% dividend increase (4% ahead of our expectations).
"The key takeaways from the results are: (i) Group revenue has increased by 2% in Q219 (+7% in Q1) which translated into 4% group EBITDA growth (excl IFRS 16) (+19% in Q1); (ii) European corrugated volumes increased by “approximately 2%” in H119 consistent with performance in Q119; (iii) In the Americas, EBITDA came in 6% ahead of our forecasts at €179m with strong performances in the US, Colombia (volumes +9%) and Mexico; (iv) OCC cost savings amounted to €32m (€25m Europe, €7m Americas); (v) corrugated box prices were higher yoy in H119. Overall, this is a solid performance from Smurfit Kappa and we expect to make no material changes to forecasts."
© 2019 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: European Supermarket Magazine.
