Packaging giant Smurfit Kappa has said that its EBITDA rose by more than 27% in the first half of its financial year, to €724 million, with its half-year performance boosted by the acquisition of Reparenco at the start of July.
EBITDA margin for the period was 16.4%, which chief executive Tony Smurfit attributed to the quality of the group’s assets, its geographic reach, and its market positioning.
“SKG's integrated business model and a performance-led culture continue to drive demonstrably superior returns,” Smurfit commented.
“The performance during the first half is a measure of the tremendous efforts of our people and our continued success in developing innovative packaging solutions for our customers,” he added.
Regional Performance
The group’s European business reported an EBITDA margin of 17.3% in the first half, with corrugated volumes up 3%, as market demands remain "strong", the company said.
In the Americas, EBITDA margin was up to 15.2%, boosted by a recovery of input costs, while investments in mills in Mexico and Colombia have delivered incremental tonnage for integration.
Smurfit said that the company sees the Americas region as offering “ongoing opportunities to expand our geographic reach”.
On the acquisition of Reparenco, Smurfit said that the business represents a “compelling strategic fit for SKG and delivers a significant and early step in our medium-term plan, securing our current and expected European containerboard needs in a highly cost-effective manner”.
Smurfit Kappa anticipates its 2018 EBITDA to be "materially better" than last year, forecasting the interim dividend to increase by 10% at year end.
Analyst View
Commenting on its performance, Barry Dixon of Davy Stockbrokers said, "Smurfit Kappa Group’s H1 performance reflects ongoing strength in industry fundamentals, as well as excellent execution by its management.
"With full-year forecasts likely to increase, free cash flow will be even stronger than currently forecast. This will provide the company with further shareholder value-enhancing options. Given this potential, it is little wonder why the company’s board was so resistant to a takeover."
Elsewhere, David O'Brien of Goodbody added, "Overall, this is a solid set of numbers from Smurfit Kappa. We are likely to upgrade our forecast for the contribution from Reparenco in due course, with our underlying assumptions remaining unchanged. We believe these results are going to be well received, with upgrades to follow."
© 2018 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.
