Smurfit Kappa’s posts 24% increase in Q3 pre-tax profits

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Smurfit Kappa’s posts 24% increase in Q3 pre-tax profits

Smurfit Kappa’s posts 24% increase in Q3 pre-tax profits
November 07
15:33 2012

Corrugated giant Smurfit Kappa has reported a 24% rise in pre-tax profits for the three months to the end of September

The firm announced pre tax profits of €105m this morning (7 November).

Third quarter revenues fell by 2% to €1.830 billion from €1.868 billion in challenging markets while basic earnings per share rose by 50% to 33.4 cent from 22.2 cent.

Despite macroeconomic pressures, the firm said it continues to expect full year earnings before tax and amortisation to be in line with 2011.

Smurfit Kappa said its European EBITDA increased by 4% year on year in the first nine months of 2012 to €644m, in spite of a fall in revenue.

‘Challenging markets’

Chief executive Gary McGann said: “SKG is pleased to report a strong EBITDA outcome of €280 million in the third quarter of 2012. This performance reflects the strength of the Group’s integrated model and the benefits of its operating efficiency in a generally soft macroeconomic environment.

“Our differentiated European offering and extensive market footprint has underpinned a strong performance in the period. Following a number of one-off items in the first half of the year, our Latin American operations improved their overall profitability in the third quarter, and continue to provide important diversity and growth opportunities for SKG.

“In challenging markets, activity level was satisfactory as a result of our continued focus on our corrugated customers by supporting their marketing efforts, providing innovative packaging solutions and optimising costs throughout their supply chains.”

Eastern Europe and Latin America

It said that paper price and other input costs increases during the period underpinned corrugated pricing which remained fairly stable. It noted that Eastern European countries performed well with 3% growth in the Polish box market.

Revenues from its Latin American operations rose to €1.032 billion in the nine months to the end of September and now represents 19% of the group’s overall revenue.

The company said that the business continues to benefit from the value and contribution of its market leading kraftliner mill system. This grade saw a price increase of €50 per tonne during the quarter, bringing price increases to €90 per tonne over the last two quarters.

In recycled containerboard, it also announced a €100 per tonne price hike which has been partially implemented to date. ”With recovered paper costs on a long term upward trend, we will need further price increases to restore economic margins,” the company cautioned.

Smurfit Kappa said it has completed two bond offerings, which reduced its future interest costs, extended its debt maturity profile and further diversified its funding sources. It noted that it has reduced its net debt by €483m in the last two years.

Quality earnings stream

McGann concluded: “Despite macroeconomic pressure we continue to expect full year EBITDA in line with that achieved in 2011. The range of steps we have undertaken in our business positions SKG for performance and growth, and our objective is to continue to deliver a quality earnings stream with industry leading EBITDA margins.”

Smurfit Kappa Q3 results

Q3                         Q2

Revenue                                €1,830                 €1,868

Profit before income tax  €105                       €85

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