Smurfit Kappa benefits from low recovered fibre prices

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Smufit Kappa Group
Smufit Kappa Group

Packaging company Smurfit Kappa Group (SKG) has released its half yearly accounts which show that its total revenue was helped by lower recovered fibre prices.  

The Group reported pre-tax earnings of €724 million (£645m), a 27% increase on the same period last year. In particular, the company benefitted from lower recovered fibre prices of €73 million (£65m) in the first half of 2018. This followed near record highs in 2017. 

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In the first half of 2018, the price of recovered fibre in SKG’s European business was down 24% year-on-year, with downward pressure on this material ending in the second quarter. 

SKG’s reported EBITDA margin of 16.4% was up on the 13.4% in 2017, highlighting the benefits of ongoing corrugated price recovery and lower recovered fibre costs. 

The company expects recovered fibre prices to increase in the long-term, but it believes the short-term price outlook remains uncertain. 

SKG’s results were negatively impacted by higher costs in areas including labour, distribution, wood and other raw materials.  

In Europe, EBITDA increased by 34% to €587 million (£523m), with prior investments, input cost recovery and volume growth being vital factors to achieving this result. 

Reported corrugated volume growth was 3% year-on-year with the benefits of acquisitions and organic growth being offset by volume loss due to price recovery initiatives.  

Pricing for both recycled containerboard and kraftliner was stable in the second quarter said SKG after they increased in both grades in the first quarter of 2018. 

The working capital outflow in 2018 was €149 million (£133m) compared to €125 million (£111m) in 2017 and was a combination of an increase in debtors and stocks, with these increases reflecting the higher corrugated pricing, but in contrast to 2017, lower OCC costs.  

Smurfit Kappa Group chief executive Tony Smurfit said: “SKG is pleased to deliver significant improvement against our key performance measures. With an increase in EBITDA of over 27% to €724 million and an EBITDA margin of 16.4% our first half performance reflects the quality of our assets, geographic reach and market positions. SKG’s integrated business model and a performance-led culture continue to drive demonstrably superior returns.  

“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.” 

Overall the company had a revenue of €4,428 million (£3,942m), a 5% increase on 2017.  

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