SKG Q1 2014 Results
Smurfit Kappa Group plc has today announced results for the 3 months ending 31 March 2014
First Quarter Highlights
Continued EPS growth year-on-year reflecting higher EBITDA and reduced interest expense
Strong Free Cash Flow in the first quarter supporting committed medium term capital allocation measures
Return on Capital Employed of 13.8%
Adoption of the Sicad I rate for our Venezuelan operations in the first quarter
S&P upgrade to BB+ rating reflecting significantly improved credit metrics
Proposed final 2013 dividend of 30.75 cent to be paid on 9 May
Performance Review and Outlook
Gary McGann, Smurfit Kappa Group CEO, commented: “In terms of the first quarter, EBITDA growth of 12% and the sharply increased EPS year-on-year reflects a strong underlying performance in our Americas business, price improvements in our European packaging operations, and materially reduced financing costs as a result of the completion of the significantly more attractive financing structure for the Group, most of which has been completed in 2013. This was offset by a number of factors including downtime in our kraftliner operations at a net cost of approximately €8 million and a further €18 million adverse impact arising mainly from the negative currency translation adjustment as a result of the Group’s decision to translate its Venezuelan operations at the Sicad I (‘Complimentary System of Foreign Currency Acquirement’) rate which was VEF 10.7 per US dollar at the end of the first quarter.
In the quarter under review, the Group reported an improved year-on-year EBITDA margin of 13.9% and an increasingly strong Return on Capital Employed of 13.8% further underlining SKG’s progress on achieving optimal returns through continued operating efficiency and judicious capital investment.
European corrugated packaging demand remains reasonable with quarter-on-quarter growth in Western Europe partially offset by lower volumes in Eastern Europe. The first quarter was also impacted by weakening recovered paper costs and an inventory build-up from the year-end, resulting in recycled containerboard price decreases which slowed down corrugated price recovery. SKG is taking approximately 25,000 tonnes of recycled containerboard downtime in the second quarter. Despite the current circumstances SKG’s integrated model has underpinned relatively good earnings development in the quarter.
The Americas business is trending strongly with good earnings progress across most of the markets. The first quarter has delivered a strong underlying financial performance as a result of good demand growth and the successful implementation of price increases in the majority of countries.
Following a number of years of debt paydown, the company has achieved its desired leverage range and is now focused on incremental high return capital projects and accretive acquisitions while sustaining a progressive dividend policy.
To increase the likelihood of success, additional resources have been applied to sourcing suitable acquisitions. The combination of efficient management of our current business and the above mentioned initiatives will deliver earnings growth momentum. In the context of the current economic environment, the Group continues to expect to grow its earnings year-on-year.”