SKG Q2 and H1 2017 Results

SKG Q2 and H1 2017 Results

Smurfit Kappa Group plc today announced results for the 3 months and 6 months ending 30 June 2017. 

Second Quarter & Half Year Key Points

  • Group revenue growth of 5% for the first six months with strong demand in most markets

  • Second quarter EBITDA of €292 million with increased sequential EBITDA margin of 13.9%

  • Kraftliner demand robust with additional €50 per tonne price increase implemented in the third quarter

  • Containerboard price increases feeding through to corrugated price recovery

  • Interim dividend increased by 5% to 23.1 cent per share

Performance Review and Outlook

Tony Smurfit, Group CEO, commented:

“We are pleased to report a good set of results for the first half which were achieved against a backdrop of continued and unprecedented recovered fibre cost inflation of approximately €75 million year-on-year. We are in the process of recovering these input costs as we move through the remainder of 2017 and into 2018.

“The Group reported sequentially improved EBITDA margins at 13.9% with both Europe and the Americas delivering improvement as a result of corrugated price recovery.

“In the first half, global containerboard supply has been very tight, and remains so. As a result of our integrated system which gives security of supply in both kraftliner and testliner, SKG continues to meet its customers’ supply needs, a competitive strength valued by both local and multinational customers. Our business continues to attract new customers as a result of this changed dynamic. We maintain our focus on investing in our asset base both organically and through acquisition to ensure we have sufficient mill and conversion capacities to meet and exceed our customers’ requirements.

“In Europe we have seen a strong demand environment in the second quarter leading to a first half increase in absolute corrugated volumes of over 2.5% with growth of 5% for the second quarter on a days adjusted basis. In the Americas, the Group reported strong volume growth in Colombia, Mexico and Brazil while Argentina and Venezuela remained challenging.

“As a result of the containerboard price increases in the first half of the year, we began, in the second quarter, increasing corrugated prices in Europe and the Americas and these increases will be progressively implemented throughout the remainder of the year and into the first quarter of 2018. However, shortage of supply and unabated input cost pressures in both regions have necessitated further containerboard price increase announcements for implementation in the third quarter. This will require a further round of corrugated price increases in the fourth quarter and beyond.

“During the first half we completed investments of €177 million across our regions and expect to spend over €400 million by year end. SKG continues to develop and improve its operations across all its business areas. Growth and cost reduction investments allied with our track record of earnings enhancing acquisitions will continue to improve the prospects for the Group.

“While recovered fibre cost pressures present short-term challenges, SKG is better positioned today than at any other point in our recent history. Our capital structure, our asset base and our integrated business model continue to strengthen. This will enhance our ability to translate today’s market conditions into improved earnings in 2017 and beyond”.  

The SKG senior management team will host a live webcast, for analysts & institutional investors, at 10.00 BST on 2 August 2017.