First Nine Months 2018 Trading Update

First Nine Months 2018 Trading Update

Smurfit Kappa Group plc (‘SKG’, 'Smurfit Kappa' or ‘the Group’) today announced a trading update for the 9 months ending 30 September 2018.

First Nine Months Overview – Delivering continued and significant year-on-year improvement

  • Group underlying revenue growth of over 7% year-on-year
  • Group pre-exceptional EBITDA growth of 27% year-on-year to €1,130 million
  • EBITDA margin at 16.9%, a 290 bps improvement over the same period in 2017
  • Net debt to EBITDA at 2.1x
  • Agreement to acquire high quality integrated packaging operations in Serbia
  • Full-year outcome materially better than 2017

Performance Review
Smurfit Kappa Group continues to deliver a very strong performance. The Group has implemented commercial initiatives and has experienced continued demand growth across most markets. The outcome reflects corrugated price recovery initiatives, the continued benefit of our capital investment programmes and lower average recovered fibre costs, largely offset by higher energy, labour, logistics and other raw material costs together with a negative currency translation impact.

Regional Summary
Europe reported continued year-on-year EBITDA margin expansion with corrugated demand in line with expectations. The Group expects further corrugated price recovery through the latter part of 2018.

The Group completed the €460 million acquisition of Reparenco during the third quarter and the integration is progressing well. We are also pleased to announce the agreement to acquire a high quality integrated packaging operation in Serbia, continuing to expand the Group’s geographic footprint.

The Americas reported continued volume growth with further margin expansion on a year-on-year basis. Our expectation is for continued improved performance in the Americas.

As communicated in September, as a consequence of the loss of control over Smurfit Kappa Carton de Venezuela, the Group has deconsolidated its Venezuelan operations, resulting in a write down of net assets of €66 million.

As required under International Accounting Standard 21, The Effects of Changes in Foreign Exchange Rates, currency is recycled on deconsolidation. This results in a non-cash exceptional charge to the Consolidated Income Statement of €1.2 billion, with a corresponding credit of €1.2 billion to the Consolidated Statement of Comprehensive Income. This has no impact on the net assets or total equity of the Group. It represents the transfer of negative currency reserves, generated by previous devaluations of the Bolivar Fuerte, from the foreign currency translation reserve into the retained earnings reserve.

Tony Smurfit, Group CEO, commented:

“As we start the fourth quarter, we see continued demand growth and further corrugated price recovery. Smurfit Kappa continues to lead the industry, delivering innovative and value added packaging solutions for our customers. In a world increasingly focused on the environment, demand for sustainable packaging solutions will only add to the existing strong secular drivers of corrugated use.

“In May of this year, we stated that we expect 2018 to be materially better than 2017. SKG is on track to deliver a materially better outcome in 2018 with our key performance measures showing significant and continuing improvement.”

Download the Full Press Release - First Nine Months Trading Update