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07 Nov 2012

Q3 Results 2012

Smurfit Kappa Group plc (‘SKG’ or the ‘Group’) today announced results for the 3 months and 9 months ending 30 September 2012.

  • Strong EBITDA outcome of €280 million in the third quarter
  • Industry-leading EBITDA margins reflecting SKG’s continued focus on innovative packaging, cost and operating efficiency
  • Two successful bond offerings totalling €690 million resulting in reduced debt servicing costs,improved debt maturity profile and further diversification of funding sources
  • Acquisition of Orange County Container Group for US$340 million at 5.1x 2012 EBITDA post synergies
  • Expect year-end EBITDA in line with 2011
Performance Review and Outlook

Gary McGann, Smurfit Kappa Group CEO, commented: “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.

Our business also continues to benefit from the value and contribution of our market leading kraftliner mill system. This grade achieved a price increase of €50 per tonne during the quarter, bringing kraftliner price increases to €90 per tonne over the last two quarters. In recycled containerboard, we announced a €100 per tonne price increase 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.

Against a range of strategic, financial and operating measures, SKG is also pleased to report meaningful progress in the year to date. The continued strength of our operating performance has delivered a net debt reduction of €483 million in the last two years with our Net Debt/EBITDA ratio down to 2.58x at the end of September 2012.

In September, we completed two consecutive bond offerings which reduces future interest costs, extends our debt maturity profile and further diversifies our funding sources.

We recently announced our agreement to acquire Orange County Container Group, delivering immediate earnings growth for SKG upon completion, and significantly strengthening our existing position in the high growth region of northern Mexico.

These actions, which give us a debt profile appropriate to the industry and the economies in which we operate, together with the recent increase in the share freefloat to 92% following the placements by the private equity holders, have combined to address a number of issues of previous concern to the equity market.

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. The consistent quality of our earnings, together with the relentless focus on cash flow, will enable us to maintain an appropriate debt level and a sustained and progressive dividend policy, whilst continuing to target accretive acquisitions to enhance growth.”

SKG - Q3 2012 Press Release.pdf