SKG Q2 and H1 2013 Results
Smurfit Kappa Group plc (“SKG” or the “Group”) today announced results for the 3 months and 6 months ending 30 June 2013.
First half European box volume growth in excess of 2% year-on-year; Americas growth of 5% excluding SK Orange County (‘SKOC’)
Cost take-out of €100 million re-confirmed
EBITDA margin progression from 12.7% in quarter one to 13.4% in quarter two
Capital structure successfully repositioned from leveraged to corporate
Interim dividend increased by 37% to 10.25 cent
Recycled containerboard price increase of €50 per tonne effective from 1 August
Performance Review and Outlook
Gary McGann, Smurfit Kappa Group CEO, commented: “Smurfit Kappa Group is pleased to report first half revenue growth of 6% and strong EBITDA of €512 million. The strong result has been achieved through improved pricing, continued cost take-out and enhanced efficiency programmes. In spite of the recessionary conditions in Europe, the Group delivered like-for-like box volume growth in Europe of over 2% year-on-year and 5% volume growth in the Americas, excluding box volumes of SKOC.
SKG’s ability to win new business in the current challenging operating environment is evidence of the Group’s strong value proposition for our customers. With an integrated global network of packaging designers, trademarked software tools and technical engineers, SKG is well placed to deliver a superior total offering together with real cost efficiencies throughout its customers’ supply chains. In July the Group announced the development of a unique 3D tool entitled ‘Virtual Store’ to enhance the understanding of shopper behaviour. This will translate into real benefits for retail ready packaging design.
With the successful integration and performance of SKOC, the Group is progressing well with its strategy to expand in the higher growth markets of the Americas. Packaging volumes in the region have grown by 5% year to date and EBITDA margins are recovering to their previous relatively high levels, assisted by the absence of the significant one-off issues which affected the business in 2012. The accretive acquisition of SKOC reflects the Group’s ability to identify, acquire, and integrate complementary businesses.
The continued focus on increased geographic diversity, together with the integrated model, is underpinning the consistency of SKG’s earnings irrespective of economic circumstances.
In July, the Group successfully completed a new €1,375 million refinancing of its Senior Credit Facility on a lower margin unsecured basis comprising a €750 million term loan with a margin of 2.25% and a €625 million revolving credit facility with a margin of 2.00%. This transaction represents a major milestone in the evolution of the Group’s capital structure and concludes the successful re-positioning of SKG’s debt profile from leveraged to corporate, whilst reducing interest costs by approximately €13 million per annum. In addition SKG has put in place a new trade receivables securitisation programme of up to €175 million which carries a margin of 1.70%. These transactions provide the Group with greater financial flexibility, including the potential to refinance part of its more expensive bond debt at the appropriate time.
The Group confirms it will pay an interim dividend of 10.25 cent, a year-on-year increase of 37%. This improved dividend represents the Group’s commitment to provide shareholders with certainty of value and reflects the confidence of the Board in the Group’s performance and prospects.
Rising input costs and improving circumstances in the European paper industry including, low inventory levels, solid export markets and relatively high operating rates support higher recycled containerboard prices. The Group has therefore announced a price increase of €50 per tonne effective from 1 August. With this move towards more economically sustainable recycled paper pricing, the Group will recover the increased costs in its corrugated pricing with the usual three to six month lag. This in turn will support continued performance and growth into 2014”.