SKG Q2 and H1 2015 Results

Smurfit Kappa Group plc today announced results for the 3 months and 6 months ending 30 June 2015.

  • Pre-exceptional EPS growth of 38% in the first half of the year
  • EBITDA margin of 14% expected to improve sequentially through the second half of 2015
  • Interim dividend increased by 30% to 20 cent, bringing full year 2015 payment to 60 cent per share
  • €189 million of acquisitions completed in the year to date
  • Group corrugated packaging growth of over 6% year to date with underlying growth at over 4% in Europe
  • Good progress on containerboard pricing and strong packaging demand providing underpin to corrugated price increases towards the latter part of 2015 and into 2016 

Performance Review and Outlook 

Gary McGann, Smurfit Kappa CEO, commented: “In the first half of the year the Group delivered EPS growth of 38%, underpinned by good underlying business conditions, significantly reduced long-term funding costs and the earnings impact of capital investments, acquisitions and efficiency programmes completed within the last twelve months. The EBITDA result of €551 million in the year to date also reflects the negative impact of the Group’s adoption of the variable Sistema Marginal de Divisas (‘Simadi’) rate for the consolidation of our Venezuelan operations, somewhat offset by recent acquisitions. The Group Return on Capital Employed (‘ROCE’) is 14.6%. As underlying EBITDA margins improve through the second half of the year and acquisitions begin to contribute to earnings, the ROCE is expected to revert back to 15% by the year end.

“European corrugated packaging volumes have remained strong, delivering volume growth of over 4% in the first half of 2015. As a consequence of this consistently good growth, a balanced supply/demand environment and upward pressure in recovered paper prices, the European containerboard market has continued to tighten. As a result the Group has sought and is achieving virgin and recycled containerboard price increases and these increases are expected to support higher corrugated pricing at the backend of the year and into 2016.

“The Group’s operations in the Americas are performing well and the integration of the recently acquired corrugated packaging businesses in the US, Central America, Colombia and Dominican Republic is progressing as planned. The Group will continue to seek to expand its strong position across this region through accretive acquisitions and organic business growth, and expects EBITDA margins to continue to improve through the second half as corrugated price increases are implemented, particularly in the major markets of Colombia and Mexico.

“The Group’s leverage increased to 2.7 times net debt to EBITDA due to the completion of a number of acquisitions during the quarter, 2.6 times on a pro forma basis adjusting for the earnings from acquisitions less disposals. The leverage ratio is expected to further reduce through the historically cash generative second half of the year, while the Group maintains significant financial flexibility through its strong free cash flow, cash balances and a €625 million revolving credit facility.

“The Group is pleased to confirm an increase in the interim dividend to 20 cent, bringing the total payment in 2015 to 60 cent per share, an increase of 30% year-on-year. The material increases in the dividend in recent years reflect the Board’s continued confidence in the business’ capacity to support a strong and progressive dividend.

“The Group is a significantly stronger business today than at any other time in its recent history, and its effective capital structure, well invested asset base and increasingly differentiated customer offering provide a strong platform to drive the business forward. We continue to expect to deliver earnings growth year-on-year, and we remain focused on accelerating returns to shareholders through delivery against our capital allocation commitments, maintaining a progressive dividend, sustaining high-return capital expenditure and delivering opportunistic growth through accretive acquisitions.”

Download Q2 2015 Results press release (688kb)

Download Q2 Results presentation (977kb)