Q3 2014 Results

Smurfit Kappa Group plc today announced results for the 3 months and 9 months ending 30 September 2014.

  • Third Quarter & First Nine Months | Key Points

  • Year to date pre-exceptional EPS growth of 55% reflecting a good operational performance and lower financing costs
  • Continued growth in return on capital employed (‘ROCE’) to 14.5%
  • Strong free cash flow continues to support growth and lower leverage of 2.2 times net debt to EBITDA
  • Implementation of price increase of €30 per tonne in both testliner and kraftliner
  • Corrugated volume growth of 2% year-on-year to September 2014
  • Immediately accretive acquisition of Bates Container for US$158 million completed in October 2014
  • SKG to deliver 2014 EBITDA results in line with market expectations
Performance Review and Outlook 

Gary McGann, Smurfit Kappa Group CEO, commented: “In the first nine months of 2014 Smurfit Kappa has delivered year-on-year earnings growth with EBITDA of €866 million, an increase of 6%, and pre-exceptional EPS of 115.2 cent, an increase of 55%. These results reflect the continuing benefits of the Group’s integrated business model, the strength of its international portfolio of businesses, the consistent delivery on cost reduction initiatives and a fundamentally improved capital structure. As a consequence, ROCE, which is a key performance measure for the Group, continued to improve to 14.5% in the quarter. 

“In spite of a somewhat weaker macroeconomic backdrop in the third quarter the Group continued to see demand growth in Europe through the period, and delivered a strong performance in the region supported by pricing actions and continuing cost take-out initiatives. The implementation of both recycled and virgin containerboard price increases during the quarter is underpinning corrugated pricing. 

“As part of its ongoing focus on controlling operating costs and improving operational efficiency, the Group has commenced a process of engagement with its Works Councils and Trade Unions regarding the rationalisation or closure of four corrugated facilities and a recycled containerboard mill in Europe. This action will incur an estimated total charge of €50 million in 2014, €15 million of which has been included in the third quarter results. 

“In the Americas, SKG’s business continues to operate well with organic volume growth across most countries in the quarter. Colombia and Mexico had a strong performance, while Venezuela remains challenging due to high inflation and a weakening currency.

“Acquisitions, including Bates Container in the US, Corrumed in Colombia and Rierba in the Dominican Republic, were completed in 2014 for a total consideration of approximately €155 million, reflecting the Group’s objective of further integrating Smurfit Kappa Orange County’s (‘SKOC’) Forney mill and of pursuing acquisitions in growth regions such as Colombia and the Dominican Republic. 

“Despite macroeconomic concerns, the Group expects to deliver 2014 EBITDA growth in line with market expectations. 

“Following a period of debt paydown SKG is substantially better positioned today than at any other point in its recent history, with a well invested asset base and an optimal capital structure. The full year contribution of recently acquired businesses, a substantially reduced interest expense and the Group’s unrelenting focus on operating efficiency will deliver and drive value. Going forward, this presents a broad range of strategic and financial options, and the capacity to deliver an improved financial performance at all points of the industry cycle.”