Smurfit Kappa’s shares jumped on Wednesday as the cardboard box-making giant’s earnings for the first half of the year beat market expectations, as it managed to hike prices amid soaring production costs and supply chain disruptions.
Earnings before interest, tax, depreciation and amortisation (ebitda) rose 50 per cent to €1.17 billion for the period. This meant that ebitda for the second quarter came to €660 million, which was materially ahead of the median €515 million forecast of analysts at Goodbody Stockbrokers and Davy.
Davy analyst Allan Smylie described it at a “blow-out quarter”, adding that he was raising his full-year earnings forecast for the group by €150 million to €2.2 billion.
Smurfit Kappa shares were up more than 5 per cent in midafternoon trading in Dublin, though they remain down 30 per cent so far this year, amid market concerns about the outlook for the global economy.
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Smurfit Kappa said that the result reflects the resilience of the group’s integrated model, benefits of an ongoing investment programme and ability to pass on rising prices to customers, even as it deals with higher year-on-year energy, recovered fibre, labour, distribution and other raw material costs.
“In the first half of 2022, we have overcome many challenges including sharply increasing input costs, logistics and supply chain constraints, Covid-19 disruption and the impact of the war in Ukraine,” said chief executive Tony Smurfit.
The company said it will increase its interim dividend by 8 per cent to 31.6c per share.
Demand for Smurfit Kappa boxes, its end product, grew by 2.5 per cent over the first months of the year.
“Both our regions performed strongly during the first six months, with Europe reporting ebitda of €926 million with an ebitda margin of 18.7 per cent and the Americas reporting ebitda of €271 million with an ebitda margin of 18.8 per cent,” Mr Smufit said.
The group’s margin widened to 18.4 per cent from 16.7 per cent for the previous year. However, its margin for the second quarter came to 19.6 per cent, a record for the group.
Smurfit Kappa raised €660 million in a share sale in late 2020 to accelerate investment projects to take advantage of a surge in ecommerce and a shift across the consumer goods industry towards sustainable packaging.
The Dublin-based group announced at the start of April that it had decided to quit the Russian market, joining a host of multinationals that pledged to stop business in the country after it invaded Ukraine in late February. Russia represented about 1 per cent of the group’s €10.1 billion group sales last year.
Smurfit Kappa said that while its planned exit from the Russian market is in the early stages, it hopes to conclude it by the end of the year.
