If you grew up in the 1990s, there’s a good chance you saw The Simpsons’ interpretation of a cardboard box factory. It’s fair to say it did not create the most exciting image of what goes on at such a place.
While the Springfield box factory was a dank mess of little importance, Smurfit Kappa plays a key role in the global economy – none more so than during the pandemic when housebound consumers went online shopping at a rate never seen before.
As one of the biggest makers of cardboard boxes, it profited from retailers needing ever more packaging for everything from giant TVs to the latest hardback.
Not surprisingly, investors reaped the benefit. From just under €21 in late March 2020, the stock more than doubled to top €50 last summer. As with many pandemic-related highs, though, it hasn’t lasted. The shares have fallen back to €36.50 on Wednesday, albeit off from its 2023 lows. Don’t forget, the Smurfit board were under pressure as recently as 2018 to accept a takeover bid from rival International Paper that valued its shares at about €37.54.
Beyond the pandemic, the latest Smurfit figures point to a slowing global economy. Sales fell 9 per cent while cardboard consumption dropped 6 per cent.
There is “generally tepid demand out there from the consumer”, Tony Smurfit, chief executive, told analysts, with people choosing things like holidays instead of buying more stuff. When that demand will return as the economic clouds darken globally, is unclear. “Your guess is as good as mine on that,” Mr Smurfit said. Customers’ stocks of packaging will normalise, “but when that happens, I don’t have a crystal ball for that”, he added.
The straight-talking Mr Smurfit is definitely not the only chief executive or policymaker who can’t see where the economy is going as interest rates rise and growth slows, but three cheers for his honesty. It takes a certain self confidence to effectively tell the market “I don’t know”, when asked a question. Perhaps it helps to have your surname above the door. Still, it would be welcome if more leaders took a similar attitude.
