Smurfit Kappa Group has reported a 77 per cent drop in second quarter pretax profits to €19 million and said it plans to raise the price of its containerboard as the cost of raw materials increases and demand stabilizes.
Europe’s largest maker of cardboard boxes will increase the price of all its brown containerboard grades by €60 per ton with effect from September 1st, the company said in a statement today.
Recycled containerboard has been at €275 a ton for the last four months, according to Goodbody Stockbrokers.
The effects of the price increase will come through in early 2010, the company said.
“While there is growing evidence that the rate of demand decline levelled off in quarter two, as yet tangible signs of economic recovery are limited despite the improvement in confidence indicators,” chief executive Gary McGann said in the statement.
“Looking towards the second half of the year, demand is expected to remain stable at current levels, while raw material costs are on an increasing trend.”
Second-quarter earnings before interest, tax, depreciation and amortization fell less than analysts estimated, dropping 29 per cent to €184 million. Its EBITDA margin for the quarter was 12.3 per cent, down 1.6 percentage points year-on-year.
Sales declined 19 per cent to €1.5 billion during the quarter. Operating profits fell 44 per cent to €87 million. For the first six months of the year pretax profits were down 73 per cent to €39 million with revenues off 18 per cent at €3 billion.
The group’s net debt fell 4 per cent to €3.1 billion. A cost reduction programme had delivered €60 million in savings during the first half, the company said.
The company said it had secured amendments to its credit facilities meaning it has no “material maturity until December 2013.
Shares in Smurfit closed largely flat at €4.25, giving the company a market value of €926 million.
Additional reporting Bloomberg
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