Smurfit Kappa reports pre-tax loss on falling demand

Packaging company Smurfit Kappa posted a full-year pre-tax loss as demand from manufacturers and consumers dropped and prices declined on higher inventories at its rivals.

The company reported a pre-tax loss of for the year ending December 31st compared to a pre-tax profit of €170 million a year ago. It is suspending dividend payments for this year.

Earnings before interest, tax, depreciation and amortisation (ebitda), excluding exceptional items declined 12 per cent to €941 million while revenues were 3 per cent lower at €7.06 billion.

For the fourth quarter EBITDA fell 29 per cent to €196 million. The group’s fourth-quarter figures were affected by a goodwill writedown of €171 million and charges adding up to €78 million on fixed assets and investments, Smurfit said.

Smurfit Kappa chief executive Gary McGann said against an increasingly difficult market backdrop the group had delivered “a relatively strong financial outcome” with free cash flow of €281 million and a reduction of €219 million in net debt. The company has a debt pile of €3.19 billion.

“With negative growth forecast for many European economies in 2009, the group expects a continuation of difficult operating conditions,” Mr McGann said in a statement.

“The group is suspending dividend payments in 2009 and will re-evaluate its future dividend policy in light of prevailing market conditions and capital structure.”

The company is to seek cost cuts of €75 million in 2009 and €50 million next year.

He said the group remains in a strong cash position with €720 million cash on its balance sheet and €600 million in unused credit lines.