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Smurfit shares surge to near 5-year high

Wednesday, February 06 12:06:17

Irish packaging group Smurfit Kappa posted an 11pc rise in full-year pretax profit, buoyed by strong demand and increased exposure to high-growth markets such as Mexico.

Shares in the group, which designs and manufactures paper-based packaging for the likes of Unilever and Procter and Gamble, were up 2.5 percent at 10.30 euros earlier this morning, not far short of a five-year high of 10.64 euros set last week.

Strong demand and a stable outlook also promoted Europe's leading containerboard and corrugated packaging producer to increase its final dividend 37 percent to 20.5 cents per share.

Dublin-based Smurfit, formed through the 2005 merger of Jefferson Smurfit and Kappa Packaging, has for the last four years focused on paying down debt which stood at 2.79 billion euros at the end of 2012.

The company, which last month successfully refinanced some of its debts with a 400 million euros note offering, said yearly pretax profit rose to 331 million euros ($448 million), boosted by cost controls, on revenue which was flat at 7.34 billion.

"This is our second largest result since 2007 and this performance reflects the benefit of our continuing focus on operating efficiency," Chief Financial Officer Ian Curley told reporters.

Curley said the sharply increased dividend "reflects our confidence in the underlying performance (and) prospects for business and sustainable strength of our business model."

The group's earnings before interest, tax, depreciation and amortisation (EBITDA) rose slightly to 1.02 billion euros and its EBITDA margin widened to 13.9 percent from 13.8 percent.

Smurfit made its first major acquisition since 2005 when it bought Mexican business Orange County Container Group (OCCG) for $340 million in September.

The target, an integrated paper-based packaging company with significant corrugated and converting operations, reported EDITDA about 13 percent ahead of plan, Smurfit said.

Curley said the company would continue to lower its debt, aided by the proceeds of continued strong growth in sales to European customers.

"We've had good stability of demand with regard to the consumer through Europe for the past couple of years," he said.

Analyst Barry Dixon at Davy Research said the results should reassure investors that Smurfit would not pursue an aggressive acquisition strategy and would instead focus on its stated objective of following a "progressive dividend policy". (C ) Reuters