Smurfit Kappa Group Plc (LON:SKG) have swung to an annual profit and given shareholders an impressive update on Wednesday.
The Dublin based firm said that it had reached an annual profit across its financial year and as a result has lifted its final payout.
Notably, the firm said that one of costs across 2018 and issues with its Venezuelan business didn’t repeat, which allowed a strong performance across 2019.
Smurfit Kappa reported a pretax profit of €677 million, swinging from 2018’s €404 million loss, certainly impressive considering the struggles that the firm faced in 2018.
Looking at its 2018 business, the FTSE 100 lister said that it reported €1.34 billion in exceptional items relating to structural and operational issues in Venezuela.
Following these problems, the Venezuelan government took control of Smurfit Kappa Carton de Venezuela in the third quarter of 2018.
As a result, the firm dissolved its operations in the country, which seems to have been a blessing in disguise from the update today.
Smurfit raised its final dividend by 12% to 80.90 cents a share, taking its full-year payout to 108.80 cents, up 21% from 89.90 cents.
Smurfit bounce back in 2019
Following the strong results posed this morning, CEO Tony Smurfit commented
“2019 represents another period of strong delivery and performance for SKG. EBITDA was €1,650 million, a 7% increase on 2018 with an increased EBITDA margin of 18.2%. Our vision is to be a globally admired company, dynamically delivering secure and superior returns for all stakeholders. Our recent performance shows progress towards the realisation of our vision.
“Across 35 countries, we continue to create market leading innovative solutions for over 65,000 customers, delivering sustainable and optimised paper-based packaging. The 2019 outcome also reflects our performance culture, which has, at its core, an unrelenting customer focus.
“During the year, we continued to strengthen our integrated model, following the acquisition of Reparenco in 2018, and our more recent acquisitions in France, Bulgaria and Serbia. These acquisitions significantly enhance our business and further expand our geographic reach. As with previous mergers and acquisitions, the new teams have integrated well and further strengthen the depth and quality of the Group.
“Our European business continued to perform strongly, delivering an EBITDA margin of 19.0%. Demand growth was ahead of the market and in line with our expectations for the year with particularly good performances in Iberia and Eastern Europe.
“The Americas region continued to perform well, delivering an increased EBITDA margin of 17.5% up from 15.7% in 2018. Our three main countries of Colombia, Mexico and the US had strong financial performances with demand in Colombia particularly strong.
“A central element of our continued success is the quality of our people. To ensure SKG attracts, retains and develops the best talent, we partner with leading global business schools such as INSEAD to develop global training programmes across our business. In the last three years alone, over 1,400 have participated in these programmes across the Group with many thousands more on local educational training programmes.
“Through our unique market offering, our ESG credentials, and a suite of industry leading applications that are impossible to replicate, SKG is increasingly well positioned to capitalise on the industry’s long-term growth potential. Our product is renewable, recyclable and biodegradable and is the most effective transport and merchandising medium for our customers, while improving their environmental footprint. The consistency of our delivery strategically, operationally and financially, through our recent Medium-Term Plan, reflects both the quality of our people and our world-class asset base.
“From a demand perspective, the year has started well and, while macro and economic risks remain, we expect another year of strong free cash flow and consistent progress against our strategic objectives.
“Reflecting the Board’s confidence in the unique strengths of SKG and its prospects, the Board is recommending a 12% increase in the final dividend to 80.9 cent per share.”
Smurfit win eco-trends market
In October, the firm saw its shares in green once again as Smurfit looked to captivate the eco-friendly green trend which has been flooding business strategies.
The Dublin based packaging firm said it delivered a “strong performance” in the year-to-date.
For the nine months, ending on September 30th revenue was up 3% to€ 6.85 billion and earnings before interest, tax, depreciation and amortisation 11% higher at €1.26 billion.
The FTSE100 listed firm also reported that Ebitda margin increased 140 basis points to 18.3%.
Notably, American operations also grew approximately 2% with continued EBITDA and EBITDA margin improvement year-on-year.
Raparenco acquisition
A while back back, Smurfit also reported that that they had struck a deal with Dutch paper and recycling firm Raparenco in a €460 million acquisition.
The transaction is designed to be earnings accretive, with the addition of Raparenco expected to lead to savings of over €30 million.
Including an Ebitda of €72 million, Raparenco’s Ebitda and synergies equate to a transaction multiple of less than 4.5.
The update from Smurfit Kappa today is impressive, and the firm have bounced back with a rigid growth strategy coupled with a shrewd acquisition.
Shares in Smurfit Kappa trade at 2,900p (+6.70%). 5/2/20 10:44BST.
