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Smurfit Kappa Group returns to growth in fourth quarter, shares rise

In many respects, 2023 is a year to forget for Smurfit Kappa. The group’s shares were in a classic downtrend through the last year with a series of lower highs as revenue and demand fell, culminating in full-year EBITDA and revenue falling 12%.

Full-year results released on Wednesday showed operating profit fell 16% to €1,403m and profit before tax sank 18% to €1,055m as the packaging company grappled with falling demand for packaging.

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Smurfit Kappa’s fortunes are inextricably linked with consumer demand and slowing retail sales across major economies fed directly into their earnings.

However, there were some signs of positivity and Smurfit Kappa shares rose 4.5% on Wednesday.

Margins improved in the full year, and the company said it had returned to growth in the fourth quarter.

“The demand environment for the industry in 2023 was difficult primarily due to destocking and a lack of economic activity in certain sectors, particularly durable goods,” said Tony Smurfit, Group CEO.

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“However, one trend in which we have seen strong acceleration, is an increasing demand for sustainable packaging solutions. While full year volumes for the Group were down 3.5%, we saw a progressive improvement in demand during the year, with a return to growth in the fourth quarter.”

Investors will be pleased that despite soggy full-year results, the company pushed ahead with a dividend increase.

“Whilst they will never compete for the most exciting sector award, packaging firm Smurfit Kappa rounded off a challenging year with a return to growth in Q4 while bumping up their final dividend by 10%. It was about time shareholders got some good news after the lukewarm reception to their acquisition of US counterpart WestRock. WestRock posted some lacklustre numbers last week, missing forecasts,” said Adam Vettese, analyst at eToro.

“Europe’s largest packaging manufacturer now faces the challenge of sustaining the increased demand to make up the overall shortfall in volumes experienced last year. If durable goods demand returns and customers increase their stock levels, then Smurift Kappa shares could kick on in 2024.”

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