Smurfit Kappa shares soar with ‘particularly pleasing’ Q3 earnings of €390m

FTSE-listed packaging company Smurfit Kappa (LON:SKG) watched its shares bounce to around 5% on Wednesday morning, on news of strong Q3 earnings that put it on track to hit its full-year target.

Having posted EBITDA of €1.13 billion for the year-to-date, the company boasted an EBITDA margin of 17.8% and ‘particularly pleasing’ third quarter EBITDA of €390 million. The company said that from both an operational and financial perspective, this progress demonstrates “the strength and resilience of the Group”.

Smurfit Kappa added that its results reflected the benefits of its capital allocation decisions, cost management, geographic reach and recovery across its US and Americas businesses. It continued, saying the strong data underlines its 65,000 customers’ support for its innovation, supply chain management and sustainability credentials.

The company said that its business is now ‘strongly weighted’ towards FMCG customers, where it feels it is well-positioned to capitalise on e-commerce and innovative packaging demand. It added that it had implemented new ways of working during the pandemic, and would carry out a programme to look at ways to further increase its operational efficiency and effectiveness.

Responding to the company’s progress and full-year targets, the company’s CEO, Tony Smurfit, commented:

“I am pleased to report that the quality of our business and the strength of our people has produced an excellent performance in both the third quarter and the year-to-date. While some uncertainty still exists around the evolution of the effects of COVID-19 in the weeks ahead, absent a dramatic change to working practices, the Group expects to deliver EBITDA in the range of €1,460 million to €1,480 million for the full year 2020.”

“We are increasingly excited by our future prospects and the structural growth drivers of our business including e‑commerce and sustainable packaging as well as our innovative ability to capitalise on these opportunities. Reflecting the Board’s confidence in SKG’s performance and prospects, it is recommending a second interim dividend of 27.9 cent per share. This second interim dividend, following the payment of an interim dividend in September, ensures the Group is aligned with the dividend payment cycles of previous years. It is proposed to pay this dividend on 11 December 2020 to all ordinary shareholders on the share register at the close of business on 20 November 2020.”

Following the update, Smurfit Kappa shares bounced around 5% at lunchtime on Wednesday, up to 3,258.00p a share 04/11/20. This price is ahead of any other price posted during the year-to-date, and ahead of analysts’ target price for the stock, of 3,150p.

The company has a ‘Buy’ rating from analysts, a p/e ratio of 17.13 – behind the consumer cyclical average of 31.19 – and a 56.53% “outperform” rating from the Marketbeat community.

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Jamie Gordon
Senior Journalist at the UK Investor Magazine. Also a contributing writer at the Investment Observer, UK Property Journal and UK Startup Magazine. Postgraduate of King's College London with a specialisation in Business Ethics. Interested in Development Economics and David Hume.