Smurfit Kappa Group plc significant improvement against key performance measures

Smurfit Kappa Group plc (LON:SKG) today announced results for the 6 months ending 30 June 2018.

First Half Key Points

Significant improvement against all key performance measures
Underlying1 revenue growth of 8%
EBITDA increase of 27% to €724 million and EBITDA margin of 16.4%
ROCE of 18.1%
Strong Free Cash Flow of €148 million and Net Debt to EBITDA of 2.1x
Completion of Reparenco acquisition for €460 million on 2 July accelerating the Medium Term Plan
7.5 year bond issuance of €600 million in June 2018
Interim dividend increased by 10% to 25.4 cent per share
Performance Review and Outlook

Smurfit Kappa, Tony Smurfit, Group CEO, commented:

“SKG is pleased to deliver significant improvement against our key performance measures. With an increase in EBITDA of over 27% to €724 million and an EBITDA margin of 16.4% our first half performance reflects the quality of our assets, geographic reach and market positions. SKG’s integrated business model and a performance-led culture continue to drive demonstrably superior returns.

“The performance during the first half is a measure of the tremendous efforts of our people and our continued success in developing innovative packaging solutions for our customers.

“Europe reported a record EBITDA margin of 17.3% for the first half, with corrugated volume growth of 3%. Market demand remains strong and the Group has continued to recover corrugated pricing in line with expectations.

“The Americas reported a year-on-year improvement in EBITDA margin to 15.2% for the first half as the recovery of input costs continues. Demand is strengthening with improving corrugated growth. Our 2017 mill investments in Mexico and Colombia continue to ramp-up and deliver incremental tonnage for integration. We see the Americas as a region for growth with ongoing opportunities to expand our geographic reach.

“The Group communicated its Medium Term Plan in February of this year. The plan outlined the positive medium-term growth drivers of corrugated demand such as e-commerce, discount retailers, increased supply chain complexity and the substitution of plastic and other non-renewable substrates. SKG is uniquely positioned to capitalise on these secular drivers with our industry leading business applications delivering scientifically backed solutions to our customers, whether this is in reducing their costs, driving sales growth or reducing their business risk.

“I am particularly pleased with the acquisition of Reparenco financed by our successful bond issuance in June. This acquisition represents a compelling strategic fit for SKG and delivers a significant and early step in our Medium Term Plan, securing our current and expected European containerboard needs in a highly cost effective manner.

“With significant growth opportunities, both organic and through acquisition, we have announced increased medium-term performance targets including: an objective to invest an incremental €1.6 billion above base capex to capitalise on internal and external growth opportunities; an increased medium-term ROCE target of 17% and a lower target leverage range of 1.75x to 2.5x net debt to EBITDA.

“Our first half performance represents an early yet significant step towards the delivery of these targets.

“As we start the second half, business conditions remain strong. We are excited about our prospects and we continue to expect our 2018 EBITDA to be materially better than 2017. Reflecting the Board’s confidence in the Group’s performance and prospects the interim dividend is increased by 10% to 25.4 cent per share.”

About Smurfit Kappa

Smurfit Kappa, a FTSE 100 company, is one of the leading providers of paper-based packaging solutions in the world, with around 46,000 employees in approximately 370 production sites across 35 countries and with revenue of €8.6 billion in 2017. We are located in 22 countries in Europe, and 13 in the Americas. We are the only large-scale pan-regional player in Latin America.

With our pro-active team, we relentlessly use our extensive experience and expertise, supported by our scale, to open up opportunities for our customers. We collaborate with forward thinking customers by sharing superior product knowledge, market understanding and insights in packaging trends to ensure business success in their markets. We have an unrivalled portfolio of paper-packaging solutions, which is constantly updated with our market-leading innovations. This is enhanced through the benefits of our integration, with optimal paper design, logistics, timeliness of service, and our packaging plants sourcing most of their raw materials from our own paper mills.