Smurfit Kappa revenue down in first half of 2020

Smurfit Kappa Group, a packaging firm based in Dublin, saw a 9 percent decrease in revenue in the first half of its fiscal year compared with the same time period in 2019. Earnings before interest, taxes, depreciation and amortization (EBIDTA) also fell by 13 percent compared with the same time period in 2019. 

For the first six months of 2020, ending June 30, the company achieved EBITDA of 735 million euros (or about $864 million) with an EBITDA margin of 17.5 percent. It had free cash flow of 238 million euros (or about $280 million). Operating profit before exceptional items for the first half of 2020 was 450 million euros (or about $529 million), which is 19 percent lower than for the same time period in 2019. 

According to Smurfit Kappa’s earnings report, these results “reflect the negative impact of COVID-19 on demand, the adverse impact of currency and the fall in box prices.” 

In a news release on the company’s latest earnings report, Smurfit Kappa says its European business performed strongly in the first six months with an EBITDA margin of 17.6 percent and flat corrugated box volumes. Box demand was up about 1 percent on an absolute basis and flat on an organic basis, up 2 percent in the first quarter and off 2 percent in the second quarter, negatively impacted by the pandemic. Corrugated pricing was in line with expectations. 

During the first six months, the group also invested 134 million euros (or about $158 million) in a recovery boiler in Austria. Smurfit says this is the group’s “largest ever investment” to date. That investment will help the company to lower its CO2 emissions by 40,000 metric tons to help the group achieve its sustainability emissions target.

In addition, the company also completed an upgrade of a machine at its kraftliner mill in Bordeaux, France, which will add 44,000 metric tons of capacity. The European pricing for testliner and kraftliner has reduced by about 120 euros per metric ton (or about $141) and 165 euros per ton (or about $194), respectively, from the high in October 2018 to June 2020. 

The EBITDA margin of the Americas business improved year over year from 17.1 percent to 19 percent. Colombia, Mexico and the U.S. accounted for 85 percent of the region’s earnings with strong performances in all three countries. After a strong start to the year, volumes in the region were impacted by COVID-19 in the second quarter. As a result, volumes for the first half were down 2.6 percent year over year.

“[Smurfit Kappa Group] has again demonstrated the strength and the consistency of its delivery through these results,” says Tony Smurfit, CEO of Smurfit Kappa Group. “This performance reflects targeted capital investment; effective acquisitions; a continued focus on innovation and sustainability; and, above all else, the quality of our people. [Smurfit Kappa] will remain agile and resilient, continuing to deliver, and while known macro and economic risks remain, we are confident in our future prospects.

“In April, in light of the macro uncertainty due to the COVID-19 pandemic, the board acted prudently in withdrawing its recommendation to pay a final dividend of 80.9 cents per share. We stated at that time that the board remained committed to providing shareholders with an attractive dividend stream. Consequently, the board has now decided to pay an interim dividend of 80.9 cents per share, the equivalent amount of the withdrawn final dividend. This decision underscores the board’s belief in the inherent strengths of the [Smurfit Kappa] business, its balance sheet, free cash flow generation and its long-term prospects and our recognition of the importance of dividends to shareholders.”