TIDMSKG
4 May: Smurfit Kappa Group plc ('SKG', 'Smurfit Kappa' or 'the
Group') today announced a trading update for the 3 months ending 31
March 2018.
First Quarter Overview - Significant year-on-year improvement
across all key metrics
-- Group underlying1 revenue growth of 7% year-on-year
-- Group EBITDA growth of 22% year-on-year to EUR340 million
-- EBITDA margin of 15.7%, significant year-on-year improvement
-- Increased ROCE of 16.1%
-- Improved net debt to EBITDA ratio of 2.2x; medium-term target of 1.75x
to 2.5x
-- Proposed final dividend for 2017 of 64.5 cent per share, a 12%
increase year-on-year, payable on 11 May
-- Full-year outcome expected to be materially better than 2017;
delivering continued EBITDA growth
Performance Review
Smurfit Kappa Group is pleased to report a strong performance
with significant year-on-year improvement across all key metrics.
Underlying revenue grew by 7% and reported EBITDA grew by 22%
year-on-year resulting in a first quarter reported EBITDA of EUR340
million. These results reflect the ongoing benefits of our capital
investment programme and strong demand in most markets where SKG is
increasingly working with its customers to help them sell more and
reduce their cost of doing business.
During the quarter, the Group continued to implement pricing
initiatives and experienced good demand growth across most markets
with reported revenue of EUR2,168 million. The first quarter
outcome was positively influenced by lower average recovered fibre
costs of EUR17 million year-on-year, which were largely offset by
higher other costs and a negative currency translation impact
primarily related to the fall in the US dollar versus the euro.
First quarter EBITDA translates to a first quarter EBITDA margin
of 15.7%, an increase of 2.7 percentage points on a margin of 13.0%
in the first quarter of 2017.
The Group's first quarter ROCE was 16.1% equalling the Group's
previous record.
Regional Summary
SKG again recorded solid demand across Europe during the
quarter, notwithstanding an early Easter and some significant
adverse weather conditions. On a days adjusted basis corrugated
volume growth was 4%, or 3% net of acquisitions. Corrugated price
recovery in the quarter was fully in line with our expectations.
Moreover, SKG now expects additional corrugated price recovery
through 2018 as we recover the latest containerboard price
increases. Containerboard markets are tight and are expected to
remain so for the foreseeable future. During the quarter, our
Facture mill took planned extended maintenance downtime which had a
negative year-on-year EBITDA impact of EUR9 million for the first
quarter of 2018 and is expected to reduce to EUR5 million on a full
year basis due to the absence of a second half shut.
For the quarter, the Americas reported strongly improved margins
year-on-year, reflecting the recovery of key input costs incurred
in 2017 which continues into 2018. The ongoing ramp up of the two
mill investments in Mexico and Colombia in 2017 is progressing
well.
Capital Resources and Cash Flow
Free cash flow for the first quarter was an inflow of EUR20
million, marginally up year-on-year reflecting the improved EBITDA
performance offset by a higher working capital outflow, driven by
volume growth, improved selling prices and lower average recovered
fibre prices.
Net debt was EUR2,799 million at the end of March resulting in a
net debt to EBITDA ratio of 2.2x. This compares to 2.3x at the end
of December 2017 and 2.4x at the end of March 2017. The Group's
balance sheet continues to provide considerable strategic and
financial flexibility, subject to our stated leverage range of
1.75x to 2.5x.
Commercial Offering and Innovation
Up to the end of April 2018 the Group's design and innovation
capabilities continue to be acknowledged with 31 awards, the most
recent at the EFIAs (European Flexographic Industry Awards) in
April where the Group won in 14 categories.
During a week-long e-commerce event at the end of February, the
Group launched an array of innovative new concepts and services
designed to optimise performance in this rapidly growing sector.
140 visitors, including brand owners and e-tailers, came to the
event which also included interactive exhibitions and
demonstrations. Proven packaging design techniques were presented
demonstrating an ability to drive sales across every channel.
The Group has continued to expand its network of Global
Experience Centres bringing the total to 23 in March 2018 with the
opening of our Mexico City Experience Centre. These experience
centres provide a platform to deliver our industry leading
portfolio of Smart applications that help our customers win in
their marketplace by applying the Group's unrivalled scale and
depth of data.
Medium Term Outlook
The Group is implementing its medium-term plan announced in
February 2018. In addition to a revised ROCE target of 17% and a
lower leverage range of 1.75x to 2.5x EBITDA, the Group intends to
invest EUR1.6 billion above base capital expenditure over the next
four years. To the end of April, SKG has ordered or approved over
EUR230 million of new investment as part of this plan. These orders
and approvals include 23 corrugated conversion machines, 3
recycling depots, 34 automation projects, 57 machine systems and
our recently announced Facture kraftliner expansion project. For
2018, SKG intends to invest over EUR600 million in capital
expenditure.
These investments reflect the significant progress made in
advancing the Group's medium-term strategy with returns expected in
2018 and beyond as we continue to execute the plan. As well as
maintaining integration levels and driving efficiencies and cost
reduction initiatives, these investments are intended to accelerate
growth in the Group's chosen sectors and markets. This growth is
supported by strong secular drivers such as the expansion of
e-commerce and the discount retailers, the evolution of customers'
omni-channel requirements, the development of corrugated packaging
as a sustainable, renewable and bio-degradable solution and as a
merchandising medium in the battle for the consumer.
Tony Smurfit, Group CEO, commented:
"Smurfit Kappa Group has again delivered a strong set of results
with significant improvement across all key metrics. We have
momentum in price recovery in our corrugated business, demand
remains robust and paper markets remain tight.
"Paper-based packaging is the sustainable, renewable and
recyclable packaging option for our customers and is increasingly
used as a key merchandising medium across industries. We have what
we consider to be the team, unique performance culture, asset base,
innovation capability and financial capacity to capitalise on an
increasingly attractive outlook for our business.
"Trading in the second quarter remains very encouraging with
good demand across most regions, continued corrugated price
recovery and lower sequential recovered fibre costs. For the year,
while recovered fibre pricing remains uncertain, we have strong
momentum in the business and expect continued corrugated price
recovery and execution of our medium-term plan, further enhancing
SKG's operating platform for sustained growth. We are excited about
our prospects in the short, medium and long-term and expect our
2018 EBITDA to be materially better than 2017."
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 EUR8.6 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.
smurfitkappa.com
Check out our microsite: openthefuture.info
Follow us on Twitter at @smurfitkappa and on LinkedIn at
'Smurfit Kappa'.
Contacts
Garrett Quinn Melanie Farrell or Mark Kenny
Smurfit Kappa FTI Consulting
T: +353 1 202 71 80 T: +353 1 663 36 80
E: ir@smurfitkappa.com E: smurfitkappa@fticonsulting.com
Further Information
Each of the following statements contained in this
announcement:
-- "Group EBITDA growth of 22% year-on-year to EUR340 million";
-- "Full-year outcome expected to be materially better than 2017;
delivering continued EBITDA growth"; and
-- " We are excited about our prospects in the short, medium and
long-term and expect our 2018 EBITDA to be materially better
than
2017".
constitutes a "profit forecast" for the purposes of Rule 28 of
the Irish Takeover Rules. As required by Rule 28 of the Irish
Takeover Rules, each profit forecast has been reported on by KPMG
as reporting accountants to SKG and Citigroup Global Markets
Limited ("Citi") and Davy Corporate Finance ("Davy") as financial
advisers to SKG. Each of KPMG, Citigroup and Davy has given and has
not withdrawn its consent to the publication of its name in the
form and context in which it is included in this announcement.
This announcement is not intended to, and does not, constitute
or form part of (1) an offer or invitation to purchase or otherwise
acquire, subscribe for, tender, exchange, sell or otherwise dispose
of any securities, (2) the solicitation of an offer or invitation
to purchase or otherwise acquire, subscribe for, tender, exchange,
sell or otherwise dispose of any securities, or (3) the
solicitation of any vote or approval in any jurisdiction, pursuant
to this announcement or otherwise.
The distribution of this announcement in, into, or from, certain
jurisdictions other than Ireland and the United Kingdom may be
restricted or affected by the laws of those jurisdictions.
Accordingly, copies of this announcement are not being, and must
not be, mailed or otherwise forwarded, distributed or sent in,
into, or from any such jurisdiction. Therefore persons who receive
this announcement (including without limitation nominees, trustees
and custodians) and are subject to the laws of any jurisdiction
other than Ireland and the United Kingdom who are not resident in
Ireland or the United Kingdom will need to inform themselves about,
and observe any applicable restrictions or requirements. Any
failure to do so may constitute a violation of the securities laws
of any such jurisdiction.
Responsibility Statement
The Directors of Smurfit Kappa accept responsibility for the
information contained in this announcement. To the best of their
knowledge and belief (having taken all reasonable care to ensure
that such is the case), the information contained in this
announcement is in accordance with the facts and does not omit
anything likely to affect the import of such information.
Citi, which is authorised by the Prudential Regulation Authority
and regulated in the UK by the Financial Conduct Authority and the
Prudential Regulation Authority, is acting as financial adviser
exclusively for Smurfit Kappa and no one else in connection with
the matters set out in this announcement and will not regard any
other person as its client in relation to the matters in this
announcement and will not be responsible to anyone other than
Smurfit Kappa for providing the protections afforded to clients of
Citi nor for providing advice in relation to any matter referred to
herein.
Davy, which is authorised and regulated in Ireland by the
Central Bank of Ireland, is acting exclusively for Smurfit Kappa
and no one else in connection with the matters referred to in this
announcement and will not be responsible to anyone other than
Smurfit Kappa for providing the protections afforded to clients of
Davy, or for providing advice in connection with the matters
referred to in this announcement.
Forward-looking Statements
This announcement includes certain "forward-looking statements"
with respect to the business, strategy and plans of Smurfit Kappa
and its expectations relating to Smurfit Kappa's future financial
condition and performance. Statements that are not historical
facts, including statements about Smurfit Kappa or Smurfit Kappa's
belief and expectation, are forward-looking statements. Words such
as "believes", "anticipates", "estimates", "expects", "intends",
"aims", "potential", "will", "would", "could", "considered" and
"likely", and variations of these words and similar future or
conditional expressions are intended to identify forward-looking
statements but are not the exclusive means of identifying such
statements. By their nature, forward-looking statements involve
risk and uncertainty because they relate to events and depend upon
future circumstances that may or may not occur and other factors,
which are in some cases beyond the Group's control. Therefore
actual results or performance may differ materially from those
expressed or implied by such forward-looking statements.
Forward-looking statements only speak as of the date on which
they are made, and the events discussed in this announcement may
not occur. Subject to compliance with applicable law and
regulation, Smurfit Kappa is not under any obligation to update
publicly or revise forward-looking statements, whether as a result
of new information, future events or otherwise.
Rule 8 - Dealing Disclosure Requirements
Under the provisions of Rule 8.3 of the Irish Takeover Rules, if
any person is, or becomes, "interested" (directly or indirectly) in
1% or more of any class of "relevant securities" of Smurfit Kappa
or International Paper Company ("International Paper"), all
"dealings" in any "relevant securities" of Smurfit Kappa or
International Paper (including by means of an option in respect of,
or a derivative referenced to, any such "relevant securities") must
be publicly disclosed by not later than 3.30 pm (Irish time) in
respect of the relevant securities of Smurfit Kappa and 3.30pm (New
York time) in respect of the relevant securities of International
Paper on the "business day" following the date of the relevant
transaction. This requirement will continue until the date on which
the "offer period" ends. If two or more persons co-operate on the
basis of any agreement, either express or tacit, either oral or
written, to acquire an "interest" in "relevant securities" of
Smurfit Kappa, they will be deemed to be a single person for the
purpose of Rule 8.3 of the Irish Takeover Rules.
Under Rule 8.1 of the Irish Takeover Rules, all dealings in
relevant securities of Smurfit Kappa by International Paper, or
relevant securities of International Paper by Smurfit Kappa, or by
any party acting in concert with either of them must also be
disclosed by no later than 12 noon (Irish/UK time) in respect of
the relevant securities of Smurfit Kappa and 12 noon (New York
time) in respect of the relevant securities of International Paper
on the "business day" following the date of the relevant
transaction.
A disclosure table, giving details of the companies in whose
"relevant securities" "dealings" should be disclosed can be found
on the Irish Takeover Panel's website at
www.irishtakeoverpanel.ie.
"Interests in securities" arise, in summary, when a person has
long economic exposure, whether conditional or absolute, to changes
in the price of securities. In particular, a person will be treated
as having an "interest" by virtue of the ownership or control of
securities, or by virtue of any option in respect of, or derivative
referenced to, securities.
Terms in quotation marks are defined in the Irish Takeover
Rules, which can be found on the Irish Takeover Panel's
website.
If you are in any doubt as to whether or not you are required to
disclose a "dealing" under Rule 8, please consult the Irish
Takeover Panel's website at www.irishtakeoverpanel.ie or contact
the Irish Takeover Panel on telephone number +353 (0)1 678 9020;
fax number +353 (0)1 678 9289.
Profit Forecast/Asset Valuation
Except as expressly stated, no statement in this announcement is
intended to constitute a profit forecast for the purposes of Rule
28 of the Irish Takeover Rules. No statement in this announcement
is intended to constitute an asset valuation.
Publication on a website
A copy of this announcement will be made available, subject to
certain restrictions relating to persons resident in restricted
jurisdictions, on the Smurfit Kappa website at www.smurfitkappa.com
and by no later than 12 noon on the business day following the date
of the announcement. Neither the content of the websites referred
to in this announcement, nor the contents of any other website
accessible from hyperlinks on such websites, is incorporated into
or forms part of this announcement.
1 Underlying in relation to financial measures throughout this
report excludes acquisitions, disposals, currency and
hyperinflation movements where applicable
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(END) Dow Jones Newswires
May 04, 2018 02:00 ET (06:00 GMT)
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