Any readers who bought into Smurfit Kappa Group (SKG) following its transfer to a London premium listing earlier this year would surely be satisfied with a return on capital employed of 15.4 per cent at the half-year mark. And although revenues were broadly flat on a year ago, SKG - Europe's largest corrugated packaging group - managed to drive adjusted profits up by 12 per cent, all the more impressive given higher-than-expected input costs.
Although SKG isn't immune to fluctuations in the price of raw materials, it is better protected as its packaging plants source most of their raw materials from its own paper mills. The advantages of this were reflected in positive free cash flow generation in the face of net working capital outflow and increased capital expenditure.
SKG is intent on expanding its geographic footprint, but the group's dominant market position in European markets means that its fortunes are intertwined with the continent's economic output - and there's reason to feel quietly confident on that score. Indeed, total corrugated volumes accelerated through the second quarter, while improved efficiencies fed through into a cash margin of 14.6 per cent for the first half, up from 13.8 per cent.
Irish broker Davy anticipates profits of €695m (£588m) for the December year-end, leading to EPS of 206¢ (up from €599m and 173¢ in 2015).
| SMURFIT KAPPA (SKG) | ||||
|---|---|---|---|---|
| ORD PRICE: | 1,763p | MARKET VALUE: | £4.17bn | |
| TOUCH: | 1,761p-1,763p | 12-MONTH HIGH: | 2,004p | LOW: 1,424p |
| DIVIDEND YIELD: | 3.4% | PE RATIO: | 11 | |
| NET ASSET VALUE: | 887¢* | NET DEBT: | 139% | |
| Half-year to 30 June | Turnover (€bn) | Pre-tax profit (€m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2015 | 4.00 | 243 | 73.2 | 20.0 |
| 2016 | 4.05 | 312 | 90.8 | 22.0 |
| % change | +1 | +28 | +24 | +10 |
Ex-div: 29 Sep Payment: 28 Oct £1=€1.183 *Includes intangible assets of €2.5bn, or 10,529¢ a share | ||||
