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Smurfit warns against hard Brexit

The packaging giant's battle with the Venezuelan government continues
July 31, 2019

Smurfit Kappa (SKG) chief executive Tony Smurfit is worried about the impact of a no-deal Brexit on his customers. “It won’t necessarily impact us directly, because we’re self-sufficient in the UK,” he said, as the packaging giant makes its own paper and boxes (although it may encounter issues with raw materials access). But given the potential knock-on impact for exporters, a hard Brexit is “not what we’re hoping for” and “not what we’re planning on”, he commented. 

IC TIP: Buy at 2.882€

Smurfit achieved growth in Europe and the Americas. Higher corrugated prices and lower recovered fibre costs contributed towards a 17 per cent improvement in European cash profits, while strong performances in Colombia, Mexico and the US drove up Americas cash profits by 14 per cent. Argentina, which Mr Smurfit labelled “our problem country”, entered a period of hyperinflation and rapidly devaluing currency, although the picture has stabilised and the company’s exposure here is not significant. 

Smurfit Kappa is still pursuing a “substantial claim” in the International Court of Arbitration against the Venezuelan government, over the requisition of its assets in the troubled state.

House broker Investec forecasts full-year 2019 pre-tax profits of €924.8m and EPS of 299.8¢, rising to €949.2m and 302.4¢ in 2020.

SMURFIT KAPPA (SKG)   
ORD PRICE:2,882¢MARKET VALUE:€7.5bn
TOUCH:2,880-2,882p12-MONTH HIGH:3,676pLOW: 2,118p
DIVIDEND YIELD:3.5%PE RATIO:na
NET ASSET VALUE:1,205¢NET DEBT:129%
Half-year to 30 JunTurnover (€bn)Pre-tax profit (€m)Earnings per share (¢)Dividend per share (¢)
20184.4341612525.4
20194.6245614127.9
% change+4+10+13+10
Ex-div:26 Sep   
Payment:25 Oct   
£1=€1.09 *Includes intangible assets of €2.67bn, or 1,125¢ a share