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Smurfit Kappa rises as dividend restored

Earnings for the six months to 30 June were weighed down by lower box price and to a lesser extent Covid-19
Smurfit Kappa rises as dividend restored

Packaging group Smurfit Kappa (SKG) saw cash profits (Ebitda) tumble by 13 per cent year-on-year in the six months to 30 June, to €735m (£667m). While the decline was partly down to Covid-19, the deciding factor was actually a drop in box prices.

IC TIP: Hold at 2,620p

Europe accounted for more than three-quarters of total cash profits, and volumes were flat across the first half – a 2 per cent increase in the first three months of the year was offset by a 2 per cent dip in the second quarter thanks to the pandemic. Within that movement, there was an uptick in demand from ‘fast moving consumer goods’ (FCMG) customers – particularly in food and healthcare – and a desire for more e-commerce packaging.

But while European prices for testliner cardboard were flat year-on-year, kraftliner prices fell by €25 per tonne. Both remain below the highs reached in October 2018.

Net debt has come down by 6 per cent since the December year-end, to €3.26bn. Equivalent to 2.1 times cash profits, this is within its 1.75 to 2.5 times target range. Meanwhile, lower capital expenditure and a smaller working capital outflow pushed free cash flow up by almost 50 per cent year-on-year to €238m. Full year capex is guided to be between €530m-570m, versus €730m in 2019.

Analyst consensus compiled by FactSet places cash profits at €1.34bn for the full year, down from €1.65bn in 2019.

SMURFIT KAPPA (SKG)   
ORD PRICE:2,620pMARKET VALUE:£ 6.2bn
TOUCH:2,618-2,622p12-MONTH HIGH:3,054pLOW: 1,831p
DIVIDEND YIELD:2.8%PE RATIO:16
NET ASSET VALUE:1,287¢*NET DEBT:107%
Half-year to 30 JunTurnover (€bn)Pre-tax profit (€m)Earnings per share (¢)Dividend per share (¢)
20194.6245614127.9
20204.2038311780.9
% change-9-16-17+190
Ex-div:13 Aug   
Payment:11 Sep   
£1=€1.10, *Includes €2.6bn in intangible assets or 1,085¢ a share