Smurfit Kappa report pre-tax profits of €299m for 2011

Total revenue climbed 10% from 2010 to €7.36bn and underlying earnings grew by 12% to just over €1bn. Earnings per share before exceptional items rose by 69% to €1. The company said it has reinstated a dividend, with a final dividend of 15 cent to be paid.

 David O’Brien of Goodbody commented: “Smurfit Kappa has reported Q411 EBITDA of €245m (-5% yoy), which compares to our forecast of €233m (5% ahead) and was at the upper end of the consensus range of €219-244m. The key variance was a better than expected outcome for the European operations.

Net debt reduced by €110m over the period to €2,752m, which compares to our forecast of €2.86bn. The key variance was a working capital inflow of €133m versus our forecast of a €63m inflow. Management has also proposed an amendment to further extend debt maturities.

 Effectively, this will push out the 2013/14 maturities by three years and if the 20% cash repayment is fully taken up, it would reduce the gross debt by over €300m. A reflection of the improved leverage (2.7x net debt to EBITDA) and sustained confidence in the long-term outlook for the business, management has reinstated the dividend. The Board is proposing a final dividend of 15c, which implies an annualised yield of 3.

Overall, this is a very strong set of results and the reinstatement of the dividend is a big of vote of confidence and in our view gives us comfort that progress will be made on the pricing front. As Smurfit Kappa is the most leveraged to an improvement in the pricing cycle, we reiterate our BUY recommendation with a PT of 900c. Indeed, as we have noted before the bias to forecasts remains to the upside due to the shift in the pricing cycle and management’s comments that cost saving targets of €150m can be improved upon.”

Posted Date: 09th Feb 2012