5th Nov 2014 10:52
LONDON (Alliance News) - Ireland-based packaging giant Smurfit Kappa Group PLC Wednesday said revenue inched up in the third quarter but its pretax profit declined, after booking bigger exceptional costs in the quarter, although profits for the first nine months as a whole are up.
The company said revenue rose 1% in the three months ended September 30 to EUR2.03 billion, compared with EUR2.02 billion the prior year. However its pretax profit declined by 11% to EUR93 million, down from EUR104 million the prior year, having booked EUR52 million in exceptional costs during the period, compared with only EUR17 million last year.
Smurfit Kappa also said it started the rationalisation or closure of four corrugated facilities and a recycled containerboard mill in Europe, as part of its plans to cut costs across the business.
"This action will incur an estimated total charge of EUR50 million in 2014, EUR15 million of which has been included in the third quarter results," said Chief Executive Gary McGann in a statement.
For the first nine months as a whole, its pretax profit was up 39% on the prior year to EUR321 million, compared with EUR231 million a year earlier. Revenue for the nine month period rose 1% to EUR5.98 billion, up from EUR5.92 billion last year. It posted year-to-date basis earnings per share growth of 68% to EUR94.2 cents, reflecting what it said was a good operational performance and lower financing costs.
"In spite of a somewhat weaker macroeconomic backdrop in the third quarter the group continued to see demand growth in Europe through the period, and delivered a strong performance in the region supported by pricing actions and continuing cost take-out initiatives. The implementation of both recycled and virgin container board price increases during the quarter is underpinning corrugated pricing," said McGann.
The group said it that despite "macroeconomic concerns", it expects to deliver earnings before interest, taxes, depreciation and amortisation growth for 2014 in line with market expectations.
"The full year contribution of recently acquired businesses, a substantially reduced interest expense and the group?s unrelenting focus on operating efficiency will deliver and drive value. Going forward, this presents a broad range of strategic and financial options," said McGann.
Smurfit Kappa said its European packaging operations is performing well, with positive price and volume momentum in the third quarter underpinned by cost cutting and effective capital investment.
"Although operating conditions in France remain challenging, volumes across...core markets continue to show year-on-year improvement with good gains in the larger markets of Germany, the UK, Spain, Italy and Scandinavia. Volumes have remained steady in October," the company said.
Following some increases in corrugated pricing in the first quarter, the company said it saw some marginal price decreases in the third quarter.
Smurfit Kappa said the European market for kraftliner has remained "relatively tight" for much of 2014, and strong demand has continued into the latter part of the year. Aided by positive pricing momentum in the recycled containerboard market, the grop said it has achieved EUR30 per tonne of its announced EUR50 per tonne price increase in September.
"As Europe?s largest producer of kraftliner, with a net long position of 500,000 tonnes, the group will immediately benefit from the higher price environment," it said.
Smurfit Kappa shares were trading 1.3% higher Wednesday mid-morning at EUR16.6 per share.
By Rowena Harris-Doughty; [email protected]; @rharrisdoughty
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