4th May 2018 07:53
LONDON (Alliance News) - Paper and packaging firm Smurfit Kappa Group PLC said on Friday it saw "significant year-on-year improvement" across all key metrics in the first quarter of the year.
The FTSE 100-listed company also laid out plans to increase its capital expenditure to accelerate growth.
Underlying revenue grew 7% in the three months to the end of March, while earnings before interest, taxes, depreciation and amortisation rose 22% to EUR340 million. The company said its full-year outcome is expected to be "materially better" than 2017.
Smurfit said the Ebitda figure translates to a first-quarter Ebitda margin of 15.7%, an increase of 2.7 percentage points on 13.0% in the first quarter of 2017.
During the quarter, the company said it continued to implement pricing initiatives and experienced "good demand growth" across most markets with reported revenue of EUR2.17 billion.
The first-quarter result was "positively influenced" by lower average recovered fibre costs of EUR17 million, which were offset by higher other costs and the fall in the US dollar versus the euro.
On a days-adjusted basis, corrugated volume growth was 4%, or 3% net of acquisitions in the quarter.
"Corrugated price recovery in the quarter was fully in line with our expectations. Moreover, SKG now expects additional corrugated price recovery through 2018 as we recover the latest containerboard price increases," the company said.
During the quarter, the company said its Facture mill took planned extended maintenance downtime which had a negative year-on-year Ebitda impact of EUR9 million, which is expected to reduce to EUR5 million on a full year basis due to the absence of a second half shut.
In addition to a revised return on capital employed target of 17%, Smurfit said it intends to invest EUR1.6 billion above base capital expenditure over the next four years. To the end of April, Smurfit said it has ordered or approved over EUR230 million of new investment as part of this plan.
"As well as maintaining integration levels and driving efficiencies and cost reduction initiatives, these investments are intended to accelerate growth in the group’s chosen sectors and markets," the company said.
For 2018, Smurfit intends to invest "over EUR600 million" in capital expenditure.
Chief Executive Tony Smurfit said: "Trading in the second quarter remains very encouraging with good demand across most regions, continued corrugated price recovery and lower sequential recovered fibre costs."
"For the year, while recovered fibre pricing remains uncertain, we have strong momentum in the business and expect continued corrugated price recovery and execution of our medium-term plan, further enhancing SKG’s operating platform for sustained growth," He added.
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