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Packaging And Design

Packaging Firm Smurfit Kappa Says Worst Is Over As Volume Growth Returns

By Reuters
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Packaging Firm Smurfit Kappa Says Worst Is Over As Volume Growth Returns

The chief executive of packaging giant Smurfit Kappa said that the worst of a year-long dip in demand for the sector appeared over after volumes increased in the fourth quarter, snapping three successive quarterly declines.

Packaging companies rode a boom in demand for goods and e-commerce during COVID-19 lockdowns. But a fall in volumes when economies reopened and consumers spent more on travel and other services led to a 12% drop in Smurfit's full-year core profit, as expected.

The Irish group, Europe's largest paper packaging producer, said volumes fell 3.5% in 2023 as a whole as customers destocked and demand for durable goods weakened but were flat in Europe and up by 1.6% in the Americas in the fourth quarter.

'Improvements In Demand'

'That trend is continuing into January, that we have seen improvements in demand again, so I think the worst is behind us in the sense of demand,' Smurfit told CNBC, adding that February also looked good so far.

The growth in fourth quarter volumes compared with declines of 7%, 5% and 2% in the first, second and third quarters, respectively.

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After raising the prices customers pay for its boxes by up to 40% throughout 2021 and 2022, Smurfit's prices fell last year but was more than compensated for by lower energy and raw material costs, taking its EBITDA (earnings before interest, tax, depreciation and amortisation) margin up to 18.8% from 18.6% in 2022.

Annual Highlights

Full-year EBITDA of €2.08 billion ($2.24 billion) were broadly in line with the approximate €2.05 billion the group forecast in November. That was still its second-largest profit ever and sharply higher than €1.7 billion recorded in 2021.

While Smurfit had flagged signs of tentative improvements in its German order books in November, CFO Ken Bowles told Bloomberg that the key German market continued to lag, saying "it's not terrible, but it could be a lot better."

The group said it hopes to close the $11 billion deal to buy US rival WestRock agreed last year in early July.

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