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Packaging And Design

Smurfit Kappa First Quarter Results: What The Analysts Said

By Steve Wynne-Jones
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Smurfit Kappa First Quarter Results: What The Analysts Said

Smurfit Kappa has posted a 7% increase in revenue in the first quarter of its financial year, with EBITDA rising by 25%.

Commenting on the group's performance, Tony Smurfit, group chief executive said that the group made an "excellent start to the year building on our established strengths of customer-focused innovation, our integrated operating model, and our ever expanding geographic reach".

Here's how leading industry analysts saw the business' performance:

Barry Dixon, Davy

"Smurfit Kappa Group’s Q1 trading update reinforces the increasingly resilient nature of the company’s business model. Solid demand growth combined with on-going investment in the business continue to drive margins (and returns) higher. Importantly, this investment programme is funded by strong internal cash generation."

"The sustained improvement in the quality of the business is not reflected in the current valuation. We reiterate our ‘Outperform’ rating and 3700c price target."

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Darren McKinley, Cantor Fitzgerald

"25% growth in EBITDA is an exceptional result for Smurfit Kappa, cycling tough comps from Q1 2018 in which they also delivered a similar 22% growth in EBITDA. The margin improvement reflects progress in managements cost control initiatives which are of significant benefit to shareholder returns. Sustaining this level of profitability for the full year could lead to earnings upgrades of c.10% and see current year valuations fall to c.8.2xP/E which would be a 20% discount to its seven year mean.

"Investors should be pleased to see solid organic growth and exceptional growth in earnings relative to a contraction in earnings reported by the average S&P 500 company. With net debt to EBITDA at a more comfortable level of c.2x, we would not rule out further bolt on acquisitions.

"Smurfit Kappa is our preferred Irish industrial/materials company and would be using any broad market weakness over the coming months to accumulate their shares for what we see as possible 15% total return through year end from current levels."

David O'Brien, Goodbody

"European corrugated volume increased by +2% yoy in line with our forecast while corrugated box prices are “in line with management expectations”. We anticipated a slight sequential increase from Q418 and it appears there was little movement on pricing during the period. Organic volumes increased by 3% in the Americas with pleasing performance noted in Colombia, Mexico and the US. Management expects a year of progress without guiding to specific financial outcome for the year.

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"It is no surprise to see Smurfit Kappa report a strong start to the year reflecting last year’s box price increases, cost management, acquisitions and volume growth. Prices have yet to reflect the €100/tonne of containerboard weakness which we believe will weigh on H219. Notwithstanding a strong start to the year we remain cautious on the overall sector given the downside risk to forecasts."

© 2019 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: European Supermarket Magazine.

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