Smurfit Kappa’s earnings tumbled 13.6 per cent in the three months to June, just before the cardboard box-making group completed its merger with US rival WestRock to create a group with a market value of more than $25 billion (€23.1 billion).
Earnings before interest, tax, depreciation and amortisation (Ebitda) fell to $480 million (€444 million) from $556 million for the same period last year, amid higher input costs and lower box prices, the newly formed Smurfit WestRock said on Tuesday evening. Net sales dipped to $2.97 billion from $3.08 billion.
However, the company said there were signs that a recovery in demand from a downturn last year is gaining momentum, with the volume of corrugated boxes sold increasing 3.1 per cent in the second quarter, driven by 3.5 per cent growth in Europe. Volumes increased by a more modest 1.5 per cent in the Americas.
“These results were also achieved against a backdrop of significantly higher recovered fibre costs and lower corrugated box prices,” said group chief executive Tony Smurfit. “We expect these increased costs will be recovered through increased box pricing with the customary time lag.”
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Smurfit Kappa, Ireland’s first multinational group, effectively doubled in size on July 5th as the takeover of WestRock created the world’s largest paper packaging group with more than $30 billion of annual revenues. Legacy Smurfit Kappa shareholders started off with 50.2 per cent of the enlarged business.
The enlarged group is based in Dublin, but has ditched its Dublin stock market quotation as part of a rejig that has seen its main listing move from London to New York. The company was immediately included in the influential S&P 500 index after the merger went through.
Analysts hope that Mr Smurfit, the former chief executive of Smurfit Kappa, and his chief financial officer Ken Bowles, who now lead the entire group, will turn around the underperforming legacy WestRock assets.
WestRock had a strategy targeting $1 billion in cost and productivity savings by 2025 across its mill network, supply chain and general running costs, against a $18 billion cost base in 2023. BofA Securities analyst, led by Patrick Mann, said in a report earlier this month that Smurfit Kappa’s “well-regarded” management could accelerate this.
Smurfit Kappa’s adjusted Ebitda margin shrank to 16.2 per cent in the reporting quarter from 18.1 per cent for the corresponding period last year. The next set of quarterly results will by the first to be reported by the combined Smurfit WestRock group.
“While we don’t underestimate the amount of hard work ahead of us, there is tremendous energy and enthusiasm to ensure a successful future for Smurfit Westrock,” said Mr Smurfit.
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