Smurfit Kappa Group has set its sights on the blue-chip FTSE 100 index of the biggest companies on the London Stock Exchange after its share price bounced back strongly following stellar annual results and news of a review of its listing.
Its share price in Dublin jumped 12 per cent after it reported revenues of €8.1 billion, solid earnings growth and a 23 per cent dividend rise, assuaging market fears that the global company’s performance would fall short.
Smurfit Kappa also announced that Ian Curley, its chief financial officer who was pipped to the top job last year by Tony Smurfit, is to leave the company at the end of March, to be replaced by current financial controller Ken Bowles.
Mr Smurfit played down its share price spike, and said the company was only recovering what it has lost in recent weeks.
He agreed its results had been met with “relief” by nervous markets.
“We’re bemused as to why our share price had fallen – perhaps there was someone who was forced to liquidate their position,” he said.
He said Smurfit Kappa was “as worried as anyone” that the recent chaos that has gripped equities markets would spill over on to “main street” – the real economy. “But we don’t see it yet.”
Pretax profits at the packaging group rose 58 per cent in 2015 to €599 million, while its returns in the fourth quarter accelerated, jumping 230 per cent to €191 million.
Its earnings in the last three months beat analysts’ expectations, and the company struck a positive tone in its 2016 outlook to soothe nerves of investors.
Right price
The company forecast “good earnings growth” for this year.
It confirmed a capital expenditure outlay of €380 million for 2015, and its chief executive said it was currently focused on securing acquisitions “at the right price” in the US.
“We walked away from two deals recently. We will wait for the right opportunities because they have got to create value for our shareholders,” said Mr Smurfit.
Smurfit Kappa last month announced its long-awaited entry into the Brazilian market with the purchase of two companies there for €186 million. Mr Smurfit said it saw further opportunities to grow by acquisition in Brazil via bolt-on deals.
Smurfit Kappa is also planning to upgrade its UK listing from standard to a premium listing, which opens the door to its entry into the FTSE. On its current valuation the company could fall just short of the FTSE 100, and Mr Smurfit said it would “be better to be well inside than knocking on the door” of the premier index.
Equation
“We could be FTSE 250 or we could be FTSE 100. It’s really a mathematical equation [that depends on its market capitalisation relative to other companies]. What would be damaging would be if you kept falling in and out [of the FTSE 100].”
The group plans to convert its existing UK listing quote from euro to sterling next month. It will retain its Irish listing.
David O’Brien, an analyst with Goodbody, said: “This is an encouraging update from Smurfit Kappa which should provide investors comfort that the malaise in financial markets is not reflective of activity on the ground.” The broker reiterated a buy recommendation on Smurfit Kappa.
