Smurfit Kappa raises corrugated prices as profits dive

In half-year results published this morning, the Dublin-based corrugated group revealed that sales for the first half of the year had dropped 18% to EUR 3.0bn compared to the same period in 2008. Pre-tax profits dropped to EUR 39m from EUR 145m last year.

A number of plant closures, both temporary and permanent, were also revealed in the results statement.

But the key announcement was a EUR 60/tonne increase in brown containerboard as of 1 September. Smurfit Kappa chief executive Gary McGann said that the rise was a response to “increasing input cost pressures” but said that it also reflected the tough corrugated market.

“Materially reduced containerboard inventories and the progressively deteriorating condition of the containerboard industry in Europe are significant factors that support this price increase.”

The company said that recycled containerboard prices had been stable but at an “unsustainably low” level throughout the second quarter.

McGann said that the price increase would have little effect on profits in 2009 but would have a positive effect on price levels in 2010.

For the second half of the year, McGann said demand was expected to remain at current levels although raw material prices were “on an increasing trend”.

In its operating review of the first half of the year, the group revealed that it had closed three corrugated box plants in Spain, the Netherlands and Denmark. It also began consultation with staff over 140 redundancies at an Irish plant last month.

Eleven recycled containerboard plants have also closed or been idled indefinitely so far this year, with one further closure announced for the second half of the year, removing 1.6m tonnes of production cpacity from the market.

Smurfit Kappa has also closed its Nanterre paper mill in France for six months as of 30 April 2009. It said that this reduced second-quarter output by 30,000 tonnes, in addition to a further 65,000 tonnes of market-related downtime in the quarter.

In Latin America, where Smurfit Kappa’s operations represent around 16% of its overall turnover, volumes were down around 11% in the second quarter compared to a year earlier.

The group added that it was continuing to work with the Venezuelan government over the seizure of 1,500 hectares of eucalyptus forest in the country in March.

SMURFIT KAPPA H1 2009 RESULTS
EURm, for the six months to 30 June 2009

Turnover 3,002 (2008: 3,678)
EBITDA 363 (2008: 514)
EBITDA margin 12.1% (2008: 14.0%)
Pre-tax profit 39 (2008: 145)

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