Smurfit Kappa records 30% drop in Q1 profit

The paper-based packaging giant recorded EUR 1.5bn (£1.3bn) in sales during the first three months of the year, 18% lower than in 2008. Earnings before interest, tax, depreciation and amortisation (EBITDA) fell by 30% to EUR 180m.

In its interim management statement this morning, Smurfit Kappa Group chief executive Gary McGann described the performance as “resilient in a difficult operating environment”.

He said the “ongoing uncertainty in the global economy” made it difficult to provide “guidance in any meaningful manner”. “While demand and pricing remain under pressure, we are now seeing signs of increasing capacity rationalisation.”

McGann said the results reflected a strong performance in Latin America, where the firm recorded 21% EBITDA growth, on constant currencies, that contributed 16% to total revenue. Smurfit Kappa did not comment on the seizure of land in Venezuela by president Hugo Chavez in March.

European corrugated deliveries, meanwhile, declined by 3% in the quarter, although corrugated pricing is more resilient than containerboard.

Smurfit Kappa is reducing its capacity through the temporary closure of its Nanterre paper machine in France that produces recycled containerboard. The machine stopped production on 1 April for six months.

It has also initiated the closure of three corrugated plants in Spain, the Netherlands and Denmark.

In the trading statements, Smurfit said it would “take necessary action to reduce its cost base and adapt its production system to the sustainable level of demand”.

SMURFIT KAPPA Q1 2009
(all figures in millions of euros)

Turnover 1,504 (2008: 1,832)
EBITDA 180 (257)
Operating profit before exceptional items 82 (156)
Net debt 3,187 (3,373)

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