Materials

Smurfit Kappa Group (SKG) has reported improved profits in 2007, despite rising input costs, but said it faced an "uncertain" 2008.

In its first set of full-year results since floating last March, the Ireland-based packaging group, which was created by the merger of Jefferson Smurfit and Kappa Packaging, said yesterday (13 February) that it had implemented three recycled containerboard price increases in Europe to reflect higher raw materials and energy costs.

Pre-tax profit for the year to 31 December 2007 was €170m (£126m), compared with a loss of €143m in the previous year. Turnover rose by 4.3% to €7.3bn.

The group "progressively" implemented corrugated price increases in each quarter of 2007, totalling 8% for the year, to reflect higher containerboard prices. It said it would continue to raise prices in 2008 to recover its paper input costs.

However, as a result of a sharp increase in US imports, SKG did not achieve the kraftliner price increase planned for April 2007, although average selling prices for the material were higher year-on-year than in 2006.

The group's total European kraftliner volumes fell by 2% in 2007 compared with 2006, primarily owing to a fire at the Facture mill in France.

Strong growth for containerboard in the UK, Benelux and Germany in the first nine months of 2007 was partly offset by poor summer demand in France, Spain and Italy. Demand in the fourth quarter was slower across the region, owing to a long Christmas closedown.

European corrugated volumes, excluding the impact of disposals and closures, increased by around 1% in 2007.

The group's specialities business, comprising its solidboard mills, boxboard and paper sack businesses and bag-in-box operations, reported a 13% EBITDA increase, reflecting a focus on restoring "acceptable" end product pricing.

SKG chief executive Gary McGann said the group's performance reflected the generally positive price environment in Europe, the continuing drive to maximise the benefits of the merger, and a strong contribution from the group's Latin American businesses.

Despite the "uncertain" economic outlook, McGann said he expected "modest" EBITDA growth for 2008.