SMURFIT KAPPA has had its debt rating upgraded by international agency Fitch on the back of the paper and packaging group's reduction in net debt to €3.4 billion from €4.8 billion in 2007.

Fitch said the upgrade to BB from BB- reflected "the group's improved debt measures and financial flexibility". It realised savings of €166 million last year, ahead of its original target of €166 million for 2006-2009. The group's ebitda - earnings before interest, tax and write-offs, a measure of cashflow - increased 20 per cent, or €181 million, to €1.064 billion, while its ebitda margin rose from 12.7 per cent to 14.6 per cent.

Proceeds from the group's flotation in March 2007 were used to repay €1.4 billion in debt. Its net debt at the end of 2007 stood at a multiple of 3.2 times ebitda, compared to 5.5 times a year earlier and below the management's target range. The group, which has €400 million in cash, expects its net debt to be below three times ebitda this year.

Smurfit Kappa's chief financial officer Ian Curley said: "For 2007, Smurfit Kappa Group delivered ebitda growth within the range of expectations set at IPO, industry-leading margins and exceeded both its leverage and synergy objectives."

The group operates in 22 countries in Europe and in nine countries in Latin America. It is planning to expand its interests in eastern Europe and Latin America. Its operations in Latin America account for 14 per cent of group turnover but have a higher percentage of profitability, with an ebitda margin of 20 per cent.

The group has pre-empted the slowdown in paper and packaging markets, reducing its capacity by 810,000 tonnes since 2004.

Its shares closed up 1.8 per cent at €8.13 in Dublin.