PAPER AND packaging specialist Smurfit Kappa Group’s (SKG) operations earned profits of €206 million in the first six months of the year, the company’s latest figures show.
SKG said that sales in the first half of 2010 grew 7 per cent to €3.2 billion from €3 billion during the same period last year. Strong prices for its paper and packaging products helped boost operating profits in the first six months of 2010 by 22 per cent to €206 million from €170 million during first half of 2009.
However, finance costs and once-off items, which included a €40 million charge related to an asset swap in May with rival Mondi, left the group with a pretax loss of €9 million for the period, compared with a €39 million gain for the first six months of last year.
A €31 million tax bill left the group with a €40 million loss for the period. As a result, its loss per share was 17.4 cent, against a gain of 6.7 cent during the first of 2009.
Earnings before interest, tax, depreciation and amortisation charges, and exceptional items, were €404 million, up 11 per cent on last year, when they came to €363 million.
SKG said it expected to deliver 20 per cent growth by the year’s end. Analysts Barry Dixon and Robert Gardiner, of brokers Davy, said this implied full-year earnings of €900 million. In the second quarter (the three months ended June 30th), revenues grew 13 per cent to €1.7 billion from €1.5 billion in 2009.
Operating profits were up 37 per cent at €119 million from €87 million. Exceptional charges, the bulk of which were incurred in the second quarter, left SKG with a pretax loss of €5 million during the quarter. Losses per share were 10.3 cent against earnings per share of 3 cent during the same quarter in 2009. Chief executive Gary McGann said prices increases for its main container board products helped drive revenue and operating profit growth. He pointed out that prices have recovered by 9.6 per cent from their trough last year. “We expect that to go to 15 per cent by year end.”
Input prices are also increasing, and are running at about €115 a tonne, a result of a rise in paper prices and increased demand for wood, which is a key raw material. However, SKG expects that continued increases in the price of its products will help offset that.
The group recently announced price increases of €60 a tonne for some products to offset the impact of the pressure on wood supplies.
SKG’s businesses are based in Europe and Latin America. Volumes in Europe were up 3 per cent in the first quarter and 5 per cent in the second. The group said in euro terms Latin American earnings were up 31 per cent. A cost cutting programme delivered a further €50 million in savings.
