Smurfit Kappa ups dividend after underlying earnings beat expectations

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Smurfit Kappa PLC (LON:SKG) has increased the final dividend after full-year underlying earnings (EBITDA) came in ahead of guidance.

The paper and board maker upped the distribution by 8% to 87.4 Euro cent (76.7p) per share as chief executive Tony Smurfit said the demand trends seen during the fourth quarter have continued into the new year, although COVID-19 uncertainty remains.

READ: Smurfit Kappa announces new sustainability and diversity targets

“Driven by strong secular trends such as e-commerce and sustainability, the outlook for our industry is increasingly positive,” he commented in the final results.

In the year to December 31, revenue shed 6% to €8.5bn while EBITDA lost 9% to €1.5bn, though it was above guidance of €1.46-1.48bn. Net debt was cut by 32% to €2.3bn.

Both Europe and the Americas saw strong demand in the fourth quarter offsetting significantly higher input costs, mostly in recovered fibre.

The FTSE 100 firm also repaid government support received during the pandemic while it made investments of €35mln to boost operating efficiency, with benefits expected to be realised in two years.

“The Irish-headquartered company continues to capitalise upon the inexorable rise of e-commerce. In addition, its business mix is weighted toward fast-moving consumer goods and so the company could benefit if and when the virus is contained, and economic activity starts to pick up in earnest,” noted Russ Mould, AJ Bell Investment Director.

“Containerboard prices have been rising and how supply of containerboard has become very tight, for both kraftliner and testliner. As a result, further price increases may be on the cards and that could boost profit margins, even if input costs are on the rise too, notably energy.”

“The US-based firms International Paper and Packaging Corporation of America announced price increases for containerboard. Besides higher raw material costs, surging e-commerce volumes have helped here, as have decisions by European rivals SCA of Sweden and UPM-Kymmene to cut production last summer.”

Shares rose 3% to 3,648p on Wednesday morning.

–Adds analyst comment, shares–

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