Corrugated packaging price hikes to remain priority for Smurfit

By Jane Byrne

- Last updated on GMT

Related tags Smurfit kappa group

Container board and corrugated packaging supplier, Smurfit Kappa Group (SKG), announcing a 20 per cent hike revenue today, said ongoing price increases will remain a priority in 2010 due to input cost pressures such as raw materials, labour and energy costs.

Price recovery helped earnings before interest, tax, depreciation and amortisation (EBITDA) for the three months to end June reach €221m, up from €84 million on the same period last year.

Smurfit was the first major packaging supplier to raise prices this time last year citing profit concerns and higher input costs.

SKG chief executive Gary McGann today said that the Group’s improved EBITDA margin primarily reflects the progress in its European packaging business’ performance, supported by increasing demand growth and further advances in corrugated price recovery in that region and in Latin America.

In fact, he noted a healthy pick-up in demand across all the supplier’s key markets.

Demand recovery in the period was particularly strong in the Group’s businesses in Germany, Italy, the UK, France and Scandinavia, said SKG, and the statement pointed to SKG’s Latin American corrugated deliveries being 11 per cent higher year-on-year in quarter two, with particularly strong demand in Colombia, Mexico and Argentina.

But the group maintains that further corrugated price increases are required in the second half to compensate for higher input costs, and restore acceptable profitability and returns for the group.

Corrugated pricing recovery remains SKG’s priority for the remainder of 2010, with good evidence of satisfactory progress year to date,”​ said the financial trading statement.

In Europe, the Group’s corrugated volumes in quarter two were on average five per cent higher than in the first quarter of 2010, and eight per cent higher than in the second quarter of 2009.
SKG added that in July, demand for its corrugated products has remained firm.

Yesterday, Anglo-South African paper and corrugated group Mondi reported a 16 per cent hike in sales of €3bn in the six months to 30 June, with again price increases and cost reduction initiatives ensuring Mondi's pre-tax profit was €177m in the first half of the year.

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