Latin American packaging demand boosts revenue – Smurfit Kappa

By Mark Astley

- Last updated on GMT

Related tags Smurfit kappa group Latin america

Latin American packaging sales and higher box prices in Europe contributed to a 10% third-quarter revenue increase on Q3 2010, says packaging giant Smurfit Kappa Group (SKG).

The company, which makes a wide range of paper-based packaging for the food and drink industry, has attributed much of the quarter’s growth to continued demand for corrugated packaging in the Latin American market, where EBITDA for the quarter reached €66m.

During the first half of 2011, SKG experienced 2% growth in corrugated packaging, which continued into the third quarter with a further 1% boost.

The company recorded revenue of €1.8bn for the third-quarter and overall an EBITDA result of €264m – a 9% increase on €243m for Q3 in 2010.

Latin American EBITDA for the quarter represents a 19.6% margin on revenue – higher than the 17.6% reported in the third quarter of 2010, but below 19.9% recorded in Q2 2011.

After the first nine months of 2011, Latin American EBITDA stood at €177 million - 23% of the group’s total for the year-to-date.

Latin American demand

Smurfit Kappa Group CEO Gary McGann said: “In the third quarter, box demand continued to grow, albeit at a slower pace than in the first half, and higher inventory levels generated some downward pressure on paper prices in Europe.”

Higher box prices and the company’s strong focus on cost efficiency contributed to a European EBITDA margin of 13.6% for Q3, despite extended maintenance downtime at the group’s kraftliner mill in Sweden, which reduced overall output by around 90,000 tonnes.

“Against that backdrop, our EBITDA margin of 14.1% primarily highlights the increasing efficiency of our integrated model, continued box price recovery, and a sustained strong performance in our Latin American business.”

Strong year-on-year performances from operations in Colombia and Venezuela, and continued efforts in Mexico and Argentina led to an EBITDA of €66m for the quarter and €177m for the nine months to the end of September – representing 23% of the group’s total.

A quarterly report from Smurfit Kappa said: “Despite some country-specific challenges from time to time, the Group believes that the geographic diversity of its business in the Latin American region, together with the proven ability of its local management to drive the business, will continue to deliver a strong performance through the cycle.”

Strong third quarter

SKG achieved an overall EBITDA margin of 14.1% for the third quarter, which highlights the “earnings stability of the integrated model,” ​said the quarterly report.

Overall revenue of €5.5bn for the first nine months of 2011 represented a 12% increase on the first three quarters of 2010.

At €771m for the first nine months of 2011, EBITDA was 19% higher than the same period in 2010, equating to an additional €124m.

McGann added: “Over the past four years, we have strengthened our business platform through significant debt paydown and unrelenting cost reduction actions, which will sustain the delivery of strong cash flows and improving returns through the cycle.”

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