ii view: Smurfit swings back into profit

by Keith Bowman from interactive investor |

A 12% dividend hike and a good start to the year has seen investors chasing this packaging maker higher.

Full-year results to 31 December 2019 

  • Revenue up 1% to €9.05 billion
  • Pre-tax profit of €677 million, up from a 2018 loss of €404 million
  • Adjusted profit (EBITDA) up 7% to €1.65 billion
  • Net debt up 12% to €3.5 billion
  • Final dividend payment up 12% to 80.9-euro cents per share
  • Total payment for the year of €1.09 

Chief executive Tony Smurfit said:

“2019 represents another period of strong delivery and performance for SKG. During the year, we continued to strengthen our integrated model, following the acquisition of Reparenco in 2018, and our more recent acquisitions in France, Bulgaria and Serbia. These acquisitions significantly enhance our business and further expand our geographic reach.

“From a demand perspective, the year has started well and, while macro and economic risks remain, we expect another year of strong free cash flow and consistent progress against our strategic objectives.”

ii round-up:

Paper-based packaging company Smurfit Kappa (LSE:SKG) posted a return to profit in these latest full-year results. 

Smurfit, the only large-scale pan‑regional player in Latin America, suffered 2018 losses following the seizure of its Venezuelan business by President Nicolas Maduro’s regime. The Dublin-based company is currently seeking compensation.

Sales and profits proved broadly in line with expectations, although the dividend hike was above forecast. Accompanying management comments regarding a positive start to 2020 from a demand perspective were also highly favourable. 

The share price, which gained around 40% in 2019, outpacing rival DS Smith (LSE:SMDS) by more than 10%, led gainers across the FTSE 100 index with a jump of over 5% in late afternoon UK trading. 

Servicing over 65,000 customers across 35 countries, full-year free cash flow improved by 11% to €547 million, while the adjusted profit margin rose to 18.2% from 17.3% in 2018. 

Smurfit owns around 67,000 hectares of forest globally and makes a wide range of papers, mainly used for packaging purposes. It also manufactures paper-based packaging and offers recycling solutions to its customers, reprocessing over 6 million tonnes of recovered paper across the globe.

Management’s estimation for capital expenditure of €615 million during 2020, down from over €700 million in 2019, added to the positivity, boosting hopes for free cash flow and financial flexibility going forward. 

ii view:

Smurfit Kappa offers investors the chance to invest in a geographically diverse paper based packaging company. Its product is renewable, recyclable and biodegradable. It is listed on the FTSE4Good index. Under its current productivity or Medium-Term Plan, over €700 million of capital projects have to date been approved or spent, covering almost 100 projects. 

For investors, management outlook comments highlighting macro and economic risks offer some caution. But a prospective dividend yield of just over 3% (not guaranteed) and covered nearly three times by earnings, offers attraction. So does a forward price/earnings (PE) ratio below both the three and 10-year averages. 


  • Only large-scale pan-regional player in Latin America
  • Pursing a productivity improvement plan


  • Italian Competition Authority investigating paper and packaging market
  • Net debt increased

The average rating of stock market analysts:


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Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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