Smurfit Kappa eyes acquisitions in Europe and Latin America

Smurfit Kappa Group, the paper and packaging giant, is eyeing further expansion through buyouts in Europe and Latin America.

Ian Curley, the chief financial officer of the group, said the company is "looking at" several potential deals in the two regions, but declined to specify which countries it is considering for investment.

“We are working on a number of possible deals. We are always looking at new markets, but we also like to invest in markets where we already have people on the ground,” he said.

The group has substantial operations across western and eastern Europe, as well as in Argentina, Chile, Mexico and across the northern tip of South America. The company is known to also want to enter the market in Brazil.

“Ideally, we would buy box plants located close to our customers, and integrate them with one of our paper mills over time,” said Mr Curley.

He said that if the deals it is currently working on did not materialise, it would most likely return cash to shareholders.

A strong performance in Europe saw Smurfit Kappa exceed forecasts with its full-year results on Monday, reporting a 2 per cent bump in revenues and a 29 per cent jump in pre-tax profits.

Gary McGann, Smurfit Kappa CEO, said that the group’s 2014 performance is “strong evidence of the resilience of our integrated and geographically diverse business model”.

Revenues in the year to December 31st 2014 advanced by 2 per cent to €8 billion, as profits before tax jumped by 29 per cent to €378 million. The group had free cash flow of €362 million as of end-2014.

Smurfit completed over €160 million of acquisitions in 2014 in the US, Dominican Republic and Colombia.

In Europe, the group reported 2 per cent corrugated volume growth year-on-year for the full year, as pricing in the end corrugated market improved by 1 per cent year-on-year and was generally stable at this level throughout the year.

In the Americas, the group performed well with volume growth and good margins in most countries, and the group's larger Latin American operations in Colombia and Mexico delivering "strong earnings progression during the year".

In Venezuela, economic volatility continues to drive currency uncertainty , impacting the business in 2014.

Mc McGann said that the group outperformed its cost take-out target in 2014 with the delivery of € 117 million in cost reduction initiatives during the year, and in 2015, the group expects to continue to further reduce its cost base by € 75 million.

Smurfit said it would increase its ordinary dividend by 30 per cent to 40 cent per share, and will evaluate “ alternative uses of capital, including returns of surplus capital to shareholders”.

Looking to 2015, Mr McGann said that “assuming no material dis-improvement in European economic conditions, we expect to grow the business through continued superior operating performance, high return internal investments and targeted acquisitions”.

The group also launched € 250 million senior unsecured notes to reduce its senior credit facility.

In a note, Goodbody Stockbrokers said that it was a “good set of results with operating performance ahead of expectations”.