Smurfit sees 67% fall in first-quarter profits

PACKAGING FIRM Smurfit Kappa has cancelled its full-year forecast after a 67 per cent drop in pretax profit in the opening three months of the year.

Company chief executive Gary McGann said it was difficult to provide any meaningful guidance in respect of the company's performance. Only 12 weeks ago, he said pre-exceptional earnings before interest tax depreciation and amortisation (Ebitda) in the full year would be marginally below €800 million.

"There's no point in anticipating a false dawn," he told reporters after the firm's annual meeting in Dublin. "We're not guiding. Circumstances are such that it's extremely difficult to give any sensible guidance."

Pretax profit fell to €20.1 million in the three months to March from €61.55 million; operating profit before exceptionals fell to €82 million from €156 million; and pre-exceptional Ebitda fell to €180 million from €257 million.

The firm gained €6.4 million on a debt buyback. Revenue fell 18 per cent to €1.5 billion and basic earnings per share fell 79 per cent to 3.8 cent.

Smurfit Kappa shares, down 64 per cent in 12 months, gained 9.4 per cent yesterday to close at €2.91. Company chairman Liam O'Mahony, who declined to say when investors might see a recovery in the share or a restoration of dividends, said the firm was well within its banking covenants.

The company has positioned itself to withstand the obvious challenges it faces with more than €700 million cash and €600 million in unused credit lines, he said.

Stating that market conditions worsened very significantly since last year, he said the packaging sector was no exception to the consequences of recession "with very significant pressure" on all activity. "The entire focus of the business is on cash generation, paying down debt, being prudent."

Mr McGann said Smurfit Kappa was in talks with the Venezuelan government led by president Hugo Chávez over its seizure of a farm from the company in March. The firm believed the the land was an "economically inconsequential" part of its business. "A minister in government has personally represented to me that there is absolutely no targeting [ of] Smurfit Kappa . . . for nationalisation."

Mr O'Mahony succeeded former Anglo Irish Bank chairman Seán FitzPatrick after the latter's departure from the bank in December. Asked if Smurfit investors had any reason for concern given the disclosures from Anglo, Mr O'Mahony said there was no reason to have the slightest concern about how the firm was run or its governance.

Mr McGann, who resigned as a non-executive director of Anglo in January, resigned the chairmanship of Dublin Airport Authority in February amid escalating controversy about the bank. He said he never considered his position in Smurfit Kappa.

"Not only was there never a moment that Gary considered his position, there was never a moment that the board had any concerns whatsoever about Gary's position," Mr O'Mahony said.

There were no questions from shareholders at the agm.