Smurfit Kappa takes €128m hit as it agrees to sell Russian assets

Cardboard-box maker reports better-than-expected full year earnings and positive outlook for 2023

Smurfit Kappa took a €128 million financial hit cutting the value of its Russian assets to zero as it hastened a retreat from the country by agreeing to sell the operations to its local management team.

The cardboard-box maker said last April that it was exiting the Russian market, joining a host of multinationals that pledged to stop business in the country as a result of its invasion of Ukraine. The €128 million related to the impairment of assets in Russia, Smurfit Kappa said on Wednesday as it reported better-than-expected full-year earnings.

The charge reduced the value of the assets to zero, a spokeswoman confirmed to The Irish Times.

“The group has now entered into an agreement to sell its Russian operations to local management,” the company said in the results statement, adding that completion of the transaction remained conditional on regulatory approval from Russian authorities.


The paper and packaging group owns three plants in and around St Petersburg and it also bought a major corrugated packaging plant in Moscow in 2017. It had been targeting significant growth in Russia before the invasion which was followed by a wave of sanctions by western allies. The business, which employs about 800 people, continues to operate.

Smurfit Kappa posted a 38 per cent jump in earnings last year, as product price increases offset a dip in demand for boxes and a surge in energy and raw material costs.

Earnings before interest, tax depreciation and amortisation (ebitda) rose to €2.36 billion from €1.7 billion for the previous year, Smurfit Kappa said on Wednesday, with the result topping the consensus forecast among analysts of €2.29 billion. Revenue rose 27 per cent to €12.8 billion, while the company’s ebitda margin rose to 18.4 per cent from 16.8 per cent.

Shares in the company declined by 3.1 per cent to €37.91 in Dublin on Wednesday as investors were disappointed by a 6 per cent drop in the volume of box sales in the fourth quarter of last year, driven by a decline in demand in Germany, where consumers “went into their shell”, according to group chief executive Tony Smurfit.

However, Mr Smurfit told analysts on a call that European box volumes have improved so far this year. While the chief executive said that German volumes have yet to pick up, he is confident that consumer sentiment will improve in that country.

“For the full year, box volumes for the group were down less than 2 per cent. The rate and pace of inflation clearly had a negative effect on the demand environment in 2022,” said Mr Smurfit.

“This coincided with the partial reversal of the unsustainably high demand levels seen through the pandemic period. This slowdown was particularly evidenced in the latter part of the year, especially in the month of December, where we saw stock reductions and downtime taken by customers.”

Smurfit Kappa has proposed a 12 per cent increase in its final dividend, to 107.6 cent per share.

In Europe, ebitda increased by 42 per cent to €1.85 billion for the year, reflecting the impact of higher paper and corrugated prices partly offset by higher costs for energy, recovered fibre – which is used to make new boxes – and other raw material.

Corrugated box volumes were down 2 per cent against a strong result for 2021, with a slowdown in its German and British markets in particular partly offset by a more robust performance in countries such as France and Spain.

In the Americas, ebitda increased by 25 per cent to €553 million, with Colombia, Mexico and the United States accounting for over 80 per cent of the region’s earnings. Box volumes in the Americas, excluding acquisitions, were broadly flat year-on-year, again compared with a very strong prior year comparative.

“Although very early, 2023 has started well. While there are and always will be challenges, Smurfit Kappa has never been in better shape strategically, financially and operationally,” said Mr Smurfit. “We have put ourselves in a position with the steps that we have taken, and continue to take, to deliver high quality performance and to take advantage of the many opportunities we see around us.”

The company’s net debt of €2.99 billion equated to a record low of 1.3 times full-year ebitda as of the end of December, with the ratio having fallen from 1.7 times a year earlier.

Joe Brennan

Joe Brennan

Joe Brennan is Markets Correspondent of The Irish Times