Cantillon: McGann contemplates the Promised Land

Smurfit Kappa chief executive Gary McGann. Photograph: Alan Betson/The Irish Times

Smurfit Kappa chief executive Gary McGann. Photograph: Alan Betson/The Irish Times

 

We’ve turned the page on our debt woes. That was the message from the three wise men of the paper and packaging giant Smurfit Kappa – chief executive Gary McGann, chief operating officer Tony Smurfit and finance chief Ian Curley – at a media briefing this week in Dublin’s Westbury hotel.

When the company floated in 2007, its timing couldn’t have been lousier, although McGann puts it down to bad luck. At the time, he recalls, “debt was abounding, it was just a cheap form of credit”. Then the credit crunch hit and, as we all know, the markets fell out of love with IOUs.

Smurfit Kappa, which had net debts of €3.4 billion, was punished hard by investors and has spent the years since chipping away at its debt pile. It has repaid €600 million in all. One got the sense this week, from McGann in particular, that management considered it drudgery to have to focus on repaying debt instead of growing its operations.

“Debt paydown is no longer central to growing the value of the company,” said a relieved-looking McGann. “Quite frankly, it has been a rollercoaster ride.”

He said Smurfit Kappa has not yet reached “the Promised Land, and when we do, I don’t even know if it will be as good as we’d like it to be”. The real question is not what the Promised Land looks like. Rather, it should be: where is it?

Late last year the company splashed out €260 million on Orange County, a Mexican-based producer with some operations in America. Since then, market observers have speculated about whether the company would re-enter the US market. The economy there is, after all, on the mend. Could the US be the Promised Land?

McGann would not be drawn. “The challenge for management is not to try and second guess what investors want. That’s a fool’s paradise – they often contradict themselves anyway,” he said.

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