Davy shaves Smurfit Kappa earnings estimates by 1.3%

Stockbroker sees falls in sterling and Mexican peso affecting packaging group results

Smurfit Kappa Group chief executive Tony Smurfit. Photograph: Brenda Fitzsimons

Smurfit Kappa Group chief executive Tony Smurfit. Photograph: Brenda Fitzsimons

 

Davy has shaved its earnings estimates for Smurfit Kappa as a result of unfavourable currency movements and higher prices for the recycled cardboard used to make new boxes.

Barry Dixon and Colin Sheridan, analysts at the stockbroking firm, cut their full-year forecast for earnings before interest, tax, depreciation and amortisation (ebitda) for the paper packaging giant by 1.3 per cent to €1.23 billion. They reduced their 2017 estimate by the same percentage to a similar amount.

“We estimate that Smurfit Kappa generates circa 5 per cent of its ebitda in the UK and close to 12 per cent in Mexico,” the analysts said. They noted that sterling and the Mexican peso have weakened against the euro in recent months.

Earnings at the group, led by Tony Smurfit, will also be affected by increasing prices for old corrugated containers (OCC), the raw material for boxes made from recycled containerboard, according to Davy.

However, some of a spike in prices seen in August “appears to have been reversed in recent weeks”, the analysts said.

Smurfit Kappa purchases 4.3 million tonnes of OCC a year in Europe and 5.5 million tonnes globally, according to analysts at US investment bank Jefferies.