Packaging group Smurfit Kappa said earnings dropped 1 per cent in the first half of the year, as margins in its recycled paper operations fell.

For the first half, Smurfit's earnings before interest, taxes depreciation and amortisation (EBITDA) fell slightly to €500 million from €507 million in the same period a year ago.

However, there was some cause for optimism, with the second quarter earnings coming in ahead of expectations. The group also confirmed its full-year guidance, and said it had reduced its net debt by more than €500 million in last two years.

EBITDA reached €255 million in the three months to end-June, beating a market consensus of €243 million.

"While macro-economic risks remain, we continue to expect a 2012 full year EBITDA similar to that achieved in 2011," said Smurfit's chief executive Gary McGann in a statement.

Smurfit said it will pay an interim dividend of 7.50 cents per share in October after reinstating its dividend in February following a two-year hiatus after successfully lowering its debt and on the back of an improved outlook.

Shares in Smurfit closed at €6.05 yesterday, valuing the group at €1.3 billion.

The group said it expected free cash flow generation to accelerate in the second half.

Additional reporting: Reuters