Smurfit Kappa expects recovery in European operations
Company sees European revenues rise by €45m
Gary McCann: said the company now has further firepower for more acquisitions. Photograph: Brenda Fitzsimons
Smurfit Kappa Group (SKG), the paper and packaging giant that yesterday released its third-quarter financial results, foresees a continued improvement in its European operations as the region’s economy recovers from the currency crisis.
European revenues at Smurfit Kappa, which is run by the former Anglo Irish Bank director Gary McGann, rose by €45 million in the third quarter, driven by stronger performances in the UK, Poland and the Benelux countries.
Overall, group revenues rose 10 per cent to more than €2 billion while operating profits rose by 9 per cent to €196 million. Much of the improved performance was driven by its Americas division, where sales were up €141 million.
“You can see from the figures that there has been a sequential improvement in Europe. After a slow start, the figures have been getting better each month. Europe is at an inflection point,” said Ian Curley, the company’s chief financial officer.
At a conference call with analysts yesterday, Mr McGann said growth in Mexico, where last year it paid $340 million to acquire Orange County, had been slower than anticipated. “There seems to be some nervousness there regarding politics and the economy,” he said.
Mr McGann said SKG expects to take out €100 million in costs this year. Its free cash flow for the first nine months also increased by €100 million, meaning the company now has further firepower for more acquisitions.
Mr Curley said it could “easily” conclude a €300 million buyout of another firm without having to borrow. The company has focused heavily in recent years on reducing its debt pile, which fell by €187 million in the third quarter.
SKG’s share price closed yesterday at €18.27, up 1.4 per cent. At the beginning of 2009, its share price was €1.79.