Smurfit fights for compensation after Venezuelan assets seized

Smurfit Kappa said on Wednesday, as it reported record earnings, that it has started proceedings to seek compensation after the Venezuelan government seized its local business their last year.

Smurfit Kappa wrote down its remaining €60 million of net assets in Venezuela last August, as it removed its operations there from the group balance sheet, after losing control of it to the Caracas government.

Smurfit Kappa said in its annual trading statement that it submitted a request for arbitration with the World Bank’s International Disputes in December against Venezuelan president Nicolas Maduro’s government, saying it is seeking compensation for the seizure of SKCV “as well as for other arbitrary, inconsistent and disproportionate” measures that have “destroyed the value” of its local investments.

Many governments, including the Republic, have recognised opposition Venezuelan leader Juan Guaido as the country’s interim president in recent weeks as it remains in the middle of a political and humanitarian crises, amid food shortages and hyperinflation.

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"It's a terrible tragedy what's happening in Venezuela," Tony Smurfit, group chief executive said on Wednesday.

Smurfit Kappa’s Venezuelan problems had little effect last year on the wider group, which posted a 25 per cent surge in earnings before interest, tax, depreciation and amortisation (ebitda) to a record €1.545 billion, on the back of a strong global economy and growth in e-commerce.

Revenues up

The Dublin-based and FTSE 100-listed group saw its revenues increase by 4 per cent to €8.94 billion, according to the annual results statement, which also outlined plans for a 12 per cent hike in its annual shareholder dividend to 72.2c per share. The company said that this year has started “positively”, even though most recent economic data is pointing to slowdown in global growth.

Shares in Smurfit Kappa have fallen by about 28 per cent in London since an unwanted suitor, Memphis-based International Paper (IP), walked away in June last year, claiming that the Irish group had refused to properly engage on a potential deal, which was valued at as much as €9 billion at one stage. The decline also occurred against the backdrop of a wider slump by equities internationally in the second half of last year, amid concerns about the outlook for the world economy.

Mr Smurfit said his company “did engage” with IP management, but the US group’s indicative proposal was “so far away” from Smurfit Kappa’s worth that it made no sense to enter proper negotiations.

Smurfit Kappa said 12 months ago that it plans to spend €1.6 billion expanding its operations and buying rivals over the space of four years. Its largest deal of 2018 was its purchase of Dutch company Reparenco for €466 million. It also sealed smaller deals in France and Serbia.

Smurfit Kappa is currently weighing up a large paper facility in Colombia, which may cost between €200 million and €400 million do develop. A decision on the investment, which would be the group’s largest ever such project, will be made this year, he said. The group has traditionally built its business buying assets that peers had developed.