Paper-based packaging group Smurfit Kappa (SKG) reported a trading update for the nine months to 30 September and said third quarter performance was ahead of expectations, pushing the shares up 3% to £31.9.

Nine month revenues reached €6.3 billion while earnings before interest, taxes, depreciation and amortisation (EBITDA) were €1.12 billion, achieving a margin of 17.8%.

The company noted ‘a particularly pleasing’ third quarter performance with EBITDA of €390 million, demonstrating the strength and resilience of the group.

With its business strongly weighted towards fast moving consumer goods (FMCG) companies, Smurfit Kappa is well positioned to benefit from enhanced growth and accelerating trends in e-commerce.

Adapting to new ways of working, remotely and within its operations the company said it was working on opportunities to increase operating efficiencies.

In recognition of the effort within the organisation to keep critical supply chains open during the pandemic, the company will be awarding all permanent employees with a unique recognition award in the fourth quarter.

POSITIVE OUTLOOK

Chief executive Tony Smurfit commented: ‘We are increasingly excited by our future prospects and the structural growth drivers of our business including e‑commerce and sustainable packaging as well as our innovative ability to capitalise on these opportunities.’

Reflecting increased confidence the board has recommended a second interim dividend of 27.9 cent per share. Assuming no dramatic change to working practices the company expects to deliver full-year EBITDA in the range of €1.46 billion to €1.48 billion, around 1%-to-2% above analysts’ consensus estimates, according to data provided by Refinitiv, providing scope for future upgrades.

We looked at the Smurfit Kappa investment case in this article.

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Issue Date: 04 Nov 2020