SKG First Half 2021 Results

Key Points
- Revenue growth of 11%
- EBITDA of €781 million with an EBITDA margin of 16.7%
- Corrugated growth of over 10% and over 9% versus 2020 and 2019 respectively
- Accelerating investment plans to meet customer needs and capitalise on growth
- Agreement to acquire 600,000 tonne recycled containerboard mill
- Strong and progressive corrugated price recovery offsetting significant input cost increases
- Interim dividend increased by 5% to 29.3 cent per share

Performance Review and Outlook
Tony Smurfit, Group CEO, commented:
“I am pleased to report a strong first half performance with revenue growth of 11%, EBITDA of €781 million and an EBITDA margin of 16.7%. Growth in corrugated was over 10% against the same period in 2020 and over 9% on 2019 and we continue to see strong demand for our core products.

“As a result of our past and current capital investments in our integrated business model, we have, for the most part, been able to fulfil our customers’ needs during this period of exceptionally strong demand. It has also been a period of significant input cost pressures which we have and will continue to recover through corrugated price increases.

“Against this backdrop our European business delivered a strong performance with EBITDA of €591 million and an EBITDA margin of 16.2%. Our Americas business equally delivered a strong performance with EBITDA of €211 million and an EBITDA margin of 20.4%. These performances reflect the benefits of our integrated business model, our investment programmes, strong market positions and our performance culture which has come to the fore during these high pressured times. I would like to pay a special tribute to all our people who are going the extra mile to satisfy customer demands.

“To further strengthen the integration of the Group and the security of supply for our customers we are pleased to announce today the acquisition, subject to customary closing conditions, of a world-class recycled containerboard mill with a capacity of 600,000 tonnes. This mill is strategically well positioned in Northern Italy, it is highly complementary to our existing operational footprint and will support the acceleration of the significant investments we are making in our converting operations.

“In addition to our announced acquisition in Italy we were also delighted to complete the acquisition of two operations in our Americas region in Peru and Mexico. These two businesses further add to our geographic footprint, including a new market through Peru, and customer offering, and I am delighted to welcome a further 608 employees to Smurfit Kappa. We continue to be excited by the opportunities presented by this region.

“We are accelerating our investment plans to capitalise on the significant growth opportunities available to us. This growth is coming from the structural drivers of paper-based packaging, as the sustainable product of choice by consumers and customers alike, as well as the continued strong growth in e-commerce. I am very proud of our product development teams in SKG who have ensured our product offering in innovation and design is the best in the industry globally.

“During the first half we also published our 14th Sustainable Development Report, independently assured for over 10 years. Amongst the highlights of the 2020 report was significant action across our key metrics, such as, a further 7% reduction in our carbon intensity, an 18% reduction in waste to landfill intensity and a 29% improvement in safety performance.

“I am also happy to report that both Moody’s and Standard & Poor’s have upgraded our credit rating to Baa3 and BBB- respectively, in addition to Fitch’s BBB- rating.

“The second half has continued the trend of strong demand and corrugated price recovery. SKG remains very confident in our prospects and excited about the opportunities for our business. Our first half performance has established a platform for strong and accelerated earnings growth through the remainder of 2021.

“Reflecting this and the future prospects of the business the Board is recommending a 5% increase in the interim dividend.”