Smurfit Kappa rallies off two-year lows as rival raises outlook

Shares in cardboard box-maker Smurfit Kappa rallied strongly on Monday off lows last seen at the height of the Covid-19 crisis in 2020 after UK rival DS Smith raised its earnings outlook.

London-based DS Smith said in a trading statement that it now expects its adjusted profit for the for the six months to the end of October, the first half of its financial year, to be at least £400 million (€456m) and that its full-year performance is “expected to be ahead” of the group’s previous expectations.

Goodbody Stockbrokers analyst David O’Brien said that this implies about 45 per cent earnings growth on the year and compares to his forecast of £377 million. He noted DS Smith’s performance was being driven by strong pricing for its products and cost control even if this was partially offset by a like-for-like decline on cardboard box volumes.

Shares in Smurfit Kappa soared as much as 8.1 per cent to €30.13 on Monday, making the group the best performer on the Iseq. The Irish multinational’s stock had fallen about 40 per cent between the end of December and close of trading last Friday, ending last week at €27.86, its lowest since July 2020, amid concerns about the global economy.

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DS Smith chief executive Miles Roberts said: “I am very pleased with the performance in the year to date and the momentum in our business. We remain focused on delivering for our customers and managing our costs in an inflationary environment. While the macroeconomic outlook remains uncertain, performance this year is ahead of our previous expectations, and we look forward to the remainder of the year with confidence.”

Smurfit Kappa reported in July that its first-half earnings before interest, tax, depreciation and amortisation (Ebitda) jumped 50 per cent to €1.17 billion to top analysts estimates at the time.

Smurfit Kappa, led by chief executive officer Tony Smurfit, said that the result reflected the resilience of the group’s integrated model, benefits of an ongoing investment programme and ability to pass on rising prices to customers even as it deals with higher year-on-year energy, recovered fibre, labour, distribution and other raw material costs.

The Irish company has focused investment recently on projects to take advantage of a surge in ecommerce and a shift across the consumer goods industry towards sustainable packaging.