Paper and packaging giant Smurfit Kappa has reported lower revenues and profits for 2023 as packaging volumes declined in the face of a global economic slowdown while signalling its planned acquisition of US rival WestRock in a $21 billion-plus deal would close in early July this year.
The tie-up between the Dublin-listed company and WestRock, formally agreed in September, is set to create the world’s biggest packaging group with annual revenues of about $34 billion (€31.7 billion).
Smurfit said revenue for last year fell by 12 per cent to €11.3 billion while operating profit declined by 16 per cent to €1.4 billion. Chief executive Tony Smurfit nonetheless hailed the results as “the second best” in the company’s 90-year history.
“Our 2023 results again demonstrate Smurfit Kappa Group’s proven capacity to perform across all market conditions. While there are, and will always be, challenges in the macro environment, we look forward to the year ahead with confidence and excitement,” he said.
On the back of the result, the company’s board recommended a 10 per cent increase in the final dividend to 118.4 cent per share.
“The demand environment for the industry in 2023 was difficult primarily due to destocking and a lack of economic activity in certain sectors, particularly durable goods,” Mr Smurfit said.
“However, one trend in which we have seen strong acceleration is an increasing demand for sustainable packaging solutions,” he said.
While full-year volumes for the group were down 3.5 per cent, “we saw a progressive improvement in demand during the year, with a return to growth in the fourth quarter”, he said.
The WestRock deal is essentially a takeover by Smurfit Kappa that will see the group headquartered in Dublin, but will result in its Irish stock market quotation being dropped as it moves its main listing from London to Wall Street.
Mr Smurfit and chief financial officer Ken Bowles are set to run the enlarged group.
[ Smurfit Kappa merger target CEO in line for golden parachute of up to €33mOpens in new window ]
Davy analyst Justin Jordan noted that the company’s earnings before interest, tax, depreciation and amortisation (Ebitda) of €2.08 billion for 2023 was 1.5 per cent ahead of its “approximately €2.05 billion” guidance, provided in its November trading update.
Also commenting on the results, Goodbody said: “Encouragingly, volumes continued to improve throughout the year with the group noting a ‘return to growth’ in Q4 putting the full-year decline at 3.5 per cent.”
“However, box prices took a further leg down in Q4 albeit pricing remains resilient against the backdrop of weaker container board prices,” it said.
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