The head of Smurfit Westrock has said that moving a stock listing to New York only works for European companies with big American businesses, as the newly merged packaging giant banks on its own switch from London dramatically boosting its share price and valuation.
Dublin-based Smurfit Westrock, which began trading on the New York stock exchange on July 8th, is one of several companies that has shifted its primary listing from London to tap into bigger capital pools.
“If we get properly rated, it [the share price] should be considerably higher than where we currently are,” Tony Smurfit, chief executive of what is now the world’s biggest boxmaker by sales, told the Financial Times.
He added that the New York move would be seen as a success “if we do well...and the share price reflects that”.
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The company, which is targeting $400 million in cost savings from the $20 billion tie-up between Ireland’s Smurfit Kappa and US-based WestRock, began trading at $47.40 per share in New York on Monday. The merger completed on July 5th.
Justin Jordan, packaging analyst at brokerage Davy, noted that the firm trades at a more than 20 per cent valuation discount to US peers International Paper and Packaging Corporation of America, but “as confidence builds in [the] merger integration...we expect a positive re-rating in line with peers”. He is targeting a price of $65 per share.
Mr Jordan noted that last year was a “trough” for the industry in the US but recovering demand and price rises signalled an improved outlook.
Mr Smurfit said demand was “decent without being rock star good” but the cost of waste paper, a key component, had risen 50 per cent in recent months prompting the company to lift its own prices by 30 to 35 per cent since the beginning of the year.
“We expect to increase our box prices as we go forward to the rest of this year and into next year, and that will improve our profitability,” Mr Smurfit said.
He declined to make financial forecasts but said: “The continued supply and demand metrics for a world that is growing are still in favour of continued waste paper [price] movement upwards.”
Volumes fell 3.5 per cent last year as the Covid-19 demand for ecommerce and cardboard packaging faded, knocking shares in Smurfit, WestRock and International Paper off 2021 highs. Pre-tax profit in 2023 fell 18 per cent to just over €1 billion but the group, which is keeping a standard listing in London, raised its dividend by 10 per cent in what Smurfit called the second best year in its 90-year history “on most metrics”.
The primary listing move to New York follows in the footsteps of Irish buildings materials group CRH and other companies chasing higher valuations in the US. However, Smurfit said the shift only made sense for companies with a large US presence, adding he now expected to spend at least 25 to 30 per cent of his time in America.
Mr Smurfit said the company had shed perhaps “one or two” UK investors and had seen some rearrangement of fund investments because of the switch “but it hasn’t been too substantial”.
He expected to pull off the estimated $400 million in forecast efficiency savings from the merger with WestRock and said every target had so far been hit.
The company would continue to “sweat the assets and make sure we make good investments where appropriate”, he added. - Copyright The Financial Times Limited 2024
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