More than a year after Venezuela was ordered by an international disputes-settlement body to pay Smurfit Westrock compensation for seizing its assets in the country in 2018, Ireland’s first multinational company is still waiting for its money.
As the country’s authoritarian president, Nicolás Maduro, faces accusations from the US of being a drug cartel leader – with the Trump administration last month doubling a bounty on his head to $50 million (€42.5 million) – officials in his government took time last week to file key documents with the World Bank’s International Center for Settlement of Investment Disputes (ICSID) as part of an appeal against the award.
With Venezuela’s dire track record of complying with the ICSID process, Smurfit Westrock also filed a lawsuit in the US last year in a bid to enforce the final outcome.
Group chief executive Tony Smurfit is, no doubt, tracking efforts of a list of other unpaid creditors (including victims of bond defaults and asset expropriations) to recover what they can from a US court-sanctioned sale of Venezuela-owned oil refiner Citgo Petroleum in Texas.
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A Delaware judge on Thursday allowed hedge fund king Paul Singer’s Elliott Investment Management to proceed with a $5.9 billion bid for Citgo. It’s taken the creditors eight years to get to this stage. And even at that, the proceeds will only put a minor dent in the $19 billion they’re owed by Venezuela.
It offers a glimpse of the uphill struggle Smurfit Westrock faces even if it gets final ICSID affirmation of the award.
But, for now, Smurfit (61), would happily make do with a little investor recognition of the benefits of the creation of Smurfit Westrock last year through the $25 billion merger of Smurfit Kappa with Atlanta-based Westrock.
Shares in the group have fallen more than 7 per cent since the merged entity’s debut on the New York Stock Exchange in July last year. And they’re off almost 18 per cent so far this year, making them the worst performing shares of an Irish company listed on either side of the Atlantic – aside from Great Western Mining, a €2 million market-cap minnow.
The slump reflects continuing weakness in demand for cardboard boxes as the impact of US tariffs on trading partners drags on consumer confidence. US corrugated box demand has slumped about 10 per cent since 2022, according to procurement consultants Beroe, marking a sharp reversal from a surge seen during Covid-19 lockdowns, when ecommerce and essential goods packaging fuelled demand.
Smurfit Westrock’s Mexican operations face the largest risk from tariffs, even if this is indirect. The US imports a large amount of consumer goods and foods from there, and the fear is the impact of tariffs on end products may cause packaging demand to decline.
The market, according to many analysts, is barely giving the management team credit for the $400 million of annual synergies it expects the merger to be delivering by the end of this year, from the likes of combining the work of overlapping mills, stronger buying power and cutting duplicated group functions. Let alone the “minimum $400 million” of additional earnings improvements it expects to squeeze out of the combination over time.
The majority of investors in Smurfit Westrock are based in the US following the tie-up. They have yet to be convinced that Smurfit and his long-standing chief financial officer Ken Bowles can turn around the group’s weaker legacy Westrock assets.
“Amongst the EU investor base, Smurfit has a very good reputation,” said UBS analyst Andrew Jones in a report published this week as he initiated coverage of the stock with a buy rating. “We think this is still underappreciated by US investors who are less familiar with Smurfit than the acquired Westrock, which had a mixed operational track record prior to the takeover.”
There is little sign of demand picking up for the remainder of the year. But the team has made a decent start at overhauling the Westrock assets, closing some plants and walking away from unprofitable contracts. The Irish group’s culture of making mill managers run facilities as if they were independent owner-operators is spreading. Smurfit told analysts at the end of July that 40 per cent of previous loss-making US plants are now profitable at earnings before interest, tax, depreciation and amortisation (Ebitda) level.
Discipline has also kicked in across the wider sector. An unprecedented 3.7 million tonnes of containerboard capacity – the equivalent of 11 per cent of annual consumption – has been taken out of the market as players such as International Paper and Georgia-Pacific have also permanently closed mills.
Jones at UBS reckons that this, combined with an expected pickup in demand next year in Smurfit Westrock’s largest market (almost 60 per cent of sales), should give prices and margins a boost.
While Smurfit said in July that demand in Europe “is at the bottom or close to the bottom”, there’s a question mark over when it will pick up. The problem market is Germany. Following two years of recession, Europe’s largest economy is expected to remain stagnant this year before edging 0.7 per cent higher in 2026, according to the German central bank.
The expectation is that a number of smaller mills will have to shut if market weakness persists. Which will be good news for Smurfit Westrock whenever a recovery kicks in.
