THE THREE executive directors at packaging company Smurfit Kappa saw their bonuses curtailed but not eliminated last year as the company’s share price collapsed and final dividend payments were cancelled after the heavily indebted business fell into the red.
The bonus payment to chief executive Gary McGann was more than halved to €406,000 last year from €842,000 in 2007, according to the company’s newly published annual report. The value of his total remuneration package – including a €1.26 million salary – declined to €2.35 million from €2.59 million.
Chief operations officer Tony Smurfit saw his bonus cut by a lesser extent – to €322,000 from €594,000 – as the value of his overall remuneration package dropped to €1.54 million from €1.77 million.
The bonus paid to chief financial officer Ian Curley was cut to €287,000 from €498,000 as his overall remuneration dropped to €1.35 million from €1.5 million.
Mr McGann resigned the chairmanship of the State-owned Dublin Airport Authority two months ago in the wake of his resignation from the board of Anglo Irish Bank, where the concealment for years of huge director’s loans to former chairman Seán FitzPatrick was the prime catalyst for its descent into State control in January.
Mr FitzPatrick resigned the chairmanship of Smurfit Kappa in December when the full scale of his Anglo loans and his use of temporary loans from Irish Nationwide Building Society to avoid declaring them to the market was made public.
In spite of the deterioration in Smurfit Kappa’s business last year, the annual report reveals that Mr FitzPatrick’s remuneration as a director rose to €300,000 in 2008 from €250,000.
Mr FitzPatrick was succeeded as chairman by former CRH chief Liam O’Mahony, whose director’s remuneration rose to €125,000 from €104,000.
Smurfit Kappa shares, which ended 2007 at €11.19, dropped to €1.81 at the end of 2008. The shares, down 80.4 per cent in the past 12 months, closed up five cent at €1.51 yesterday.
The company raised €1.495 million in a partial flotation on the Irish Stock Exchange in 2007, a transaction in which its shares were priced at €16.50.
Smurfit Kappa incurred a pretax loss of €11.49 million last year amid weaker demand and higher input costs as a result of sharp economic contraction in Europe and Latin America. This was in contrast to a pretax profit of €169.9 million in the previous year. In the same period, pre-exceptional earnings before interest, tax, depreciation and amortisation dropped 12 per cent to €941 million.
In his chairman’s statement in the annual report, Mr O’Mahony said Smurfit Kappa expected a continuation of difficult operating conditions as 2009 progresses. The company’s focus will remain on maximising free cashflow and a reduction in net debt, which was €3.18 billion at the end of 2008.
“In an industry where supply/demand balance is important to sustain a commercial marketplace, the planned introduction of excessive new capacity in 2009 is exacerbating this difficult general economic situation and will continue to do so unless significant change takes place within the industry’s landscape,” he said.
A sizeable part of the drop to €6.38 million from €17.23 million in the overall value of directors’ remuneration at Smurfit Kappa reflects a €9.71 million payment in 2007 to former chairman Dr Michael Smurfit in compensation for his loss of office when the business returned to the stock market.
