Packaging giant Smurfit Kappa has reported a bumper dividend and pre-tax profit growth in 2012.
Dividends rose 37 per cent, from 15 cent to 20.5 cent, and pre-tax profits increased 11 per cent, from €299 million to €331 million, in the 12 months to December 31st.
Earnings before interest, tax, depreciation and amortisation (Ebitda) grew by 13.9 per cent, while revenues remained flat at €7.3 billion.
The results mark a turnaround for the company, which is one of the world's largest integrated manufacturers of paper-based packaging products.
Smurfit was forced to cancel its dividend in 2009, shortly after listing in 2007, as the market was uncomfortable with its high level of leverage. Smurfit Kappa chief executive Gary McGann said: "The dividend was cancelled in 2009, which we saw as the prudent thing to do in terms of making sure the business was safe."
The dividend
"We committed to shareholders that the minute we were comfortable and the outlook was good again we'd restore the dividend and we did that at the back end of 2011.
"This is a vote of confidence in terms of recommending shareholders a significant hike in the dividend to reflect a more normal dividend yield of 3 per cent."
The group has also made headway in the bond market and issued €690 million in 2012, tapping the market for a further €400 million, at its lowest rate of 4.125 per cent, in January this year.
Its focus is on expanding in high-growth markets and the group recently completed the purchase of US and Mexican paper-based packaging company, Orange County Container Group (OCCG), for €260 million.
The purchase positions Smurfit as the second-biggest player in the sector in Mexico, taking its market share from 12 to 18 per cent.
Analyst at Goodbody Stockbrokers David O'Brien noted: "There's a focus on trying to increase exposure to higher growth markets and certainly the latest deal with OCCG was great in terms of the price and exposure.
"The Mexican market has been growing fairly robustly in comparison to the EU market, which would be a little more lacklustre."
