Smurfit-Kappa's maiden set of annual results since its initial public offering last March revealed that the four top managers in the company received some €5.8 million in cash from private equity shareholders Madison Dearborn, CVC- Cinven in connection with the flotation.
The beneficiaries were chief executive Gary McGann, chief operating officer Tony Smurfit, chief financial officer Ian Curley and company secretary Michael O'Riordan. Floated at €16.50 per share, the share rose to a high of €20.88 before a slide set in that brought the stock as low as €8.02 last month.
The fall came amid exceptional volatility on international stock markets, although Smurfit-Kappa position as the world's largest producer of cardboard boxes means it is highly susceptible to volatility in international economies.
A cautious forecast of "modest" profit growth this year in light of weakening economic conditions was enough to bring the share down 4 per cent on the day to €8.85. That forecast, which implies EBITDA growth of 3 to 5 per cent, depends on economic conditions staying as they are. Any deterioration and Smurfit-Kappa will come under pressure to meet its target.
While the company has reduced capacity to restore pricing power and used the €1.495 billion proceeds of its flotation to reduce its debt mountain to €3.4 billion, its core task now is to ride out the volatility that is constraining the growth in demand for its products.
Further rationalisation is likely, although Mr McGann said yesterday that the company would be "rewarded in time" for its efforts to restructure the sector.
For the moment, there is no likelihood of its private equity investors making their exit. Madison Dearborn owns 21.5 per cent of the business and CVC-Cinven own 24.5 per cent. Neither of these groupings were sellers at the flotation price. They are unlikely to leave the stage at the current price. It's a long way back up to €16.50.
