Smurfit Kappa plans to invest an additional €1.6 billion in its business between now and 2021 in a move to spur better returns for the group, according to CEO Tony Smurfit.
The largest four-year investment plan ever launched by the company will include new machinery, product innovation, depots and production plants.
The packaging company made €8.5 billion in revenues last year and its 64,000 customers include PepsiCo, Aldi, Kellogg’s and Unilever.
Smurfit emphasised that the company won’t shy away from acquisitions, so long as they deliver value and returns for shareholders, according to the Irish Independent.
Backing The Company
"We're backing ourselves," Smurfit commented on the investment plan, continuing that the company is "not there yet" with regards to generating superior returns.
Smurfit also said that his company had €2 billion in potential mergers and acquisitions (M&A) in the last “two-plus years”.
"We're not giving up M&A," said Mr Smurfit. "We have very significant capacity to do M&A ... as long as it remains, long-term, a good deal for the company."
"We're disciplined. We have done some and we continue to look at stuff, but we're only going to do it if it makes sense, if the quality of the asset is good and we can get a return over the long term," he added.
Revenue Growth
Smurfit Kappa’s group revenue grew by 7% for Q4 2017 and 5% for the whole year to €8.52 billion.
“Our full year result was delivered against a backdrop of an increase in excess of €120 million in recovered fibre costs, generally higher raw material costs and adverse currency movements,” said Smurfit.
Its European operations performed strongly, with margins growing to 16.5%. This came as a result of high levels of demand across most product lines and input cost recovery, according to the company.
Meanwhile, its Americans performed below expectations with a margin of 14.4% due to a number of factors including increased recovered fibre costs, adverse weather events in the second half of the year, the continued rise in containerboard prices, and adverse currency movements.
However, the region has been progressing its recovery through 2017 and this will continue into 2018, according to the company.
The company acquired facilities in Russia and Greece last year, which it said are contributing positively.
“Our two most recent acquisitions in Russia and Greece are integrating well,” said Smurfit. “The Group remains ready to further expand our geographic footprint through acquisition where we can deliver long-term value creation.”
Sustainability
The sustainability of paper-based packaging is also becoming increasingly important in the age of plastic waste reduction.
“As we start 2018, the benefits of paper-based packaging are being increasingly recognised as the most sustainable, biodegradable solution for both our customers and their end customers,” said Smurfit. “KG continues to invest and develop these innovative and sustainable packaging applications which will further broaden our product portfolio. These investments will continue to ensure security of supply for our customers and help them address growing trends such as e-commerce and increasing supply chain complexity.
“While we continue to experience currency volatility, wage inflation as well as higher energy and other input costs, 2018 has seen the continuation of good demand in Europe, further input cost recovery and signs of improvement in our Americas business,” he concluded. “The Group has exciting plans in place to continue our development and sustain our industry leadership into the future”.
© 2018 - Checkout Magazine by Kevin Duggan
