Smurfit Kappa’s net income fell by 51% in the second quarter, compared to the same period last year, due to a decrease in net sales and merger costs with WestRock.
The company’s net income decreased to $132 million in the quarter ending 30 June, from $267 million in the same quarter a year previously.
The decrease was primarily due to a fall in net sales, which decreased by $107 million – or 3% – to $2,969 million in the second quarter.
This fall in sales was driven by lower average box pricing in the European business, year on year, and partially offset by an increase in group corrugated volumes of 3.1%, a $28 million net-positive foreign currency impact, and a $4 million positive impact from acquisitions.
Smurfit Westrock
Smurfit Kappa’s combination with WestRock in early July also contributed to the fall in net income, as there were transaction-related expenses of €60 million associated with the merger.
At the end of the quarter, on 5 July, Irish company Smurfit Kappa and America’s WestRock officially merged, making their debut at the New York Stock Exchange (NYSE) on 8 July.
Due to the timing of the merger completion, results for the new Smurfit Westrock will be reported in the third quarter of 2024.
EBITDA, Interest, And Cash Flow
Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) for the group was $480 million, with an adjusted margin of 16.2%, in the quarter.
This was below the adjusted EBITDA of $556 million, with an adjusted EBITDA margin of 18.1%, in the second quarter of 2023.
The group’s interest expense net decreased by $4 million, to $33 million, in the second quarter, primarily due to a reduction in net cash interest costs.
Including capital expenditure of $177 million in the second quarter of 2024 and $224 million in the same period last year, free cash flow was $163 million in the second quarter of 2024 and $83 million in the same period in 2023.
Excluding the transaction costs associated with the Smurfit Westrock combination of $23 million in the second quarter of 2024, adjusted free cash flow for the period was $186 million.
‘Tremendous Energy And Enthusiasm’
Speaking about the results, the chief executive and president of Smurfit Kappa, Tony Smurfit, said, “I am pleased to report a strong set of results and continued delivery of quality and service for our customers.
“This has been driven by our performance-led culture, together with the continuing benefits of our prior-year capital allocation decisions.
“These results were also achieved against a backdrop of significantly higher recovered-fibre costs and lower corrugated-box prices.
“We expect these increased costs will be recovered through increased box pricing, with the customary time lag.
“Smurfit Kappa’s corrugated volume growth was 3.1% in the second quarter, with 3.5% growth in Europe and 1.5% in the Americas, year on year.
“On [a] shipments-per-day basis, volume growth was 1.1% for the group, with growth of 1.4% and 0.1% in Europe and the Americas, respectively.
“Demand in Southern and Eastern Europe remained robust, while German demand remained soft.
“In the Americas, demand was generally good, with the exception of Argentina.”
On the company merger, Smurfit said, “After the quarter end, on 5 July, we completed our transaction with WestRock.
“On 8 July, Smurfit Westrock listed on the NYSE and was included in the S&P 500.
“While we don’t underestimate the amount of hard work ahead of us, there is tremendous energy and enthusiasm to ensure a successful future for Smurfit Westrock.
“I believe that with the quality of our people and the strength of our market positions, we are creating something truly unique.
“Smurfit Westrock will be the go-to sustainable packaging company, with the right product, in the right space at the right time.”
Read More: Smurfit WestRock Makes Debut At New York Stock Exchange
