Packaging group Smurfit Kappa posts 33% profit jump

By Padraic Halpin

DUBLIN -Smurfit Kappa’s revenue and core profit both rose by 33% year on year in the first quarter, sending its shares sharply higher as it benefited from growing demand and customers willing to pay more to secure packaging supply.

Europe’s largest paper packaging producer said demand for its boxes grew by 3.6% in the first three months of the year and Chief Executive Tony Smurfit told Reuters its prices were between 8% and 10% higher than the previous three months.

He said the company has been able to raise prices at a similar rate in the second quarter in response to rapidly increasing cost inflation that had accelerated further in practically all areas so far this year with supply chain disruptions much more common.

“Across every metric that we look at, we have never seen the kind of increases that exist over the last three months,” Smurfit said in an interview on the sidelines of the company’s annual general meeting.

Shares in the Irish group were 5% higher at 3,436p by 1223 GMT, making it the UK blue-chip index’s top gainer. Analysts at Goodbody Stockbrokers said the profit growth was “remarkable” given the cost backdrop.

Smurfit said customers were more concerned about getting their hands on a sufficient amount of packaging than how much they were having to pay for it and that it was gaining market share due to its recent increase in production capacity.

While there is still “plenty of demand out there”, the CEO said the conflict in Ukraine has exacerbated supply chain problems with customers struggling to source enough bottles, labels or transport to quickly fill their orders.

Smurfit added that cost inflation would ultimately “mitigate itself” but only when energy prices come down.

“Energy is driving everything in all facets and until it dissipates, I think we’re going to see continuously significant inflation,” he said.