Smurfit Kappa volumes grow as it works to keep lid on costs

Smurfit Kappa reported first quarter corrugated volume growth of around 7% in both Europe and the Americas in its first quarter on Friday.

The FTSE 100 packaging giant said containerboard prices had increased in the quarter, and again at the start of the second quarter, as a result of strong demand and higher recovered fibre and other costs.

Its recovered fibre cost had increased by around €90m (£78.24m) compared to the first quarter of last year.

Smurfit Kappa said it was progressively recovering those input costs through its corrugated box system.

In addition to cost pressures, the firm said the industry was experiencing supply disruptions and shortages of packaging papers globally.

Smurfit Kappa said it was accelerating its capital investment plans with a number of high-return projects that would enhance shareholder returns.

Those include the construction of “mega plants”, and the acquisition of converting machines in order to meet its customers’ demand growth and continue its cost optimisation.

In addition, a number of paper investments were being deployed to further strengthen the company’s integrated model and improve its sustainability footprint.

“The first quarter was remarkable in many ways,” said chief executive officer Tony Smurfit.

“We had strong corrugated volume growth in practically every area and all markets in which we operate.

“With unprecedented industry wide shortages of supply and input cost pressures, paper prices have moved up sharply.”

Smurfit said the company was recovering its input costs in line with expectations.

“I am also happy to report that both Moody’s and Standard & Poor’s have recently upgraded our long-term issuer rating to Baa3 and BBB- respectively, in addition to Fitch’s BBB- rating.

“Our strong first quarter performance has set the foundation for accelerated revenue and earnings growth as we move through 2021.

“This performance and these prospects reflect the strength and quality of Smurfit Kappa.”

At 0805 BST, shares in Smurfit Kappa Group were up 2.86% at 3,666p.