By Padraic Halpin
DUBLIN -Smurfit Kappa expects to increase prices further this year to recover high costs after bumper demand and a 19% jump in prices charged for packaging products delivered record earnings amid “unprecedented cost inflation” in 2021.
Europe’s largest paper packaging producer predicted last July that inflation was here to stay and Chief Executive Tony Smurfit told Reuters on Wednesday that it increased prices by 6% quarter-on-quarter from October to December.
Momentum in price increases will continue into the first half, he added, with energy prices still at “silly high” levels and no indication that demand for packaging is slowing down across the global economy.
“If anything, it’s the opposite,” Smurfit said in a telephone interview, referring to the demand that he said will be boosted by continued fiscal stimulus in 2022.
“The thing that I’m a little bit concerned about is that the supply chain disruptions have not gone away and when there is going to be growth, we’re going to see continued disruption to the supply chain.”
Smurfit, whose customers include Procter & Gamble, Unilever and Nestle, said its product range remains effectively sold out in each of the 36 countries it operates in with the exception of Brazil.
Exceptional demand for packaging used in e-commerce helped push Smurfit’s core earnings back above pre-pandemic levels to a record 1.7 billion euros ($1.94 billion), up 13% year on year and above the 1.67 billion forecast by 11 analysts polled by Refinitiv.
Analysts at Davy Stockbrokers said they were raising their 2022 earnings forecast by 4% to 1.95 billion euros, noting the confidence shown by a 10% increase in Smurfit’s final dividend.
The Irish group expects its profit margins to improve this year. Its EBITDA margin fell to 16.8% last year from 17.7% in 2020 after the increasing price of recovered fibre – a key raw material in boxes – cost an additional 440 million euros and energy costs rose by 235 million euros.
Smurfit Kappa’s share price was 2.2% higher at 47.9 euros at 0830 GMT.
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(Reporting by Padraic Halpin; editing by Jason Neely & Simon Cameron-Moore)