Smurfit Kappa beats earnings guidance as online sales prove strong

business
Smurfit Kappa Beats Earnings Guidance As Online Sales Prove Strong
A royal mail worker delivering a package, © PA Wire/PA Images
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By August Graham, PA City Reporter

Packaging giant Smurfit Kappa cashed in on a boom in demand from the online shopping sector driven by people being stuck at home during the pandemic.

Pre-tax profit jumped by 10 per cent to €748 million, on sales of €8.5 billion.

The results for 2020 also showed that Smurfit had beaten its own guidance for the year on earnings before interest, tax, depreciation and amortisation. The measure, known as Ebitda, dropped nine per cent to €1.5 billion, but the company had feared worse might be in store.

“This is a great set of results from Smurfit Kappa, which are ahead of expectations,” said Richard Flood, investment manager at Brewin Dolphin.

“Strong demand for packaging has been driven by the ongoing trend towards online shopping and the higher consumption of physical goods over services in 2020, due to Covid-19.”

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The company said it had been buoyed by demand for online orders of alcoholic drinks, which jumped 34 per cent in Europe.

The year had ended well for the Irish packaging business, said chief executive Tony Smurfit.

“Demand accelerated in the second half, with a particularly strong fourth quarter driven by increased demand across our customer base,” he said.

He added: “Driven by strong secular trends such as e-commerce and sustainability, the outlook for our industry is increasingly positive.

“The inherent strength of our business together with the recent capital raise provides us with an unrivalled platform to accelerate our vision and the group’s next phase of growth and development.”

As shares were trading up by around 1.6 per cent on Wednesday morning, CMC Markets chief analyst Michael Hewson highlighted that it would have been surprising if Smurfit had performed badly given the surge in online sales in the last year.

He added: “In terms of the outlook for 2021, the company said that the year has started well with the growth in online shopping expected to be sustained over the rest of the year.”

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