Smurfit Kappa revenues up 10pc in 2011; pre-tax profits rise 190pc
Smurfit Kappa Group (SKG) this morning reported a 10pc increase in its full year revenue in 2011 to 7.357bn and pre-tax profits of 299m, up over 190pc from 103m in 2010.
“We are pleased to report EBITDA growth of 12pc to €1,015m and pre-exceptional EPS growth of 69pc to €1 for the full year of 2011,” said Gary McGann, Smurfit Kappa Group CEO. “Our strong free cash flow generation delivered a net debt reduction of €358m to €2.75bn in 2011, which exceeded our net debt reduction target. Lower net debt combined with a strong EBITDA outcome delivered a reduction of our net debt to EBITDA ratio to 2.7x at year-end.”
McGann said the company’s strong financial performance demonstrates the benefits of its continued efficiency improvements, which delivered material growth in its European business. He said a number of significant development investments carried out in 2011 had reinforced its position as the leading integrated business in the industry, in both Europe and Latin America.
“We are continuing our unrelenting focus on customer service, product innovation and operating efficiency.
Within the past 18 months, we have materially improved the financial profile and flexibility of SKG, by reducing net debt by approximately €540m, while maintaining a strong liquidity position and diverse funding sources.”
McGann said an amendment request launched today, to extend the maturities of the company’s senior credit facility to 2016 and 2017 and to further increase its financial flexibility, forms part of an ongoing process of efficient balance sheet management.
“The sustained strength of our operating performance together with our enhanced capital structure provide us with an expanded range of strategic and financial options. These include continued debt paydown, increased presence in higher growth markets and a progressive dividend stream.
“Opportunities will be prioritised to maximise shareholder returns, with a clear objective of maintaining a net debt to EBITDA ratio of below 3.0x through the cycle.
“While macro-economic risks remain, in 2012 and beyond, we expect to continue delivering strong free cash flow through the cycle.
“As a consequence of our increased financial flexibility and sustained confidence in the long-term outlook for our business, we are satisfied that it is appropriate and timely for SKG to reinstate a sustainable dividend stream.”
He said that, as a result, the board is recommending a final dividend of 15c per share for 2011, representing an annualised yield of over 3pc.
Following publication of these results and the announcement that the company is looking to change its credit facility agreement, Moody’s placed all ratings of SKG under review for possible upgrade.
In a statement, Moody’s said: “The rating action reflects SKG’s progress in reducing the group’s leverage due to continued positive free cash flow generation as well as expected benefits from the announced amend-and-extend process on the back of material debt repayments and a term out of maturities. Should the amend-and-extend agreement be implemented with no material changes to the announced terms and conditions, Moody’s would expect to upgrade SKG’s CFR to Ba2. Concurrently, instrument ratings would be upgraded by one notch to Ba1 for the senior secured notes and B1 for the subordinated notes.”