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Smurfit Kappa Group plc ('SKG', 'Smurfit Kappa' or 'the Group')
today announced results for the half year ending 30 June 2023.
2023 Half Year | Key Financial Performance Measures
H1 H1
EURm 2023 2022 Change
Revenue EUR5,837 EUR6,385 (9%)
EBITDA (1) EUR1,113 EUR1,174 (5%)
EBITDA Margin (1) 19.1% 18.4%
Operating Profit before Exceptional Items (1) EUR779 EUR839 (7%)
Profit before Income Tax EUR659 EUR769 (14%)
Basic EPS (cent) 184.0 221.9 (17%)
Pre-exceptional Basic EPS (cent) (1) 197.2 221.9 (11%)
Free Cash Flow (1) EUR119 (EUR28) -
Return on Capital Employed (1) 19.0% 19.3%
Net Debt (1) EUR3,175 EUR3,309 (4%)
Net Debt to EBITDA (LTM) (1) 1.4x 1.6x
Key points:
-- Revenue of EUR5.8 billion
-- EBITDA of EUR1.1 billion and an EBITDA margin of 19.1%
-- Return on capital employed of 19.0%
-- Free Cash Flow of EUR119 million
-- Interim dividend increased by 6% to 33.5 cent per share
Tony Smurfit, Group CEO, commented:
"We are pleased to deliver an excellent outcome against a
challenging macro backdrop with a strong first half performance. In
a declining volume environment this reflects both the quality and
resilience of SKG's integrated and geographically balanced business
model. Although volumes declined by 6% in the first half, we saw
market share gains across many of the countries in which we
operate, and encouragingly, in Europe, during the second quarter,
we saw our shipments per day improve on the previous three
quarters.
"The steps we have taken and continue to take, have positioned
SKG for long-term growth. These include expanding our geographic
reach and product portfolio, our unrelenting focus on customer-led
innovation and promoting our product's natural sustainable
advantage to advance new growth opportunities. Additionally,
through our integrated model, customers benefit from security of
supply even in the most challenging market conditions.
"As a result, SKG is the packaging partner of choice for the
world's leading companies. Our team continues to excel in supplying
market-leading, innovative and sustainable packaging best
reflected, within the period, by market share gains across many of
the countries in which we operate. The significant number of
design, innovation and sustainability awards received over the
years are recognition of our customer focus and continues to
demonstrate the quality and expertise of our people and the value
they provide.
"In March, the Group announced that it had sold its Russian
operations to local management, completing its exit from the
Russian market. On a more positive note, in July of this year we
expanded our geographic reach with the opening of our new
integrated, state-of-the-art plant in Morocco and the acquisition
of a specialty packaging operation in Spain.
"Our 16(th) Sustainable Development Report emphasises the
Group's progress and commitment to our 2030 targets. The Group
continues to invest in sustainability, minimising both our own and
our customers' environmental impact and supporting the circular
economy.
"With net debt to EBITDA at 1.4x, no significant debt maturities
until 2026 and our most recent Green Bond issuance having achieved
coupons of 0.50% and 1.0% for terms of 8 and 12 years respectively,
our balance sheet continues to provide long-term strategic and
financial flexibility.
"While the global macro backdrop continues to be uncertain,
there are some encouraging signs of improvement and we are
confident about our future prospects. Smurfit Kappa has never been
in better shape strategically, operationally and financially.
Reflecting the continued confidence in the quality of our business
and our prospects, the Board has approved a 6% increase in the
interim dividend."
About Smurfit Kappa
Smurfit Kappa, a FTSE 100 company, is one of the leading
providers of paper-based packaging solutions in the world, with
more than 47,000 employees in over 350 production sites across 36
countries and with revenue of EUR12.8 billion in 2022. We are
located in 22 countries in Europe, 13 in the Americas and one in
Africa. We are the only large--scale pan-regional player in Latin
America. Our products, which are 100% renewable and produced
sustainably, improve the environmental footprint of our
customers.
With our proactive team, we relentlessly use our extensive
experience and expertise, supported by our scale, to open up
opportunities for our customers. We collaborate with
forward-thinking customers by sharing superior product knowledge,
market understanding and insights in packaging trends to ensure
business success in their markets. We have an unrivalled portfolio
of paper-based packaging solutions, which is constantly updated
with our market-leading innovations.
This is enhanced through the benefits of our integration, with
optimal paper design, logistics, timeliness of service, and our
packaging plants sourcing most of their raw materials from our own
paper mills.
We have a proud tradition of supporting social, environmental
and community initiatives in the countries where we operate.
Through these projects we support the UN Sustainable Development
Goals, focusing on where we believe we have the greatest
impact.
Follow us on LinkedIn, Twitter, Facebook, YouTube.
smurfitkappa.com
Forward Looking Statements
This Announcement contains certain statements that are
forward-looking. Forward-looking statements are prospective in
nature and are not based on historical facts, but rather on current
expectations of the Group about future events, and involve risks
and uncertainties because they relate to events and depend on
circumstances that will occur in the future. Although the Group
believes that current expectations and assumptions with respect to
these forward-looking statements are reasonable, it can give no
assurance that these expectations will prove to be correct. There
are a number of factors that could cause actual results and
developments to differ materially from those expressed or implied
by the forward-looking statements. Forward-looking statements
should therefore be construed in the light of such factors. You are
cautioned not to place undue reliance on any forward-looking
statements, which speak only as of the date made. Other than in
accordance with legal or regulatory obligations, the Group is not
under any obligation, and expressly disclaims any intention or
obligation, to update or revise any forward-looking statement,
whether as a result of new information, future events or
otherwise.
Contacts
Ciarán Potts Lorena Monsalves Melanie Farrell
Smurfit Kappa Smurfit Kappa FTI Consulting
T: +353 1 202 71 T: +353 1 202 70 00 T: +353 86 401 5250
27
E: E: E:
ir@smurfitkappa.co pressoffice@smurfitkappa. smurfitkappa@fticonsulting.co
m com m
2023 First Half | Performance Overview
The Group reported EBITDA for the first half of EUR1,113
million, down 5% on 2022, with lower earnings in Europe and higher
earnings in the Americas. The Group EBITDA margin was 19.1%, up
from 18.4% in the first half of 2022. This result, achieved in a
challenging macroeconomic environment and with strong comparators
in the prior year, demonstrates the strength of the Group's
integrated model, the innovative and value-adding solutions we
provide to our resilient customer base, the benefits of our capital
spend programme and is testament to SKG's culture of innovation and
operational excellence.
In Europe, EBITDA decreased by 6% to EUR868 million and the
EBITDA margin was 19.4%, up from 18.7% compared to the first half
of 2022. Underlying corrugated box volumes were 5.6% lower in the
first half of 2023, with year-on-year volume performance in the
second quarter improving, as anticipated, upon the levels seen in
the preceding two quarters.
Our European business continued to build on its strong operating
platform in the first half of the year with a number of projects
across our paper and corrugated divisions. In our paper division,
we have approved investments in our Herzberg, Hoya, Nettingsdorf,
Piteå and Verzuolo mills, which will reduce costs, increase
efficiencies and improve the Group's overall sustainability
footprint. In our corrugated division, we are investing across the
region in ultra-modern and energy efficient equipment, including
upgrades to corrugators and printers and expanding capacity in our
bag-in-box division. These investments will allow the Group to
increase production, reduce our environmental footprint and expand
our portfolio of high-value, innovative, sustainable packaging
solutions. In May, the Group announced the completion of a EUR40
million investment in state-of-the-art technology as part of our
strategic expansion in Poland. Our Pruszków corrugated plant now
becomes Smurfit Kappa's largest in Poland and one of the most
advanced packaging plants in Europe.
Pricing for European containerboard in the first half of the
year was lower compared to the peak levels seen in the first half
of 2022 as recovered fibre and energy prices were also lower
year-on-year and demand was lower from corrugated box producers. On
average, testliner prices were EUR200 per tonne lower in the first
six months of 2023 compared to the same period of last year, while
kraftliner was down EUR172 per tonne. Given the flexibility of our
integrated mill system in a period of subdued demand, the total
commercial downtime taken by our European mills was approximately
144,000 tonnes in the first half of 2023. This is down
significantly from the 260,000 tonnes taken in the second half of
2022.
In the Americas, EBITDA increased by 1% on the first half of
2022 to EUR274 million. The EBITDA margin was 20.3%, compared to
18.8% in the first half of 2022 with Colombia, Mexico and the US
accounting for almost 80% of the region's earnings. Box volumes in
the Americas for the first half of 2023, excluding acquisitions,
were down 7.8% against a strong prior year comparative.
SKG continued to invest in its Americas business during the
first half of the year, with growth and sustainability related
investments primarily focused in our corrugated, forestry and
speciality businesses in Argentina, Colombia, Mexico and Brazil. In
our corrugated division, we are investing in state-of-the-art
converting equipment right across the region and in our specialties
business, we are expanding our portfolio in paper sacks.
On 20 March, the Group announced that it had sold its Russian
operations to local management thereby completing its exit from the
Russian market.
On 12 July, the Group opened a new integrated corrugated plant
in Morocco, making this SKG's first operation in the attractive
growth market of North Africa. Also in July, the Group acquired a
specialty packaging operation in Spain.
Free cash flow for the first six months was a net inflow of
EUR119 million compared to a net outflow of EUR28 million in the
first half of 2022. The average maturity profile of the Group's
debt was 4.4 years at 30 June 2023 with an average interest rate of
3.06%. Net debt to EBITDA was 1.4x at the end of June 2023 versus
1.3x at the end of December 2022 and 1.6x at the end of June 2022.
SKG maintains investment grade credit ratings with Moody's
Investors Service (Baa3/Stable), S&P Global Ratings
(BBB-/Stable) and Fitch Ratings (BBB-/Stable).
2023 First Half | Financial Performance
Revenue for the first half was EUR5,837 million, down 9% on the
first half of 2022 or 7% lower on an underlying(2) basis.
EBITDA for the first half was EUR1,113 million, down 5% on the
first half of 2022. On an underlying basis, Group EBITDA was down
3% year-on-year, with Europe down 4% and the Americas up 3%.
Operating profit before exceptional items for the first half of
2023 at EUR779 million was 7% lower than the EUR839 million for the
same period of 2022.
Exceptional items charged within operating profit in the first
half of 2023 amounted to EUR34 million due to the recycling of
currency, an impairment loss on assets and other costs relating to
the sale of our Russian operations.
There were no exceptional items charged within operating profit
in the same period of 2022.
There were no exceptional finance items in the first half of
either 2023 and 2022.
Net finance costs at EUR87 million were EUR16 million higher
than 2022 primarily due to a higher net foreign currency
translation loss on debt, a higher interest cost on net pension
liabilities along with higher cash interest.
After exceptional items of EUR34 million, the profit before tax
for the first half of 2023 was EUR659 million compared to a profit
before tax of EUR769 million for the first half of 2022. The income
tax expense was EUR183 million compared to EUR195 million in 2022,
resulting in a profit of EUR476 million for the half year compared
to EUR574 million in 2022.
Basic EPS for the first half of 2023 was 184.0 cent, compared to
221.9 cent in 2022.
2023 First Half | Free Cash Flow
Free cash flow in the first half of 2023 was a net inflow of
EUR119 million compared to a net outflow of EUR28 million for 2022,
an increase of EUR147 million. The increase is primarily as a
result of a lower working capital outflow partly offset by a lower
EBITDA and a higher outflow for the change in employee benefits and
other provisions.
The working capital outflow in 2023 was EUR262 million compared
to EUR501 million in 2022. The outflow in 2023 was a combination of
a significant decrease in creditors along with an increase in
debtors, partly offset by a decrease in stock. The increase in
debtors reflects higher box prices. The decrease in creditors
reflects considerably lower recovered fibre, energy and other raw
material costs. Working capital amounted to EUR1,326 million at 30
June 2023 and represented 11.7% of annualised revenue compared to
9.7% at 30 June 2022.
Capital expenditure in 2023 amounted to EUR429 million (equating
to 142% of depreciation) compared to EUR349 million (equating to
115% of depreciation) in 2022.
Cash interest amounted to EUR66 million in 2023 compared to
EUR61 million in 2022. The increase in cash interest in the six
months to June 2023 compared to 2022 is primarily due to an
increased interest cost in certain of our higher interest
environments, which has more than offset increased interest
income.
Tax payments of EUR173 million in 2023 were EUR15 million higher
than in 2022 with higher payments in Europe.
2023 First Half | Capital Structure
Net debt was EUR3,175 million at the end of June 2023, resulting
in a net debt to EBITDA ratio of 1.4x compared to 1.3x at the end
of December 2022 and 1.6x at the end of June 2022. The Group's
balance sheet continues to provide considerable long-term strategic
and financial flexibility.
At 30 June 2023, the Group's average interest rate was 3.06%
compared to 2.89% at 31 December 2022. The Group's diversified
funding base and long-dated maturity profile of 4.4 years provide a
stable funding outlook. In terms of liquidity, the Group held cash
balances of EUR615 million at the end of June 2023, which were
further supplemented by undrawn available committed facilities of
EUR1,346 million on our sustainability--linked Revolving Credit
Facility ('RCF') and EUR312 million on our sustainability-linked
securitisation programmes.
Dividends
The Board has decided to pay an interim dividend of 33.5 cent
per share, which represents an increase of 6% on the prior year. It
is proposed to pay this dividend on 27 October 2023 to all ordinary
shareholders on the share register at the close of business on 29
September 2023.
2023 First Half | Sustainability
Smurfit Kappa continues to make significant progress towards
achieving its sustainability goals as outlined in its 16(th)
Sustainable Development Report ('SDR') published in March. The
report highlights the progress made towards our long--standing goal
of driving change and nurturing a greener and bluer planet through
the three key pillars of Planet, People and Impactful Business. It
shows that the Group's actions are delivering today, and together
with its ongoing investments and continuous improvement, it is well
positioned to deliver on its long-term ambition to have at least
net zero emissions by 2050.
The Group delivered several landmark achievements including:
-- A world first in successfully trialling hydrogen in its Saillat paper
mill in France.
-- Completion of a multi-fuel boiler in our Zülpich paper mill in
Germany which reduces the mill's CO2 emissions by 55,000 tonnes, or 2%
for the Group.
-- The announcement of an almost US$100 million investment in a
sustainable biomass boiler in our mill in Cali, Colombia, our largest
single decarbonisation project to date, which will reduce the Group's
emissions by approximately 6%.
-- Commencement of a district heating project in Austria to benefit 20,000
homes across three communities.
In the SDR, the Group reported further progress in reducing its
fossil CO(2) emissions intensity having reduced emissions by 43.9%
by the end of 2022, compared to the baseline year of 2005. This
marked a 4% improvement year-on-year, leaving the Group well on its
way to reach its 2030 target of a 55% reduction, in line with the
EU Green deal and another step forward on our journey to net
zero.
Since 2005, SKG has invested EUR1.2 billion to make our
operations more sustainable. Of this, approximately EUR1 billion
has been invested in different energy efficiency and CO(2)
reduction projects. These investments have improved overall energy
efficiency in our paper mill system by 20.6%.
The report also highlights our commitment to sustainable water
stewardship and how our efforts focus on continuing to decrease
water in-take and further improve the quality of the water
discharged from our mills. Since 2005, Smurfit Kappa has invested
EUR129 million in best practice water treatment systems, leading to
a reduction in Chemical Oxygen Demand of 36.9%.
Compared to a 2013 baseline, SKG's waste to landfill decreased
by 24% in 2022 and our Chain of Custody certified packaging
deliveries to customers reached a level of 94.3%, a record level
for the Group.
Other highlights include a 13.6% global reduction in the Total
Recordable Injury Rate compared to 2021 and the donation of EUR18.4
million to support various social, environmental and community
initiatives since 2020.
In January, the Group outlined its plan to install 12,000 solar
panels at our Sanguesa paper mill in Spain. This solar energy
project is the latest for Smurfit Kappa which has launched similar
green energy initiatives at plants in Spain, Colombia, Mexico and
most recently, in our new facility in Morocco.
In February, Smurfit Kappa announced a EUR27 million investment
in a new waste management and recovery facility at its Nervión
paper mill in Iurreta, Spain. The investment will see the mill
adopt a fully circular production process involving the biggest
landfill reduction project that SKG has undertaken to date.
Also in February, SKG was further recognised for its strong ESG
credentials and continued improvement by the leading research and
analytics company, Sustainalytics. Following an analysis of more
than 15,000 companies globally, SKG was named as an Industry Top
Rated company where it ranked in the top percentile out of 99
companies, in addition to being awarded the Regional Top Rated.
Smurfit Kappa continues to be listed on various environmental,
social and governance indices and disclosure programmes, such as
FTSE4Good, the Green Economy Mark from the London Stock Exchange,
Euronext Vigeo Europe 120, STOXX Global ESG Leaders, ISS Solactive
and Ethibel's sustainable investment register. SKG also performs
strongly across a number of third party certification bodies,
including MSCI, ISS ESG and Sustainalytics.
2023 First Half | Commercial Offering and Innovation
SKG's leadership in innovation and unrivalled market offering is
a defining characteristic of our business. With over 1,000
designers across the Group, supported by a network of laboratories,
design facilities and unique applications, we continued to deliver
the most innovative and sustainable packaging solutions for our
customers. Our unique packaging solutions help our customers to
increase sales, reduce cost, eliminate plastics and other less
sustainable substrates, mitigate risk in an essential element of
their supply chain and lower their carbon footprint.
Demonstrating this leadership in innovation, in the first half
of the year SKG won 21 awards across a host of categories including
design, safety, sustainability, community engagement and as a top
employer. Most recently, the Group was further recognised for its
technical innovation and creativity by winning 14 awards at the
Flexographic Industry Association UK awards.
The Group continues to invest in research and development to
push the boundaries of paper-based packaging and our design teams
work closely with our customers to understand their specific
requirements to develop bespoke solutions which optimise
functionality, cost-effectiveness, and consumer appeal.
In February, the Group launched its patented Vitop Uno tap which
is the first tap in the bag-in-box market to have attached tamper
protection. Vitop is the leading provider of bag-in-box closure
solutions with over six billion taps sold worldwide and the Uno tap
is now patented in Europe, the USA and a number of other
countries.
The Group continues to experience strong levels of pipeline
development across our business as customers strive for more
sustainable packaging solutions.
Summary Cash Flow
Summary cash flows for the first half are set out in the following table.
6 months to 6 months to
30-Jun-23 30-Jun-22
EURm EURm
EBITDA 1,113 1,174
Cash interest expense (66) (61)
Working capital change (262) (501)
Capital expenditure (429) (349)
Change in capital creditors (35) (108)
Tax paid (173) (158)
Change in employee benefits and other provisions (46) (22)
Other 17 (3)
Free cash flow 119 (28)
Disposal of Russian operations 1 -
Purchase of own shares (net) (28) (27)
Purchase of businesses, investments and NCI* (4) (48)
Dividends (280) (250)
Net cash outflow (192) (353)
Acquired net debt - (5)
Deferred debt issue costs amortised (3) (4)
Currency translation adjustment 12 (62)
Increase in net debt (183) (424)
* 'NCI' refers to non-controlling interests
A reconciliation of the Summary Cash Flow to the Condensed Consolidated
Statement of Cash Flows and a reconciliation of Free Cash Flow to Cash
Generated from Operations are included in sections K and L in Alternative
Performance Measures in the Supplementary Financial Information on pages 33 to
35.
Funding and Liquidity
The Group's primary sources of liquidity are cash flow from
operations and borrowings under the RCF. The Group's primary uses
of cash are for funding day to day operations, capital expenditure,
debt service, dividends and other investment activity including
acquisitions.
The Group has a EUR1,350 million RCF with a maturity of January
2026, which incorporates five KPIs spanning the Group's
sustainability objectives regarding climate change, forests, water,
waste and people, with the level of KPI achievement linked to the
pricing on the facility. Borrowings under the RCF are available to
fund the Group's working capital requirements, capital expenditure
and other general corporate purposes. At 30 June 2023, the Group's
drawings on this facility were EUR4 million, at an interest rate of
4.058%.
At 30 June 2023, the Group had outstanding EUR250 million 2.75%
senior notes due 2025, US$292.3 million 7.50% senior debentures due
2025, EUR1,000 million 2.875% senior notes due 2026, EUR750 million
1.5% senior notes due 2027, EUR500 million 0.5% senior green notes
due 2029 and EUR500 million 1.0% senior green notes due 2033.
Funding and Liquidity (continued)
At 30 June 2023, the Group had outstanding EUR13 million
variable funding notes ('VFNs') issued under the EUR230 million
trade receivables securitisation programme maturing in November
2026 and EUR5 million VFNs issued under the EUR100 million trade
receivables securitisation programme maturing in January 2026.
Both these securitisation programmes incorporate five KPIs
spanning the Group's sustainability objectives regarding climate
change, forests, water, waste and people, with the level of KPI
achievement linked to the pricing on the programme.
Market Risk and Risk Management Policies
The Group is exposed to the impact of interest rate changes and
foreign currency fluctuations due to its investing and funding
activities and its operations in different foreign currencies.
Interest rate risk exposure is managed by achieving an appropriate
balance of fixed and variable rate funding. At 30 June 2023, the
Group had fixed an average of 96% of its interest cost on
borrowings over the following 12 months.
The Group's fixed rate debt comprised EUR250 million 2.75%
senior notes due 2025, US$292.3 million 7.50% senior debentures due
2025, EUR1,000 million 2.875% senior notes due 2026, EUR750 million
1.5% senior notes due 2027, EUR500 million 0.5% senior green notes
due 2029 and EUR500 million 1.0% senior green notes due 2033.
The Group's earnings are affected by changes in short-term
interest rates on its floating rate borrowings and cash balances.
If interest rates for these borrowings increased by one percent,
the Group's interest expense would increase, and income before
taxes would decrease, by approximately EUR2 million over the
following 12 months. Interest income on the Group's cash balances
would increase by approximately EUR6 million assuming a one percent
increase in interest rates earned on such balances over the
following 12 months.
The Group uses foreign currency borrowings, currency swaps and
forward contracts in the management of its foreign currency
exposures.
Principal Risks and Uncertainties
Risk assessment and evaluation is an integral part of the
management process throughout the Group. Risks are identified,
evaluated and appropriate risk management strategies are
implemented at each level in the organisation.
The Board in conjunction with senior management identifies major
business risks faced by the Group and determines the appropriate
course of action to manage these risks.
The Board regularly monitors all of the Group's risks and
appropriate actions are taken to mitigate those risks or address
their potential adverse consequences. In addition, emerging risks
and the current global uncertainties were also considered as part
of the half year assessment.
The principal risks and uncertainties facing the Group for the
remaining six months of the financial year are summarised
below.
-- If the current economic climate were to deteriorate, for example as a
result of geopolitical uncertainty, trade tensions and/or a pandemic, it
could result in an increased economic slowdown which if sustained over
any significant length of time, could adversely affect the Group's
financial position and results of operations.
-- The cyclical nature of the packaging industry could result in
overcapacity and consequently threaten the Group's pricing structure.
-- If operations at any of the Group's facilities (in particular its key
mills) were interrupted for any significant length of time, it could
adversely affect the Group's financial position and results of
operations.
-- Price fluctuations in energy and raw material costs could adversely
affect the Group's manufacturing costs.
-- The Group is exposed to currency exchange rate fluctuations.
-- The Group may not be able to attract, develop and retain suitably
qualified employees as required for its business.
-- Failure to maintain good health, safety and employee wellbeing
practices may have an adverse effect on the Group's business.
-- The Group is subject to a growing number of environmental and climate
change laws and regulations, and the cost of compliance or the failure to
comply with current and future laws and regulations may negatively affect
the Group's business.
-- The Group is subject to anti-trust and similar legislation in the
jurisdictions in which it operates.
-- The Group, similar to other large global companies, is susceptible to
cyber-attacks with the threat to the confidentiality, integrity and
availability of data in its systems.
-- The global impact of climate change in the long-term could adversely
affect the Group's business and results of operations.
The principal risks and uncertainties faced by the Group, were
outlined in our 2022 Annual Report on pages 34 to 36. The Annual
Report is available on our website; smurfitkappa.com.
Condensed Consolidated Income Statement
6 months to 30-Jun-23 6 months to 30-Jun-22
Unaudited Unaudited
Pre-exceptional Exceptional Total Pre-exceptional Exceptional Total
EURm EURm EURm EURm EURm EURm
Revenue 5,837 - 5,837 6,385 - 6,385
Cost of sales (3,881) - (3,881) (4,383) - (4,383)
Gross profit 1,956 - 1,956 2,002 - 2,002
Distribution
costs (462) - (462) (480) - (480)
Administrative
expenses (715) - (715) (683) - (683)
Other operating
expenses - (34) (34) - - -
Operating profit 779 (34) 745 839 - 839
Finance costs (110) - (110) (85) - (85)
Finance income 23 - 23 14 - 14
Share of
associates'
profit (after
tax) 1 - 1 1 - 1
Profit before
income tax 693 (34) 659 769 769
Income tax
expense (183) (195)
Profit for the financial period 476 574
Attributable to:
Owners of the parent 476 574
Non-controlling
interests - -
Profit for the financial period 476 574
Earnings per share
Basic earnings per share - cent 184.0 221.9
Diluted earnings per share - cent 183.3 220.9
Condensed Consolidated Statement of Comprehensive Income
6 months to 6 months to
30-Jun-23 30-Jun-22
Unaudited Unaudited
EURm EURm
Profit for the financial period 476 574
Other comprehensive income:
Items that may be subsequently reclassified to
profit or loss
Foreign currency translation adjustments:
- Arising in the financial period 74 109
- Recycled to Condensed Consolidated Income
Statement 28 -
Effective portion of changes in fair value of cash
flow hedges:
- Movement out of reserve 4 -
- Fair value loss on cash flow hedges (7) (6)
Changes in fair value of cost of hedging:
- Movement out of reserve - (1)
99 102
Items which will not be subsequently reclassified to
profit or loss
Defined benefit pension plans:
- Actuarial (loss)/gain (1) 211
- Related tax - (26)
(1) 185
Total other comprehensive income 98 287
Total comprehensive income for the financial period 574 861
Attributable to:
Owners of the parent 574 861
Non-controlling interests - -
Total comprehensive income for the financial period 574 861
Condensed Consolidated Balance Sheet
30-Jun-23 30-Jun-22 31-Dec-22
Unaudited Unaudited Audited
EURm EURm EURm
ASSETS
Non-current assets
Property, plant and equipment 4,864 4,452 4,631
Right-of-use assets 328 360 345
Goodwill and intangible assets 2,661 2,760 2,672
Other investments 10 10 10
Investment in associates 20 16 16
Biological assets 125 113 100
Other receivables 50 34 39
Employee benefit assets 19 64 17
Derivative financial instruments - 5 2
Deferred income tax assets 147 116 141
8,224 7,930 7,973
Current assets
Inventories 1,110 1,296 1,231
Biological assets 12 11 10
Trade and other receivables 2,467 2,801 2,399
Derivative financial instruments 6 26 46
Cash and cash equivalents 615 491 788
4,210 4,625 4,474
Assets classified as held for sale - - 35
4,210 4,625 4,509
Total assets 12,434 12,555 12,482
EQUITY
Capital and reserves attributable to owners
of the parent
Equity share capital - - -
Share premium 2,646 2,646 2,646
Other reserves 339 375 236
Retained earnings 2,372 2,002 2,143
Total equity attributable to owners of the
parent 5,357 5,023 5,025
Non-controlling interests 13 13 13
Total equity 5,370 5,036 5,038
LIABILITIES
Non-current liabilities
Borrowings 3,594 3,614 3,600
Employee benefit liabilities 512 455 534
Derivative financial instruments 2 5 4
Deferred income tax liabilities 188 193 190
Non-current income tax liabilities 14 37 16
Provisions for liabilities 40 38 37
Capital grants 25 22 26
Other payables 11 8 10
4,386 4,372 4,417
Current liabilities
Borrowings 196 186 180
Trade and other payables 2,301 2,828 2,642
Current income tax liabilities 59 30 49
Derivative financial instruments 40 45 21
Provisions for liabilities 82 58 100
2,678 3,147 2,992
Liabilities associated with assets classified
as held for sale - - 35
2,678 3,147 3,027
Total liabilities 7,064 7,519 7,444
Total equity and liabilities 12,434 12,555 12,482
Condensed Consolidated Statement of Changes in Equity
Attributable to owners of the parent
Equity Non-
share Share Other Retained controlling Total
capital premium reserves earnings Total interests equity
EURm EURm EURm EURm EURm EURm EURm
Unaudited
At 1 January
2023 - 2,646 236 2,143 5,025 13 5,038
Profit for the
financial
period - - - 476 476 - 476
Other
comprehensive
income
Foreign
currency
translation
adjustments - - 102 - 102 - 102
Defined benefit
pension plans - - - (1) (1) - (1)
Effective
portion of
changes in
fair value of
cash flow
hedges - - (3) - (3) - (3)
Total
comprehensive
income for the
financial
period - - 99 475 574 - 574
Hyperinflation
adjustment - - - 34 34 - 34
Dividends paid - - - (280) (280) - (280)
Share--based
payment - - 32 - 32 - 32
Net shares
acquired by
SKG Employee
Trust - - (28) - (28) - (28)
At 30 June 2023 - 2,646 339 2,372 5,357 13 5,370
Unaudited
At 1 January
2022 - 2,646 260 1,473 4,379 13 4,392
Profit for the
financial
period - - - 574 574 - 574
Other
comprehensive
income
Foreign
currency
translation
adjustments - - 109 - 109 - 109
Defined benefit
pension plans - - - 185 185 - 185
Effective
portion of
changes in
fair value of
cash flow
hedges - - (6) - (6) - (6)
Changes in fair
value of cost
of hedging - - (1) - (1) - (1)
Total
comprehensive
income for the
financial
period - - 102 759 861 - 861
Derecognition
of equity
instruments - - 10 (10) - - -
Hyperinflation
adjustment - - - 30 30 - 30
Dividends paid - - - (250) (250) - (250)
Share--based
payment - - 30 - 30 - 30
Net shares
acquired by
SKG Employee
Trust - - (27) - (27) - (27)
At 30 June 2022 - 2,646 375 2,002 5,023 13 5,036
An analysis of the movements in Other reserves is provided in
Note 13.
Condensed Consolidated Statement of Cash Flows
6 months to 6 months to
30-Jun-23 30-Jun-22
Unaudited Unaudited
EURm EURm
Cash flows from operating activities
Profit before income tax 659 769
Net finance costs 87 71
Depreciation charge 285 280
Amortisation of intangible assets 23 25
Amortisation of capital grants (1) (1)
Share--based payment expense 33 31
Profit on sale of property, plant and equipment (1) (6)
Share of associates' profit (after tax) (1) (1)
Net movement in working capital (254) (501)
Change in biological assets (7) (1)
Disposal of Russian operations 28 -
Change in employee benefits and other provisions (46) (22)
Other (primarily hyperinflation adjustments) 9 7
Cash generated from operations 814 651
Interest paid (75) (57)
Income taxes paid:
Irish corporation tax (net of tax refunds) paid (16) (11)
Overseas corporation tax (net of tax refunds) paid (157) (147)
Net cash inflow from operating activities 566 436
Cash flows from investing activities
Interest received 12 2
Additions to property, plant and equipment and
biological assets (419) (418)
Additions to intangible assets (6) (8)
Receipt of capital grants 2 -
Disposal of property, plant and equipment 1 10
Purchase of subsidiaries (net of acquired cash) - (36)
Deferred consideration paid (4) (10)
Net cash outflow from investing activities (414) (460)
Cash flows from financing activities
Purchase of own shares (net) (28) (27)
Increase in other interest-bearing borrowings 29 7
Repayment of lease liabilities (53) (56)
Dividends paid to shareholders (280) (250)
Net cash outflow from financing activities (332) (326)
Decrease in cash and cash equivalents (180) (350)
Reconciliation of opening to closing cash and cash
equivalents
Cash and cash equivalents at 1 January 771 841
Currency translation adjustment 15 (17)
Decrease in cash and cash equivalents (180) (350)
Cash and cash equivalents at 30 June 606 474
An analysis of the net movement in working capital is provided
in Note 11.
Notes to the Condensed Consolidated Interim Financial
Statements
1. General Information
Smurfit Kappa Group plc ('SKG plc' or 'the Company') and its
subsidiaries (together 'SKG' or 'the Group') primarily manufacture,
distribute and sell containerboard, corrugated containers and other
paper-based packaging products. The Company is a public limited
company with a premium listing on the London Stock Exchange and a
secondary listing on Euronext Dublin. It is incorporated and
domiciled in Ireland. The address of its registered office is Beech
Hill, Clonskeagh, Dublin 4, D04 N2R2, Ireland.
2. Basis of Preparation and Accounting Policies
Basis of preparation and accounting policies
The Condensed Consolidated Interim Financial Statements included
in this report have been prepared in accordance with the
Transparency (Directive 2004/109/EC) Regulations 2007, the related
Transparency Rules of the Central Bank of Ireland and with IAS 34,
Interim Financial Reporting as adopted by the European Union. This
report should be read in conjunction with the Consolidated
Financial Statements for the financial year ended 31 December 2022
included in the Group's 2022 Annual Report which is available on
the Group's website; smurfitkappa.com.
The accounting policies adopted by the Group and the significant
accounting judgements, estimates and assumptions made by management
in the preparation of the Condensed Consolidated Interim Financial
Statements are consistent with those described and applied in the
Annual Report for the financial year ended 31 December 2022. The
Group reassessed the classification of restricted cash in 2022 as a
result of an agenda decision by the IFRS Interpretations Committee.
Consequently, restricted cash is now included as cash and cash
equivalents in the Condensed Consolidated Balance Sheet and
Condensed Consolidated Statement of Cash Flows. The comparative
balances for cash and cash equivalents have increased at 1 January
2022 by EUR14 million and at 30 June 2022 by EUR9 million. A number
of changes to IFRS became effective in 2023, however, they did not
have a material effect on the Condensed Consolidated Interim
Financial Statements included in this report.
Going concern
The Group is a highly integrated manufacturer of paper-based
packaging solutions with leading market positions, quality assets
and broad geographic reach. The financial position of the Group,
its cash generation, capital resources and liquidity continue to
provide a stable financing platform.
The Group's diversified funding base and long-dated maturity
profile of 4.4 years provide a stable funding outlook. At 30 June
2023, the Group had a strong liquidity position of approximately
EUR2.27 billion comprising cash balances of EUR615 million, undrawn
available committed facilities of EUR1,346 million under its RCF
and EUR312 million under its sustainability-linked securitisation
facilities. At 30 June 2023, the strength of the Group's balance
sheet, a net debt to EBITDA ratio of 1.4x (31 December 2022: 1.3x)
and its investment grade credit ratings, continues to provide
long-term strategic and financial flexibility.
Having assessed the principal risks facing the Group on page 10,
together with the Group's forecasts and significant financial
headroom, the Directors believe that the Group is well placed to
manage these risks successfully and have a reasonable expectation
that the Company, and the Group as a whole, have adequate resources
to continue in operational existence for the foreseeable future.
For this reason, they continue to adopt the going concern basis in
preparing the Condensed Consolidated Interim Financial
Statements.
Statutory financial statements and audit opinion
The Group's auditors have not audited or reviewed the Condensed
Consolidated Interim Financial Statements contained in this
report.
The Condensed Consolidated Interim Financial Statements
presented do not constitute full statutory financial statements.
Full statutory financial statements for the year ended 31 December
2022 will be filed with the Irish Registrar of Companies in due
course. The audit report on those statutory financial statements
was unqualified.
3. Segment and Revenue Information
The Group has identified operating segments based on the manner
in which reports are reviewed by the Chief Operating Decision Maker
('CODM'). The CODM is determined to be the executive management
team responsible for assessing performance, allocating resources
and making strategic decisions. The Group has identified two
operating segments: 1) Europe and 2) the Americas.
The Europe and the Americas segments are each highly integrated.
They include a system of mills and plants that primarily produce a
full line of containerboard that is converted into corrugated
containers within each segment. In addition, the Europe segment
also produces other types of paper, such as solidboard, sack kraft
paper, machine glazed ('MG') and graphic paper; and other
paper-based packaging, such as honeycomb, solidboard packaging and
folding cartons; and bag-in-box packaging. The Americas segment,
which includes a number of Latin American countries and the United
States, also comprises forestry; other types of paper, such as
boxboard and sack paper; and paper-based packaging, such as folding
cartons, honeycomb and paper sacks. Inter-segment revenue is not
material. No operating segments have been aggregated for disclosure
purposes.
Segment profit is measured based on EBITDA.
6 months to 30-Jun-23 6 months to 30-Jun-22
The The
Europe Americas Total Europe Americas Total
EURm EURm EURm EURm EURm EURm
Revenue and results
Revenue 4,484 1,353 5,837 4,939 1,446 6,385
EBITDA 868 274 1,142 926 271 1,197
Segment exceptional
items (34) - (34) - - -
EBITDA after exceptional
items 834 274 1,108 926 271 1,197
Unallocated centre costs (29) (23)
Share-based payment expense (33) (31)
Depreciation and depletion (net)* (278) (279)
Amortisation (23) (25)
Finance costs (110) (85)
Finance income 23 14
Share of associates'
profit (after tax) 1 1
Profit before income tax 659 769
Income tax expense (183) (195)
Profit for the financial period 476 574
*Depreciation and depletion is net of fair value adjustments
arising on biological assets.
3. Segment and Revenue Information (continued)
Revenue information about geographical areas
The Group has a presence in 36 countries worldwide. The
following information is a geographical revenue analysis about
country of domicile (Ireland) and countries with material
revenue.
6 months to 6 months to
30-Jun-23 30-Jun-22
EURm EURm
Ireland 57 55
Germany 838 936
France 725 773
Mexico 643 634
Other Europe - eurozone 1,713 1,900
Other Europe - non-eurozone 1,123 1,252
Other Americas 738 835
Total revenue by geographical area 5,837 6,385
Revenue is derived almost entirely from the sale of goods and is
disclosed based on the location of production.
Disaggregation of revenue
The Group derives revenue from the following major product
lines. The economic factors which affect the nature, amount, timing
and uncertainty of revenue and cash flows from the sub categories
of both paper and packaging products are similar.
6 months to 30-Jun-23 6 months to 30-Jun-22
Paper Packaging Total Paper Packaging Total
EURm EURm EURm EURm EURm EURm
Europe 667 3,817 4,484 978 3,961 4,939
The Americas 74 1,279 1,353 135 1,311 1,446
Total revenue by product 741 5,096 5,837 1,113 5,272 6,385
Packaging revenue is derived mainly from the sale of corrugated
products. The remainder of packaging revenue is comprised of
bag-in-box and other paper-based packaging products.
4. Exceptional items
Exceptional items charged within operating profit in the first
half of 2023 amounted to EUR34 million which related to currency
recycling, impairment of assets and other costs associated with the
disposal of our Russian operations.
There were no exceptional items within operating profit in the
first half of 2022.
There were no exceptional finance items in either year.
5. Finance Costs and Income
6 months to 6 months to
30-Jun-23 30-Jun-22
EURm EURm
Finance costs:
Interest payable on bank loans and overdrafts 25 19
Interest payable on leases 5 5
Interest payable on other borrowings 51 43
Foreign currency translation loss on debt 18 12
Fair value loss on derivatives 1 -
Fair value loss on financial assets - 1
Net interest cost on net pension liability 10 4
Net monetary loss -- hyperinflation - 1
Total finance costs 110 85
Finance income:
Other interest receivable (12) (2)
Foreign currency translation gain on debt (7) (8)
Fair value gain on derivatives not designated as
hedges (2) (4)
Net monetary gain - hyperinflation (2) -
Total finance income (23) (14)
Net finance costs 87 71
6. Income Tax Expense
Income tax expense recognised in the Condensed Consolidated
Income Statement
6 months to 6 months to
30-Jun-23 30-Jun-22
EURm EURm
Current tax:
Europe 146 128
The Americas 39 54
185 182
Deferred tax (2) 13
Income tax expense 183 195
Current tax is analysed as follows:
Ireland 15 8
Foreign 170 174
185 182
Income tax recognised in the Condensed Consolidated Statement of
Comprehensive Income
6 months to 6 months to
30-Jun-23 30-Jun-22
EURm EURm
Arising on defined benefit pension plans - (26)
6. Income Tax Expense (continued)
The income tax expense in 2023 is EUR12 million lower than in
the comparable period in 2022, primarily due to lower
profitability.
In Europe, the current tax expense is EUR18 million higher and
in the Americas the current tax expense is EUR15 million lower.
This is mainly due to changes in profitability and other timing
differences.
The movement in deferred tax from a net expense of EUR13 million
in 2022 to a credit of EUR2 million in 2023 is largely due to the
reversal of timing differences on which deferred tax was previously
recognised and the recognition of tax benefits on losses and other
tax credits.
There is no income tax expense or credit associated with
exceptional items in either 2023 or 2022.
7. Employee Benefits -- Defined Benefit Plans
The table below sets out the components of the defined benefit
cost for the period:
6 months to 6 months to
30-Jun-23 30-Jun-22
EURm EURm
Current service cost 14 20
Net interest cost on net pension liability 10 4
Defined benefit cost 24 24
Analysis of actuarial (losses)/gains recognised in the Condensed
Consolidated Statement of Comprehensive Income:
6 months to 6 months to
30-Jun-23 30-Jun-22
EURm EURm
Return on plan assets (excluding interest income) (25) (458)
Actuarial gain due to changes in financial
assumptions 24 669
Total (loss)/gain recognised in the Condensed
Consolidated Statement of Comprehensive Income (1) 211
The following is a summary of the Group's employee benefit
obligations and their related funding status:
30-Jun-23 31-Dec-22
EURm EURm
Present value of funded or partially funded obligations (1,723) (1,713)
Fair value of plan assets 1,640 1,608
Deficit in funded or partially funded plans (83) (105)
Present value of wholly unfunded obligations (407) (410)
Amounts not recognised as assets due to asset ceiling (3) (2)
Net pension liability (493) (517)
Defined Benefit Asset (for overfunded plans) 19 17
Defined Benefit Liability (for unfunded and partially
funded plans) (512) (534)
The key assumptions relating to discount and inflation rates
were reassessed at 30 June 2023 and updated to reflect market
conditions at that date.
8. Earnings per Share ('EPS')
Basic
Basic EPS is calculated by dividing the profit attributable to
owners of the parent by the weighted average number of ordinary
shares in issue during the period less own shares.
6 months to 6 months to
30-Jun-23 30-Jun-22
Profit attributable to owners of the parent (EUR
million) 476 574
Weighted average number of ordinary shares in issue
(million) 258 258
Basic EPS (cent) 184.0 221.9
Diluted
Diluted EPS is calculated by adjusting the weighted average
number of ordinary shares outstanding to assume conversion of all
dilutive potential ordinary shares. These comprise deferred shares
issued under the Group's long-term incentive plans. Where the
conditions governing exercisability and vesting of these shares
have been satisfied as at the end of the reporting period, they are
included in the computation of diluted earnings per ordinary
share.
6 months to 6 months to
30-Jun-23 30-Jun-22
Profit attributable to owners of the parent (EUR
million) 476 574
Weighted average number of ordinary shares in issue
(million) 258 258
Potential dilutive ordinary shares assumed (million) 1 1
Diluted weighted average ordinary shares (million) 259 259
Diluted EPS (cent) 183.3 220.9
Pre-exceptional
6 months to 6 months to
30-Jun-23 30-Jun-22
Profit attributable to owners of the parent (EUR
million) 476 574
Exceptional items included in profit before income
tax (EUR million) 34 -
Pre-exceptional profit attributable to owners of the
parent (EUR million) 510 574
Weighted average number of ordinary shares in issue
(million) 258 258
Pre-exceptional basic EPS (cent) 197.2 221.9
Diluted weighted average ordinary shares (million) 259 259
Pre-exceptional diluted EPS (cent) 196.3 220.9
9. Dividends
During the period, the final dividend for 2022 of 107.6 cent per
share was paid to the holders of ordinary shares. The Board has
decided to pay an interim dividend of 33.5 cent per share
(approximately EUR87 million). It is proposed to pay this dividend
on 27 October 2023 to all ordinary shareholders on the share
register at the close of business on 29 September 2023.
10. Property, Plant and Equipment
Land and Plant and
buildings equipment Total
EURm EURm EURm
Six months ended 30 June 2023
Opening net book amount 1,269 3,362 4,631
Reclassifications 47 (47) -
Additions - 379 379
Acquisitions 6 7 13
Depreciation charge (31) (204) (235)
Hyperinflation adjustment 8 16 24
Foreign currency translation adjustment 9 43 52
At 30 June 2023 1,308 3,556 4,864
Financial year ended 31 December 2022
Opening net book amount 1,175 3,090 4,265
Reclassifications 115 (112) 3
Additions 21 817 838
Acquisitions 43 15 58
Depreciation charge (62) (421) (483)
Impairments (25) (37) (62)
Retirements and disposals (1) (2) (3)
Hyperinflation adjustment 8 36 44
Foreign currency translation adjustment (5) (24) (29)
At 31 December 2022 1,269 3,362 4,631
11. Net Movement in Working Capital
6 months to 6 months to
30-Jun-23 30-Jun-22
EURm EURm
Change in inventories 124 (220)
Change in trade and other receivables (40) (533)
Change in trade and other payables (338) 252
Net movement in working capital (254) (501)
12. Analysis of Net Debt
30-Jun-23 31-Dec-22
EURm EURm
Revolving credit facility due 2026 (1) 1 4
US$292.3 million 7.5% senior debentures due 2025
(including accrued interest) 271 276
Bank loans and overdrafts 143 110
EUR100 million receivables securitisation VFNs due 2026
(including accrued interest) (2) 4 4
EUR230 million receivables securitisation VFNs due 2026
(3) 11 11
EUR250 million 2.75% senior notes due 2025 (including
accrued interest) 252 252
EUR1,000 million 2.875% senior notes due 2026 (including
accrued interest) 1,009 1,008
EUR750 million 1.5% senior notes due 2027 (including
accrued interest) 749 748
EUR500 million 0.5% senior green notes due 2029
(including accrued interest) 498 496
EUR500 million 1.0% senior green notes due 2033
(including accrued interest) 499 497
Gross debt before leases 3,437 3,406
Leases 353 374
Gross debt including leases 3,790 3,780
Cash and cash equivalents (615) (788)
Net debt including leases 3,175 2,992
(1) At 30 June 2023, the following amounts were drawn under this facility:
(a) Revolver loans - EUR4 million
(b) Drawn under ancillary facilities and facilities supported by
letters of credit -- nil
(c) Other operational facilities including letters of credit - nil
(2) At 30 June 2023, the amount drawn under this facility was EUR5 million.
(3) At 30 June 2023, the amount drawn under this facility was EUR13
million.
13. Other Reserves
Other reserves included in the Condensed Consolidated Statement
of Changes in Equity are comprised of the following:
Cash Foreign Share-
Reverse flow Cost of currency based
acquisition hedging hedging translation payment Own FVOCI
reserve reserve reserve reserve reserve shares reserve Total
EURm EURm EURm EURm EURm EURm EURm EURm
At 1 January 2023 575 (4) - (604) 334 (65) - 236
Other
comprehensive
income
Foreign currency
translation
adjustments - - - 102 - - - 102
Effective portion
of changes in
fair value of
cash flow
hedges - (3) - - - - - (3)
Total other
comprehensive
(expense)/income - (3) - 102 - - - 99
Share-based
payment - - - - 32 - - 32
Net shares
acquired by SKG
Employee Trust - - - - - (28) - (28)
Shares
distributed by
SKG Employee
Trust - - - - (15) 15 - -
At 30 June 2023 575 (7) - (502) 351 (78) - 339
At 1 January 2022 575 1 1 (541) 293 (59) (10) 260
Other
comprehensive
income
Foreign currency
translation
adjustments - - - 109 - - - 109
Effective portion
of changes in
fair value of
cash flow
hedges - (6) - - - - - (6)
Changes in fair
value of cost of
hedging - - (1) - - - - (1)
Total other
comprehensive
(expense)/income - (6) (1) 109 - - - 102
Derecognition of
equity
instruments - - - - - - 10 10
Share-based
payment - - - - 30 - - 30
Net shares
acquired by SKG
Employee Trust - - - - - (27) - (27)
Shares
distributed by
SKG Employee
Trust - - - - (21) 21 - -
At 30 June 2022 575 (5) - (432) 302 (65) - 375
14. Fair Value Hierarchy
The following table presents the Group's financial assets and
liabilities that are measured at fair value at 30 June 2023:
Level 1 Level 2 Level 3 Total
EURm EURm EURm EURm
Other investments:
Listed 2 - - 2
Unlisted - 8 - 8
Derivative financial instruments:
Assets at fair value through profit or loss - 6 - 6
Derivative financial instruments:
Liabilities at fair value through profit or
loss - (23) - (23)
Derivatives used for hedging - (19) - (19)
2 (28) - (26)
The following table presents the Group's financial assets and
liabilities that are measured at fair value at 31 December
2022:
Level 1 Level 2 Level 3 Total
EURm EURm EURm EURm
Other investments:
Listed 2 - - 2
Unlisted - 8 - 8
Derivative financial instruments:
Assets at fair value through profit or loss - 44 - 44
Derivatives used for hedging - 4 - 4
Derivative financial instruments:
Liabilities at fair value through profit or
loss - (16) - (16)
Derivatives used for hedging - (9) - (9)
2 31 - 33
The fair value of listed investments is determined by reference
to their bid price at the reporting date. Unlisted investments are
valued using recognised valuation techniques for the underlying
security including discounted cash flows and similar unlisted
equity valuation models.
The fair value of the derivative financial instruments set out
above has been measured in accordance with level 2 of the fair
value hierarchy. All are plain derivative instruments, valued with
reference to observable foreign exchange rates, interest rates or
broker prices.
There were no reclassifications or transfers between the levels
of the fair value hierarchy during the period.
15. Fair Value
The following table sets out the fair value of the Group's
principal financial assets and liabilities. The determination of
these fair values is based on the descriptions set out within Note
2 to the Consolidated Financial Statements of the Group's 2022
Annual Report.
30-Jun-23 31-Dec-22
Carrying value Fair value Carrying value Fair value
EURm EURm EURm EURm
Trade and other
receivables (1) 2,260 2,260 2,228 2,228
Listed and unlisted
debt instruments(2) 10 10 10 10
Cash and cash
equivalents (3) 615 615 788 788
Derivative assets (4) 6 6 48 48
2,891 2,891 3,074 3,074
Trade and other
payables(1) 1,810 1,810 2,121 2,121
Revolving credit
facility(5) 1 1 4 4
2026 EUR100 million
receivables
securitisation(3) 4 4 4 4
2026 EUR230 million
receivables
securitisation(3) 11 11 11 11
Bank loans and
overdrafts(3) 143 143 110 110
2025 debentures(6) 271 281 276 297
2025 notes(6) 252 248 252 246
2026 notes(6) 1,009 977 1,008 981
2027 notes (6) 749 674 748 672
2029 green notes (6) 498 405 496 385
2033 green notes (6) 499 374 497 349
5,247 4,928 5,527 5,180
Derivative
liabilities(4) 42 42 25 25
Deferred
consideration(7) 1 1 5 5
5,290 4,971 5,557 5,210
Total net position (2,399) (2,080) (2,483) (2,136)
(1) The fair value of trade and other receivables and payables is estimated
as the present value of future cash flows, discounted at the market
rate of interest at the reporting date.
(2) The fair value of listed financial assets is determined by reference to
their bid price at the reporting date. Unlisted financial assets are
valued using recognised valuation techniques for the underlying
security including discounted cash flows and similar unlisted equity
valuation models.
(3) The carrying amount reported in the Condensed Consolidated Balance
Sheet is estimated to approximate to fair value because of the
short-term maturity of these instruments and, in the case of the
receivables securitisation, the variable nature of the facility and
repricing dates.
(4) The fair value of forward foreign currency, energy and commodity
contracts is based on their listed market price if available. If a
listed market price is not available, then fair value is estimated by
discounting the difference between the contractual forward price and
the current forward price for the residual maturity of the contract
using a risk-free interest rate (based on government bonds).
(5) The fair value (level 2) of the RCF is based on the present value of
its estimated future cash flows discounted at an appropriate market
discount rate at the balance sheet date.
(6) The fair value (level 2) is based on broker prices at the balance sheet
date.
(7) The fair value of deferred consideration is based on the present value
of the expected payment, discounted using an appropriate market
discount rate at the balance sheet date.
16. Related Party Transactions
Details of related party transactions in respect of the year
ended 31 December 2022 are contained in Note 30 to the Consolidated
Financial Statements of the Group's 2022 Annual Report. The Group
continued to enter into transactions in the normal course of
business with its associates and other related parties during the
period.
During the first half of 2023, the Group provided funding of
EUR3 million to the Smurfit Kappa Foundation. There were no other
transactions with related parties in the first half of 2023 or
changes to transactions with related parties disclosed in the 2022
Consolidated Financial Statements that had a material effect on the
financial position or the performance of the Group.
17. Board Approval
This interim report was approved by the Board of Directors on 1
August 2023.
18. Distribution of the Interim Report
This 2023 interim report is available on the Group's website;
smurfitkappa.com.
Responsibility Statement in Respect of the Six Months Ended 30
June 2023
The Directors, whose names and functions are listed on pages 100
to 103 in the Group's 2022 Annual Report, are responsible for
preparing this interim management report and the Condensed
Consolidated Interim Financial Statements in accordance with the
Transparency (Directive 2004/109/EC) Regulations 2007, the related
Transparency Rules of the Central Bank of Ireland and with IAS 34,
Interim Financial Reporting as adopted by the European Union.
The Directors confirm that, to the best of their knowledge:
-- the Condensed Consolidated Interim Financial Statements for the half
year ended 30 June 2023 have been prepared in accordance with the
international accounting standard applicable to interim financial
reporting, IAS 34, adopted pursuant to the procedure provided for under
Article 6 of the Regulation (EC) No. 1606/2002 of the European Parliament
and of the Council of 19 July 2002;
-- the interim management report includes a fair review of the important
events that have occurred during the first six months of the financial
year, and their impact on the Condensed Consolidated Interim Financial
Statements for the half year ended 30 June 2023, and a description of the
principal risks and uncertainties for the remaining six months;
-- the interim management report includes a fair review of related party
transactions that have occurred during the first six months of the
current financial year and that have materially affected the financial
position or the performance of the Group during that period, and any
changes in the related party transactions described in the last Annual
Report that could have a material effect on the financial position or
performance of the Group in the first six months of the current financial
year.
Signed on behalf of the Board
A. Smurfit, Director and Chief Executive Officer
K. Bowles, Director and Chief Financial Officer
1 August 2023
Supplementary Financial Information
Alternative Performance Measures
The Group uses certain financial measures as set out below in
order to evaluate the Group's financial performance. These
Alternative Performance Measures ('APMs') are not defined under
IFRS and are presented because we believe that they, and similar
measures, provide both SKG management and users of the Condensed
Consolidated Interim Financial Statements with useful additional
financial information when evaluating the Group's operating and
financial performance.
These measures may not be comparable to other similarly titled
measures used by other companies, and are not measurements under
IFRS or other generally accepted accounting principles, and they
should not be considered in isolation or as substitutes for the
information contained in our Condensed Consolidated Interim
Financial Statements.
Please note where referenced 'CIS' refers to Condensed
Consolidated Income Statement, 'CBS' refers to Condensed
Consolidated Balance Sheet and 'CSCF' refers to Condensed
Consolidated Statement of Cash Flows.
The principal APMs used by the Group, together with
reconciliations where the non-IFRS measures are not readily
identifiable from the Condensed Consolidated Interim Financial
Statements, are as follows:
A. EBITDA
Definition
EBITDA is earnings before exceptional items, share-based payment
expense, share of associates' profit (after tax), net finance
costs, income tax expense, depreciation and depletion (net) and
intangible assets amortisation. It is an appropriate and useful
measure used to compare recurring financial performance between
periods.
Reconciliation of Profit to EBITDA
6 months to 6 months to
30-Jun-23 30-Jun-22
Reference EURm EURm
Profit for the financial period CIS 476 574
Income tax expense (after exceptional
items) CIS 183 195
Exceptional items charged in operating
profit CIS 34 -
Net finance costs (after exceptional
items) Note 5 87 71
Share of associates' profit (after tax) CIS (1) (1)
Share-based payment expense Note 3 33 31
Depreciation, depletion (net) and
amortisation Note 3 301 304
EBITDA 1,113 1,174
B. EBITDA margin
Definition
EBITDA margin is a measure of profitability by taking our EBITDA
divided by revenue.
6 months to 6 months to
30-Jun-23 30-Jun-22
Reference EURm EURm
EBITDA A 1,113 1,174
Revenue CIS 5,837 6,385
EBITDA margin 19.1% 18.4%
Alternative Performance Measures (continued)
C. Operating profit before exceptional items
Definition
Operating profit before exceptional items represents operating
profit as reported in the Condensed Consolidated Income Statement
before exceptional items. Exceptional items are excluded in order
to assess the underlying financial performance of our
operations.
6 months to 6 months to
30-Jun-23 30-Jun-22
Reference EURm EURm
Operating profit CIS 745 839
Exceptional items CIS 34 -
Operating profit before exceptional
items CIS 779 839
D. Pre-exceptional basic earnings per share
Definition
Pre-exceptional basic EPS serves as an effective indicator of
our profitability as it excludes exceptional one--off items and, in
conjunction with other metrics such as ROCE, is a measure of our
financial strength. Pre--exceptional basic EPS is calculated by
dividing profit attributable to owners of the parent, adjusted for
exceptional items included in profit before income tax and income
tax on exceptional items, by the weighted average number of
ordinary shares in issue. The calculation of pre-exceptional basic
EPS is shown in Note 8.
E. Underlying EBITDA and revenue
Definition
Underlying EBITDA and revenue are arrived at by excluding the
incremental EBITDA and revenue contributions from current and prior
year acquisitions and disposals and the impact of currency
translation, hyperinflation and any non-recurring items.
The Group uses underlying EBITDA and underlying revenue as
additional performance indicators to assess performance on a
like-for-like basis each year.
The The
Europe Americas Total Europe Americas Total
30-Jun-23 30-Jun-23 30-Jun-23 30-Jun-22 30-Jun-22 30-Jun-22
EBITDA
Currency (1%) (3%) (2%) - 8% 2%
Hyperinflation - (1%) - - - -
Acquisitions/disposals - 2% - 2% 3% 2%
Underlying EBITDA
change (4%) 3% (3%) 55% 18% 46%
Reported EBITDA change (5%) 1% (5%) 57% 29% 50%
Revenue
Currency - (3%) (1%) - 7% 2%
Hyperinflation - 1% - - 1% -
Acquisitions/disposals (1%) 2% (1%) 2% 4% 2%
Underlying revenue
change (8%) (6%) (7%) 33% 28% 32%
Reported revenue change (9%) (6%) (9%) 35% 40% 36%
Alternative Performance Measures (continued)
F. Net debt
Definition
Net debt comprises borrowings net of cash and cash equivalents.
We believe that this measure highlights the overall movement
resulting from our operating and financial performance.
30-Jun-23 30-Jun-22 31-Dec-22
Reference EURm EURm EURm
Borrowings Note 12 3,790 3,800 3,780
Less:
Cash and cash equivalents CBS (615) (491) (788)
Net debt 3,175 3,309 2,992
G. Net debt to EBITDA
Definition
Leverage (ratio of net debt to EBITDA for the last twelve months
('LTM')) is an important measure of our overall financial
position.
30-Jun-23 30-Jun-22 31-Dec-22
Reference EURm EURm EURm
Net debt F 3,175 3,309 2,992
EBITDA LTM 2,294 2,095 2,355
Net debt to EBITDA LTM (times) 1.4 1.6 1.3
H. Return on capital employed ('ROCE')
Definition
ROCE measures profit from capital employed. It is calculated as
operating profit before exceptional items plus share of associates'
profit (after tax) LTM divided by the average capital employed
(where average capital employed is the average of total equity and
net debt at the current and prior period-end).
30-Jun-23 30-Jun-22
Reference EURm EURm
Operating profit before exceptional items plus share of
associates' profit (after tax) LTM 1,605 1,436
Total equity -- current period-end CBS 5,370 5,036
Net debt -- current period-end F 3,175 3,309
Capital employed -- current period-end 8,545 8,345
Total equity -- prior period-end CBS 5,036 4,004
Net debt -- prior period-end F 3,309 2,549
Capital employed -- prior period-end 8,345 6,553
Average capital employed 8,445 7,449
Return on capital employed 19.0% 19.3%
Alternative Performance Measures (continued)
I. Working capital
Definition
Working capital represents total inventories, trade and other
receivables and trade and other payables.
30-Jun-23 30-Jun-22
Reference EURm EURm
Inventories CBS 1,110 1,296
Trade and other receivables (current and
non-current) CBS 2,517 2,835
Trade and other payables CBS (2,301) (2,828)
Working capital 1,326 1,303
J. Working capital as a percentage of sales
Definition
Working capital as a percentage of sales represents working
capital as defined above shown as a percentage of annualised
quarterly revenue.
30-Jun-23 30-Jun-22
Reference EURm EURm
Working capital I 1,326 1,303
Annualised quarterly revenue 11,367 13,442
Working capital as a percentage of sales 11.7% 9.7%
Alternative Performance Measures (continued)
K. Summary cash flow
Definition
The summary cash flow is prepared on a different basis to the
Condensed Consolidated Statement of Cash Flows and as such the
reconciling items between EBITDA and increase in net debt may
differ from amounts presented in the Condensed Consolidated
Statement of Cash Flows. The summary cash flow details movements in
net debt. The Condensed Consolidated Statement of Cash Flows
details movements in cash and cash equivalents.
Reconciliation of the Summary Cash Flow to the Condensed
Consolidated Statement of Cash Flows
6 months to 6 months to
30-Jun-23 30-Jun-22
Reference EURm EURm
EBITDA A 1,113 1,174
Cash interest expense K.1 (66) (61)
Working capital change K.2 (262) (501)
Capital expenditure K.3 (429) (349)
Change in capital creditors K.3 (35) (108)
Tax paid CSCF (173) (158)
Change in employee benefits and other
provisions CSCF (46) (22)
Other K.5 17 (3)
Free cash flow L 119 (28)
Disposal of Russian operations L 1 -
Purchase of own shares (net) CSCF (28) (27)
Purchase of businesses, investments and
NCI K.6 (4) (48)
Dividends CSCF (280) (250)
Net cash outflow (192) (353)
Acquired net debt K.7 - (5)
Deferred debt issue costs amortised (3) (4)
Currency translation adjustment 12 (62)
Increase in net debt (183) (424)
K.1 Cash interest expense
6 months to 6 months to
30-Jun-23 30-Jun-22
Reference EURm EURm
Interest paid CSCF (75) (57)
Interest received CSCF 12 2
Move in accrued interest (3) (6)
Per summary cash flow (66) (61)
Alternative Performance Measures (continued)
K.2 Working capital change
6 months to 6 months to
30-Jun-23 30-Jun-22
Reference EURm EURm
Net movement in working capital CSCF (254) (501)
Impairment loss on Russian trade receivables (8) -
Per summary cash flow (262) (501)
K.3 Capital expenditure
6 months to 6 months to
30-Jun-23 30-Jun-22
Reference EURm EURm
Additions to property, plant and
equipment and biological assets CSCF (419) (418)
Additions to intangible assets CSCF (6) (8)
Net additions to right-of-use assets (39) (31)
Change in capital creditors K 35 108
Per summary cash flow (429) (349)
K.4 Capital expenditure as a percentage of depreciation
6 months to 6 months to
30-Jun-23 30-Jun-22
Reference EURm EURm
Capital expenditure K.3 429 349
Depreciation, depletion (net) and
amortisation A 301 304
Capital expenditure as a percentage of depreciation 142% 115%
K.5 Other
6 months to 6 months to
30-Jun-23 30-Jun-22
Reference EURm EURm
Other within the summary cash flow
comprises the following
Amortisation of capital grants CSCF (1) (1)
Profit on sale of property, plant and
equipment CSCF (1) (6)
Other (primarily hyperinflation
adjustments) CSCF 9 7
Receipt of capital grants CSCF 2 -
Disposal of property, plant and
equipment CSCF 1 10
Right-of-use asset
terminations/modifications L 7 (13)
Per summary cash flow 17 (3)
Alternative Performance Measures (continued)
K.6 Purchase of businesses, investments and NCI
6 months to 6 months to
30-Jun-23 30-Jun-22
Reference EURm EURm
Purchase of subsidiaries (net of
acquired cash) CSCF - (36)
Deferred consideration paid CSCF (4) (10)
Acquired cash and cash equivalents K.7 - (2)
Per summary cash flow (4) (48)
K.7 Acquired net debt
6 months to 6 months to
30-Jun-23 30-Jun-22
Reference EURm EURm
Debt acquired - (7)
Acquired cash and cash equivalents K.6 - 2
Per summary cash flow - (5)
L. Free cash flow ('FCF')
Definition
FCF is the result of the cash inflows and outflows from our
operating activities, and is before those arising from acquisition
and disposal of businesses. We use FCF to assess and understand the
total operating performance of the business and to identify
underlying trends.
Reconciliation of Free Cash Flow to Cash Generated from
Operations
6 months to 6 months to
30-Jun-23 30-Jun-22
Reference EURm EURm
Free cash flow K 119 (28)
Reconciling items:
Cash interest expense K.1 66 61
Capital expenditure (net of change in
capital creditors) K.3 464 457
Tax payments CSCF 173 158
Disposal of property, plant and
equipment CSCF (1) (10)
Right-of-use asset
terminations/modifications K.5 (7) 13
Receipt of capital grants CSCF (2) -
Disposal of Russian operations K 1 -
Non-cash financing activities 1 -
Cash generated from operations CSCF 814 651
________________________________
(1) Additional information in relation to these Alternative Performance
Measures is set out in Supplementary Financial Information on pages 29 to 35.
(2) Additional information on underlying performance is set out within
Supplementary Financial Information on pages 29 to 35.
View source version on businesswire.com:
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CONTACT:
Smurfit Kappa Group PLC
SOURCE: Smurfit Kappa Group PLC
Copyright Business Wire 2023
(END) Dow Jones Newswires
August 02, 2023 02:00 ET (06:00 GMT)
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