Smurfit Kappa Group manages to raise prices to offset increased costs related to supply chain disruption and the war in Ukraine, the company said in its first-quarter trading update.
The group reported improved margins of 17 percent for the first three months of the year compared to 16.6 percent in the last quarter of 2021.
This was achieved against the background of rising purchase prices and global inflation. Euro-zone inflation hit 7.4 percent in March as continued Covid-related tightness and high energy costs spilled over into the consumer economy.
Smurfit Kappa increased sales for the period by 33 percent to more than €3 billion with an identical increase in earnings to €514 million.
“At the start of the second quarter, demand remains good as corrugated board prices continue to recover,” the company said in a stock exchange release.
“Cost increases and supply shortages remain a feature of our business, managed through employee engagement and active price recovery.”
Goodbody said it was a “stellar performance” that warranted an upgrade to the stock’s price target.
“This is a remarkable achievement in the context of the ongoing cost environment and further underscores the quality of the business model and the sustainability of earnings,” said David O’Brien, analyst at Goodbody.
CEO Tony Smurfit attributed the improved performance to the company’s “robust operating model” while noting “a number of significant operational challenges.”
“Virtually all input costs have risen sharply and the already tight markets and supply chains have been exacerbated by the war in Ukraine,” he said.
Smurfit Kappa said last year that Covid had accelerated its strategic plans. The company raised €660 million in fresh equity in 2020 to invest in new capacity to capitalize on online shopping growth fueled by pandemic lockdowns.
The company said growth in its core business, corrugated boxes, during the quarter was 3.6 percent, with Europe growing 3 percent and the Americas growing 6 percent.
The group recently completed the acquisition of Argencraft, a corrugated board plant in Buenos Aires, Argentina.
On April 1, Smurfit Kappa announced its intention to exit the Russian market amid mounting pressure on global companies to cut ties with Moscow following February’s invasion of neighboring Ukraine.
https://www.independent.ie/business/irish/smurfit-kappa-passing-on-cost-increases-via-higher-prices-41599652.html Smurfit Kappa passes on cost increases through higher prices