Business Person of the Month

February 2015: Gary McGann, CEO, Smurfit Kappa Group

By Business & Finance
24 February 2015
SKG company of the month, Feb 2015
Pictured: Ian Hyland, Business & Finance; Gary McGann, CEO, Smurfit Kappa Group (Business Person of the Month in association with AIB Private Banking); Gerard Corcoran, client director, AIB Private Banking.

Under Gary McGann’s leadership, SKG continues to record exceptional growth in both profits and earnings per share.

In February, Smurfit Kappa Group (SKG) announced results for Q4 2014 and the 12 months ending December 31st 2014. The results show strong growth and performance for the packaging giant with exceptional increases in both profits and earnings per share (EPS).

The packaging giant also reported pre-exceptional EPS growth of 42%, progressively improving ROCE to 15% and a 2% increase in revenue, to €8.083bn for the year from €7.957bn the previous year.

“The Group’s solid operating performance through 2014 is strong evidence of the resilience of our integrated and geographically diverse business model,” Gary McGann, CEO of SKG said when announcing the results.

“As a result, we are pleased to report higher returns and good earnings growth year-on-year in 2014, driven by new business wins, a continued focus on cost efficiencies, judicious capital investments and accretive acquisitions. Progress against these measures has increased our ROCE to 15% and supports the Group’s revised ROCE target of an average of 15% through the cycle.”

Global reach

According to the CEO: “In Europe, the Group has reported 2% corrugated volume growth year-on-year for the full year. Pricing in our end corrugated market improved by 1% year-on-year and was generally stable at this level throughout the year in spite of a more volatile pricing environment for recycled containerboard. The implementation of containerboard price increases in the third quarter, in particular, provided good support to corrugated prices at their current level.”

The results also show that SKG outperformed its cost take-out target in 2014 with the delivery of €117m in cost reduction initiatives during the year. In 2015, the Group expects to continue to further reduce its cost base by €75m.

“In recent years, the Group has fundamentally repositioned itself,” McGann said. “SKG is now regarded as a corporate credit in the debt markets following debt paydown of over €600m and annual cash interest savings of €150m since 2007. The Group will preserve its solid credit metrics through the cycle while continuing to enhance the cost, sustainability and structure of its capital base where appropriate.”

Strategy for growth

This month SKG also announced a strategy to deploy its capital towards growth opportunities through internal investment, an active M&A focus and increasing returns to shareholders.

“Firstly, our targeted programme of high return capital investments will support organic earnings growth into 2015,” McGann said. “In this context, a number of our ‘Quick Win’ projects, approved in 2014, will begin to directly boost EBITDA by €18m in 2015.

“Secondly, the Group has progressed its acquisition agenda in 2014, completing four accretive acquisitions in the higher growth Americas region totalling over €160m. In each case the Group expects returns significantly above its cost of capital and this disciplined approach will continue to underpin our evaluation of opportunities in 2015.”

McGann added that the Group remains committed to driving returns for shareholders, and to that end SKG is increasing its ordinary dividend by 30%. “Looking to 2015 – assuming no material dis-improvement in European economic conditions – we expect to grow the business through continued superior operating performance, high return internal investments and targeted acquisitions, the Group expects to deliver earnings growth, stronger free cash flows, and through the judicious use of capital to continue to improve returns for our shareholders.

CV highlights

  • Gary McGann graduated with a Bachelor of Arts from UCD and is a fellow of the Association of Chartered Accountants and also earned a Masters in Management Science from the Irish Managing Institute (IMI) and TCD.
  • McGann was appointed SKG CEO in November 2002.
  • Previously he was president and COO of the Smurfit Group since January 2000.
  • He joined the company in 1998 as CFO after holding a number of senior positions in both the private and public sectors, including chief executive of Gilbeys of Ireland and Aer Lingus Group plc.
  • A former director of Ibec, McGann is also chairman of Aon Ireland and is a non-executive director of Green REIT.
  • In November 2014, McGann was appointed as an independent non-executive director of Paddy Power and as a member of the Audit Committee.

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