By Business & Finance 
Gary McGann, CEO of Smurfit Kappa Group
Smurfit Kappa Group today announced results for Q4 2014 and 12 months ending 31 December 2014 with exceptional growth reported 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.
Speaking at the results announcement, Gary McGann, CEO of Smurfit Kappa Group (SKG), commented: “The Group’s solid operating performance through 2014 is strong evidence of the resilience of our integrated and geographically diverse business model. 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.
“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.”
McGann added: “The Group 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. 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.
“As a consequence of this process of sustained deleveraging, in February 2014 the Group announced a strategy to deploy its capital towards growth opportunities through internal investment, an active M&A focus and increasing returns to shareholders. We have been steadily delivering against our objectives.
“Firstly, our targeted programme of high return capital investments will support organic earnings growth into 2015. 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.
McGan concluded: “Finally, the Group remains committed to driving returns for our shareholders, and to that end SKG is increasing its ordinary dividend by 30%. Furthermore, in the absence of accretive acquisitions the Group will evaluate alternative uses of capital, including returns of surplus capital to shareholders. However, our stated preference is to build durable, long-term value through the continued delivery of accretive acquisitions in our target markets. Capital allocation decisions will be taken in the context of staying within the scope of our Ba1 / BB+ credit rating.
“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.”
