Smurfit Kappa expects to increase prices further this year, to recover high costs, after a mix of price hikes and bumper demand delivered record earnings amid ‘significant and unprecedented cost inflation’ in 2021.
Europe’s largest paper packaging producer predicted last July that inflation was here to stay, and Tony Smurfit, chief executive, told Reuters on Wednesday that the company had increased prices by 6%, quarter on quarter, from October to December.
The momentum in price increases will continue into the first half, Smurfit added, with energy prices still at “silly high” levels, and no indication that demand for packaging is slowing down across the global economy.
“If anything, it’s the opposite,” Smurfit said in a telephone interview, referring to the demand that he said will be boosted by continued fiscal stimuli in 2022.
“The thing that I’m a little bit concerned about is that the supply chain disruptions have not gone away, and when there is going to be growth, we’re going to see continued disruption to the supply chain.”
Smurfit, whose customers include Procter & Gamble, Unilever and Nestlé, noted that its product range remains effectively sold out in each of the 36 countries in which it operates, with the exception of Brazil.
Exceptional demand for packaging used in e-commerce helped push Smurfit’s core earnings back above pre-pandemic levels, to a record €1.7 billion ($1.94 billion), up 13% year on year, and above the €1.67 billion forecast by 11 analysts polled by Refinitiv.
Analysts at Davy Stockbrokers said that they were raising their 2022 earnings forecast by 4%, to €1.95 billion, noting the confidence shown by a 10% increase in Smurfit’s final dividend.
The Irish group’s EBITDA margin fell to 16.8% from 17.7% a year earlier, after the increasing price of recovered fibre – a key raw material in boxes – cost an additional €440 million and energy costs rose by €235 million.
Smurfit Kappa’s share price was 2.2% higher, at €47.90, at 08.30 GMT.