Prior to its merger with American competitor WestRock, Smurfit Kappa’s profits plummeted by 13.6% in the quarter ending in June. Following the completion of the merger, the now large-scale cardboard box manufacturing group, Smurfit WestRock, boasts a market cap exceeding $25 billion (€23.1 billion). The fusion subsequently contributed to a fall in earnings before interest, tax, depreciation, and amortisation (Ebitda), which dropped to $480 million (€444 million), compared to $556 million in the same period last year. Both higher production expenses and a slump in box prices caused the damage to net sales which decreased from $3.08 billion to $2.97 billion.
Nevertheless, Smurfit WestRock claimed a resurgence in demand marking an upward curve from last year’s slump, with the volume of corrugated box sales increasing 3.1% in Q2. This was primarily driven by a 3.5% growth in Europe, complemented by a modest 1.5% increase in the Americas.
Tony Smurfit, Group CEO, suggested that these results occurred against the challenges of notably increased fibre recovery costs and a decrease in corrugated box prices. He forecasted that these increased expenses could be offset by higher box prices over time.
The merger on July 5th led to a considerable expansion of Smurfit Kappa, Ireland’s first global group, effectively doubling its size and making it the largest paper packaging group globally with yearly revenues surpassing $30 billion. Initial shareholders possessed 50.2% of the enlarged business following the merger.
The expanded group has its base in Dublin but has renounced its Dublin stock market listing as part of a structural revision, resulting in its main listing’s shift from London to New York. Following the merger’s completion, the company became an immediate member of the S&P 500 index.
The former CEO of Smurfit Kappa, Mr Smurfit, and CFO Ken Bowles, who now jointly lead the group, are expected by analysts to revitalise the underperforming legacy WestRock assets.
The plan set by WestRock aims for a substantial $1 billion cutback in expenditure and enhancing productivity within its mill network, supply chain, and general operating costs by 2025. It’s a tall goal considering their cost base stood at $18 billion in 2023. BofA Securities’ analysis team, under the direction of Patrick Mann, tipped that the respected management of Smurfit Kappa could speed up this process.
Throughout the last term, however, Smurfit Kappa witnessed a reduction in adjusted Ebitda margin from 18.1% the previous year to just 16.2%. The upcoming financial reports will mark the first from the merged entity – Smurfit WestRock.
Despite the magnitude of the task ahead, there is a palpable sense of vigour and excitement to guarantee a prosperous future for Smurfit Westrock, as stated by Mr Smurfit.