REG-Smurfit Kappa Group PLC Final Results
09/02/2022 07:00
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Final Results
Smurfit Kappa Group plc (‘SKG’ or ‘the Group’) today announced results
for the full year ending 31 December 2021.
2021 Full Year | Key Financial Performance Measures
€m FY FY Change H2 H2 Change H1 Change
2021
2020
2021
2020
2021
Revenue €10,107 €8,530 18% €5,428 €4,327 25% €4,679 16%
EBITDA (1) €1,702 €1,510 13% €921 €775 19% €781 18%
EBITDA Margin (1) 16.8% 17.7% 17.0% 17.9% 16.7%
Operating Profit before Exceptional Items (1) €1,073 €922 16% €596 €472 26% €477 25%
Profit before Income Tax €913 €748 22% €500 €365 37% €413 21%
Basic EPS (cent) 263.9 227.9 16% 144.0 111.1 30% 119.9 20%
Pre-exceptional Basic EPS (cent) (1) 274.5 236.9 16% 154.6 120.0 29% 119.9 29%
Free Cash Flow (1) €455 €675 (33%) €338 €437 (23%) €117 188%
Return on Capital Employed (1) 16.0% 14.6% 14.8%
Net Debt (1) €2,885 €2,375 22% €2,549 13%
Net Debt to EBITDA (LTM) (1) 1.7x 1.6x 1.6x
Key Points
* Revenue growth of 18%
* EBITDA growth of 13% to €1,702 million with an EBITDA margin of 16.8%
* Corrugated growth of 8%
* ROCE of 16%
* Acquisition in Italy ensuring continued security of supply for our customers
* Ongoing investment programme meeting customers’ needs for innovative and
sustainable packaging
* Science Based Targets initiative (‘SBTi’) approval in line with the Paris
Agreement
* Final dividend increased by 10% to 96.1 cent per share
Performance Review and Outlook
Tony Smurfit, Group CEO, commented:
“I am happy to report that Smurfit Kappa has delivered another excellent
performance in 2021. This was particularly pleasing as the year was
characterised by unprecedented cost inflation. Full year EBITDA was €1,702
million, an increase of 13% on 2020, with an EBITDA margin of 16.8%. This
performance demonstrates the strength of the integrated model, the quality of
our business, our operational efficiency and increasing geographic and product
diversity. Over the last number of years, the Group has made significant
investments enabling us to meet our customers’ need for resilience, ensuring
they have security of supply and access to the most innovative, sustainable
packaging solutions.
“A key differentiating factor for SKG has always been our people and in a
world of significant supply constraints, I am incredibly proud of how our
48,000 employees have responded to ensure our customers’ needs were met and
indeed, continue to be met as we begin 2022.
“Driven by a number of long-term secular trends, we are reporting corrugated
growth of 8%. This growth is a clear indication that paper-based packaging,
renewable, recyclable and biodegradable, is the choice of our customers and
the end consumer versus less sustainable alternatives.
“As noted above, 2021 was characterised by significant and unprecedented
cost inflation. These costs, particularly in energy, recovered fibre and other
categories of raw materials, remain at elevated levels. We expect to continue
to recover these costs, with margin improvement, as we progress through 2022.
“Both our European and Americas businesses delivered excellent performances
in the year. Our European business recorded EBITDA of €1,302 million with an
EBITDA margin of 16.6% while our Americas business recorded EBITDA of €441
million with an EBITDA margin of 19.5%.
“Key to the performance of Smurfit Kappa over recent years has been to
invest both organically and through acquisitions to meet growing customer
demand for innovative and environmentally sustainable packaging solutions. In
2021, we approved 82 new converting machines and seven new corrugators in our
operations across Europe and the Americas. We also approved material
investments in our paper system to increase efficiency and capacity and to
meet our ambitious sustainability targets.
“In early October, we completed the acquisition of a recycled containerboard
mill in Italy with a capacity of 600,000 tonnes. This acquisition provides
additional security of supply to our customers. In our Americas region, we
continued our geographic expansion through acquisitions in Mexico and Peru.
Our continuing, customer-led investment in converting assets, the most
significant within the industry, together with our Verzuolo mill, will sustain
a clear competitive advantage for Smurfit Kappa.
“In September, we launched our Green Finance Framework, under which we
issued our dual tranche inaugural green bonds, comprising €500 million 8
year bonds with a coupon of 0.5% and €500 million 12 year bonds with a
coupon of 1%. Sustainability has always been at the core of our operations and
is now embedded within our capital structure.
“In December, the Group received approval from SBTi for our emissions
targets. These targets are not only in line with the Paris Agreement but also
industry leading and a further sign of SKG’s leadership in sustainability.
That leadership not only extends through the products we make and how we make
them but through the work we do in the communities in which we operate.
“As we begin the year, current trading is strong and our integrated paper
and packaging system remains effectively sold out. We continue to see
significant opportunities across our geographic footprint and as such, we are
investing to build a platform for durable growth to meet customer demand. I am
proud of how Smurfit Kappa continues to deliver across all performance
measures and reflecting that confidence and the ever increasing strength of
and prospects for the business, the Board is recommending a 10% increase in
the final dividend to 96.1 cent per share.”
About Smurfit Kappa
Smurfit Kappa, a FTSE 100 company, is one of the leading providers of
paper-based packaging solutions in the world, with approximately 48,000
employees in over 350 production sites across 36 countries and with revenue of
€10.1 billion in 2021. We are located in 23 countries in Europe, and 13 in
the Americas. We are the only large-scale pan-regional player in Latin
America. Our products, which are 100% renewable and produced sustainably,
improve the environmental footprint of our customers.
With our proactive team, we relentlessly use our extensive experience and
expertise, supported by our scale, to open up opportunities for our customers.
We collaborate with forward-thinking customers by sharing superior product
knowledge, market understanding and insights in packaging trends to ensure
business success in their markets. We have an unrivalled portfolio of
paper-based packaging solutions, which is constantly updated with our
market-leading innovations. This is enhanced through the benefits of our
integration, with optimal paper design, logistics, timeliness of service, and
our packaging plants sourcing most of their raw materials from our own paper
mills.
We have a proud tradition of supporting social, environmental and community
initiatives in the countries where we operate. Through these projects we
support the UN Sustainable Development Goals, focusing on where we believe we
have the greatest impact.
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Forward Looking Statements
This Announcement contains certain statements that are forward-looking.
Forward-looking statements are prospective in nature and are not based on
historical facts, but rather on current expectations of the Group about future
events, and involve risks and uncertainties because they relate to events and
depend on circumstances that will occur in the future. Although the Group
believes that current expectations and assumptions with respect to these
forward-looking statements are reasonable, it can give no assurance that these
expectations will prove to be correct. There are a number of factors that
could cause actual results and developments to differ materially from those
expressed or implied by the forward-looking statements. Forward-looking
statements should therefore be construed in the light of such factors. You are
cautioned not to place undue reliance on any forward-looking statements, which
speak only as of the date made. Other than in accordance with legal or
regulatory obligations, the Group is not under any obligation, and expressly
disclaims any intention or obligation, to update or revise any forward-looking
statement, whether as a result of new information, future events or otherwise.
The forward-looking statements in this document do not constitute reports or
statements published in compliance with any of Regulations 6 to 8 of the
Transparency (Directive 2004/109/EC) Regulations 2007.
Contacts
Ciarán Potts Melanie Farrell
Smurfit Kappa FTI Consulting
T: +353 1 202 71 27 T: +353 1 765 08 00
E: ir@smurfitkappa.com (mailto:ir@smurfitkappa.com) E: smurfitkappa@fticonsulting.com (mailto:smurfitkappa@fticonsulting.com)
2021 Full Year | Performance Overview
The Group reported EBITDA for the full year of €1,702 million, up 13% on
2020. The Group EBITDA margin was 16.8%, down from 17.7% in 2020. The result
reflects our ability to recover significant input cost pressure by way of
progressive box price increases, strong box volumes, the resilience and
security of supply delivered by our integrated model alongside the benefits of
our customer-focused innovation and capital spend programme and the dedication
of our 48,000 employees.
In Europe, EBITDA increased by 10% to €1,302 million for the year. The
EBITDA margin was 16.6%, down from 17.8% in 2020. Corrugated demand was up
approximately 8% for the year with strong performances in all countries,
illustrating the robust demand backdrop for our innovative and sustainable
product offering. Corrugated pricing has continued to improve in line with our
expectations.
Our European business continued to build on its strong operating platform
through 2021 with significant corrugated and containerboard projects announced
for France, Germany, the Czech Republic, Slovakia, Poland and the UK, as well
as in our bag-in-box operation in Spain. These investments in the latest
high-tech and energy efficient machinery, including new corrugators and
converting machines alongside facility expansion projects, will allow us to
increase production output and expand the range of high value products that we
offer to our growing customer base, while also contributing towards the
sustainability goals of the Group and our customers.
In the Americas, EBITDA increased by 19% on 2020 to €441 million. The EBITDA
margin was marginally lower at 19.5% in 2021, compared to 19.7% in 2020.
Colombia, Mexico and the US accounted for over 77% of the region’s earnings
with strong performances in all three countries. Volumes for the full year in
the Americas were up 9% year-on-year and as in Europe, the Group continued to
build on its operating platform with significant capacity and sustainability
related investment in the corrugated, containerboard and speciality businesses
across the region. In June and July, we announced the expansion of our Latin
America business with acquisitions in Peru and Mexico respectively, adding to
our geographic diversity and enhancing our customer offering in these high
growth regions.
Pricing for containerboard in both Europe and the Americas continued the
upward trend through 2021. Initially this was driven by strong demand and
rising recovered fibre prices and subsequently, in the latter part of the year
in Europe, by rising energy prices. Increasing recovered fibre prices have
cost the Group an additional €440 million in 2021 versus the prior year
while rising energy prices have cost the Group an additional €235 million
versus the prior year.
Demand for containerboard remains strong and we expect the market to remain
tight in the months ahead. The acquisition in October 2021 of the
state-of-the-art Verzuolo mill in Italy brings 600,000 tonnes of
containerboard into our integrated system ensuring we continue to meet our
customers’ needs and capture future growth.
The Group reported free cash flow of €455 million in the full year of 2021,
down 33% from €675 million in 2020. The average maturity profile of the
Group’s debt was 5.8 years at 31 December 2021 with an average interest rate
of 2.63%. Net debt to EBITDA was 1.7x at the year-end versus 1.6x at the half
year and at the end of December 2020. The Group remains strongly positioned
within its BBB-/BBB-/Baa3 credit rating.
2021 Full Year | Financial Performance
Revenue for the full year was €10,107 million, up 18% on the full year of
2020 on a reported basis and an underlying(2 )basis. Revenue in Europe was up
18%, driven by volume growth and input cost recovery through progressive box
price increases. On an underlying basis, revenue in Europe was up 17%. In the
Americas, revenue was up 20% on the full year of 2020, or 21% on an underlying
basis.
EBITDA for the full year was €1,702 million, up 13% on the full year of 2020
and ahead of our stated guidance from the third quarter trading update due to
a particularly strong finish to the year. On an underlying( )basis, Group
EBITDA was up 13% year-on-year, with Europe up 10% and the Americas up 20%.
Operating profit before exceptional items for the full year of 2021 at
€1,073 million was 16% higher than €922 million for 2020.
There were no exceptional items charged within operating profit in 2021.
Net exceptional items charged within operating profit in 2020 amounted to
€31 million. €35 million related to reorganisation and restructuring costs
in Europe and the Americas and €11 million related to the unique recognition
reward given to all permanent employees. These were partly offset by a €15
million exceptional gain on the UK pension scheme.
Exceptional finance costs of €31 million in 2021 represented a redemption
premium of €28 million together with the related accelerated write-off of
unamortised debt issue costs of €3 million due to the early redemption of
bonds.
There were no exceptional finance items charged in 2020.
Pre-exceptional net finance costs at €131 million were €13 million lower
than 2020, reflecting a decrease in both cash interest and interest cost on
net pension liabilities, a decrease in the foreign currency translation loss
on debt along with the positive swing from a fair value loss on financial
assets/liabilities in 2020 to a gain in 2021, partly offset by the negative
swing from a hyperinflation related net monetary gain in 2020 to a net
monetary loss in 2021.
With the €151 million increase in operating profit before exceptional items,
combined with the €13 million decrease in net finance costs, the
pre-exceptional profit before income tax was €944 million, €165 million
higher than in 2020.
After exceptional items of €31 million, the profit before tax for the full
year of 2021 was €913 million compared to a profit before tax of €748
million in 2020. The income tax expense was €234 million compared to €201
million in 2020, resulting in a profit of €679 million for 2021 compared to
a profit of €547 million in 2020.
Basic EPS for the full year of 2021 was 263.9 cent, compared to 227.9 cent in
2020. On a pre‑exceptional basis, EPS was 274.5 cent in 2021, 16% higher
than the 236.9 cent in the full year of 2020.
2021 Full Year | Free Cash Flow
Free cash flow in the full year of 2021 was €455 million compared to €675
million for 2020, a decrease of €220 million. EBITDA growth of €192
million, combined with lower outflows for cash interest and the absence of an
exceptional outflow of €18 million in 2021 were more than offset by higher
outflows for capital expenditure, higher tax payments, a higher outflow for
the change in employee benefits and other provisions and a negative swing in
working capital from an inflow in 2020 to an outflow in 2021.
The working capital outflow in 2021 was €114 million compared to an inflow
of €94 million in 2020. The outflow in 2021 was a combination of an increase
in debtors and stock, partly offset by an increase in creditors. These
increases reflect the combination of volume growth and higher box prices,
higher paper prices and considerably higher recovered fibre and energy costs.
Working capital amounted to €646 million at December 2021 and represented
5.7% of annualised revenue compared to 5.6% at December 2020.
Capital expenditure in 2021 amounted to €693 million (equating to 124% of
depreciation) compared to €575 million (equating to 104% of depreciation) in
2020.
Cash interest amounted to €109 million in 2021 compared to €118 million in
2020, with the decrease primarily relating to a lower average level of
borrowing. The decrease also reflects the reduction in bond interest payable
following the issuance of our dual tranche inaugural green bond and the
repayment of our higher coupon 2024 bond, in September.
Tax payments of €239 million in 2021 were €45 million higher than in 2020
with higher payments in both Europe and the Americas.
2021 Full Year | Capital Structure
Net debt was €2,885 million at the end of December, resulting in a net debt
to EBITDA ratio of 1.7x compared to 1.6x at the end of June 2021 and December
2020. With net debt to EBITDA at 1.7x, the strength of the Group’s balance
sheet continues to secure long-term strategic flexibility. Given the strong
business profile and ability to consistently deliver substantial free cash
flow, the Group is comfortably operating within its target leverage range of
1.5x to 2.0x.
In September, Smurfit Kappa announced the launch of its Green Finance
Framework with an ISS ESG Second Party Opinion. The Group subsequently
announced the launch and successful pricing of its inaugural green bond
offering, comprising €500 million of senior notes due 2029 and €500
million of senior notes due 2033 with coupons of 0.5% and 1.0% respectively.
The coupons achieved for these tenors were not only the lowest in the
Group’s history but also the lowest for a corporate issuer in our rating
category.
At 31 December 2021, the Group’s average interest rate was 2.63% compared to
3.13% at 31 December 2020. The reduction in our average interest rate was
primarily due to the refinancing
activity undertaken during the year which comprised of the repayment of our
€500 million 2.375% senior notes maturing in 2024 and the issuance of our
€1 billion dual tranche inaugural green bonds mentioned above.
The Group’s diversified funding base and long-dated maturity profile of 5.8
years (31 December 2020: 4.9 years) provide a stable funding outlook. At 31
December 2021, we had a strong liquidity position of approximately €2.52
billion comprising cash balances of €869 million, undrawn available
committed facilities of €1,343 million on our Sustainability Linked
Revolving Credit Facility (‘RCF’) and €312 million on our sustainability
linked securitisation facilities.
Dividends
The Board is recommending a 10% increase in the final dividend to 96.1 cent
per share. It is proposed to pay this dividend on 6 May 2022 to all ordinary
shareholders on the share register at the close of business on 8 April 2022,
subject to the approval of the shareholders at the AGM.
2021 Full Year | Sustainability
SKG has continued to make strong progress across our sustainability targets in
2021. Focusing on delivering sustainable packaging solutions made in an
increasingly sustainable way means that we also play an integral role in the
delivery of not only our customers’ sustainability goals but also those of
the end consumer.
The progress made during 2021 was built upon the achievements outlined earlier
in the year in our 14(th) annual Sustainable Development Report (‘SDR’).
It highlights the Group’s long-standing objective to drive change and
nurture a greener and bluer planet through the three key pillars of Planet,
People and Impactful Business. Furthermore, Smurfit Kappa’s end-to-end
approach to sustainability is evident in its innovative products and processes
that support customers and positively impact the entire value chain.
In our 2020 SDR, Smurfit Kappa reported significant progress in reducing our
fossil CO(2) emission intensity. The Group is the first in our industry to
have announced targeting at least net zero emissions by 2050 and compared to
its baseline year 2005, it reduced its emissions intensity by 37.3% by the end
of 2020. The Group is well on its way to reach our intermediate 2030 target of
a 55% reduction, in line with the EU Green Deal objectives. The Group also
made continued progress on a number of its other key sustainability targets;
water discharge, waste to landfill, chain of custody certification, safety
performance and social projects.
While the SDR has been independently assured since 2009, the 2020 SDR is the
Group’s first to report in line with recommendations of the Taskforce for
Climate related Financial Disclosures (‘TCFD’) and the Sustainable
Accounting Standards Board (‘SASB’) criteria.
Smurfit Kappa has also been contributing towards making the UN 2030
Sustainable Development Goals (‘SDGs’) a reality since 2015. This
contribution was recognised by the Support the Goals movement in March when
the Group became the first FTSE 100 company to receive a five-star rating. By
committing to these sustainability targets, the Group’s Better Planet
Packaging portfolio of sustainable products will continue to help our
customers to deliver on their own short and long-term sustainability goals.
An illustration of our continued action on CO(2) reduction was the
announcement in June of a significant investment in the Group’s Zülpich
mill in Germany aimed at significantly reducing the plant’s CO(2) emissions,
saving 55,000 tonnes of CO(2) annually.
Our circular business model which drives positive change from the responsible
sourcing of renewable raw materials to the sustainable production of
recyclable, biodegradable and fit-for-purpose packaging solutions was the
basis of our Green Finance Framework published in September and supported by a
positive ISS ESG Second Party Opinion. SKG recycles over 6 million tonnes of
predominantly post-consumer materials each year making us an essential
component of the circular economy where legislation is continuing to be
introduced to transition businesses to lower carbon and more circular business
practices. The Group’s sustainable land use has been validated by
non-governmental organisations and third party assessments which, along with
our industry leading chain of custody certification, is a key differentiator
for our customers.
In October, Smurfit Kappa announced a new project at its Nettingsdorf Paper
Mill in Austria that will utilise waste heat generated at the mill to help
power a sustainable district heating solution for the local community of
Ansfelden. Up to 25 megawatts of heat generated in the production process will
now be captured and converted through the new heat extraction plant. This heat
will be supplied to the district heating network that connects to 10,000
households, providing a sustainable and secure energy source and demonstrates
the positive environmental impact of the collaboration with the local
community.
In December, we had our emissions reduction targets approved by SBTi as
consistent with levels required to meet the goals of the Paris Agreement and
well below 2°C. This third party validation adds to our existing endorsements
from rating providers such as MSCI, Sustainalytics and ISS ESG.
SKG continues to be listed on various environmental, social and governance
indices and disclosure programmes, such as FTSE4Good, the Green Economy Mark
from the London Stock Exchange, Euronext Vigeo Europe 120, STOXX Global ESG
Leaders, ISS Solactive and Ethibel’s sustainable investment register. SKG
also performs strongly across a number of third party certification bodies,
including MSCI, ISS ESG and Sustainalytics.
2021 Full Year | Commercial Offering and Innovation
The Group continued to deliver innovation for our customers in 2021. This was
illustrated by our first virtual Better Planet Packaging event held in March
which hosted over 2,700 attendees.
In April, the Group launched the world’s first pre-certified Frustration
Free Packaging (‘FFP’) compliant solution for Amazon supply-chains. This
means customers can access one of the world’s leading trading platforms
quicker and in confidence of meeting Amazon’s strict packaging requirements,
a significant advantage as global e-commerce sales continue to grow.
Also in April, the Group’s Brazilian business won a prestigious Red Dot
Award in the area of product design. The packaging challenge came from Wine
& Bite Box to secure and protect bottles of wine and food for a growing
trend of tasting boxes being delivered to customers for an at home gourmet
experience. The award recognises this packaging as one of the most innovative
design projects in the world.
In October, the Group announced the development of its first paper-based child
lock box for laundry pods. The Click-to-Lock Box is a 100% paper-based
solution which provides a sustainable and safe alternative to the traditional
plastic box for laundry pods. The new packaging solution reduces CO(2)
emissions by 32% during production and is 100% recyclable and biodegradable.
Also in October, the Group launched a unique range of circular packaging
solutions for the rapidly growing online health and beauty market. The
customisable eHealth & Beauty portfolio includes sustainable,
paper‑based packaging solutions ideal for shipping vulnerable products, such
as fragrances, cosmetics, and skin and hair care products, as well as tamper
proof packaging designed for vitamins, supplements and sports nutrition.
In November, the Group received 13 awards for its creative and innovative
packaging solutions at the year’s Flexographic Industry Association
(‘FIA’) UK awards. Since 2013, Smurfit Kappa has received 113 FIA awards,
illustrating its leadership in the packaging industry.
The Group was recognised for its work on inclusion and diversity and as well
as for its packaging innovation, sustainability, design and print with 69
awards in 2021.
The Group continues to experience intense levels of pipeline development
across our business as customers strive for more sustainable packaging
solutions.
Summary Cash Flow
Summary cash flows( )for the second half and full year are set out in the
following table.
H2 2021 H2 2020 FY 2021 FY 2020
€m €m €m €m
EBITDA 921 775 1,702 1,510
Exceptional items - (18) - (18)
Cash interest expense (55) (57) (109) (118)
Working capital change 81 126 (114) 94
Capital expenditure (518) (345) (693) (575)
Change in capital creditors 66 33 (14) (18)
Tax paid (117) (96) (239) (194)
Change in employee benefits and other provisions (38) 7 (81) (20)
Other (2) 12 3 14
Free cash flow 338 437 455 675
Italian Competition Authority fine (124) - (124) -
Share issues (net) - 648 - 648
Purchase of own shares (net) - - (22) (16)
Sale of businesses and investments - - 37 -
Purchase of businesses, investments and NCI* (394) (4) (449) (25)
Dividends (76) (260) (302) (260)
Derivative termination (payments)/receipts (1) - 9 9
Premium on early repayment of bonds (28) - (28) -
Net cash (outflow)/inflow (285) 821 (424) 1,031
Acquired net debt (12) - (25) (1)
Disposed net cash - - (1) -
Deferred debt issue costs amortised (6) (3) (10) (7)
Currency translation adjustment (33) 64 (50) 85
(Increase)/decrease in net debt (336) 882 (510) 1,108
*( )‘NCI’ refers to non-controlling interests
Additional information in relation to these Alternative Performance Measures
(‘APMs’) is set out in Supplementary Financial Information on pages 30 to
37.
Funding and Liquidity
The Group's primary sources of liquidity are cash flow from operations and
borrowings under the RCF. The Group's primary uses of cash are for funding day
to day operations, capital expenditure, debt service, dividends and other
investment activity including acquisitions.
The Group has a €1,350 million RCF with a maturity of January 2026, which
incorporates five KPIs spanning the Group’s sustainability objectives
regarding climate change, forests, water, waste and people, with the level of
KPI achievement linked to the pricing on the facility. Borrowings under the
RCF are available to fund the Group's working capital requirements, capital
expenditure and other general corporate purposes. At 31 December 2021, the
Group’s drawings on this facility were US$8 million, at an interest rate of
0.754%.
At 31 December 2021, the Group had outstanding €250 million 2.75% senior
notes due 2025, US$292.3 million 7.50% senior debentures due 2025, €1,000
million 2.875% senior notes due 2026, €750 million 1.5% senior notes due
2027, €500 million 0.5% senior green notes due 2029 and €500 million 1.0%
senior green notes due 2033.
At 31 December 2021, the Group had outstanding €13 million variable funding
notes (‘VFNs’) issued under the €230 million trade receivables
securitisation programme maturing in November 2026 and €5 million VFNs
issued under the €100 million trade receivables securitisation programme
maturing in January 2026.
Funding and Liquidity (continued)
In April 2021, the Group amended and extended its €200 million 2022 trade
receivables securitisation programme, which utilises the Group’s receivables
in Austria, Belgium, Italy and the Netherlands. The programme was extended to
January 2026 at a reduced facility size of €100 million and with a margin
reduction from 1.375% to 1.1%.
In November 2021, the Group amended and extended its €230 million 2023 trade
receivables securitisation programme, which utilises the Group’s receivables
in France, Germany and the UK. The programme was extended to November 2026,
with the facility size remaining at €230 million and with a margin reduction
from 1.2% to 1.1%.
As part of the amendment process for each of these programmes, the Group
further aligned its sustainability ambitions and targets into its financing by
embedding its sustainability targets via KPIs into the amended and extended
trade receivables programme. These programmes now incorporate five KPIs
spanning the Group’s sustainability objectives regarding climate change,
forests, water, waste and people, with the level of KPI achievement linked to
the pricing on the programme.
Following the launch of the Group’s Green Finance Framework in September
2021, the Group issued a €1 billion dual tranche inaugural green bond
comprising €500 million 0.5% notes maturing 2029 and €500 million 1.0%
notes maturing 2033.
Additionally, in September 2021, the Group redeemed €500 million 2.375%
senior notes due 2024.
Market Risk and Risk Management Policies
The Group is exposed to the impact of interest rate changes and foreign
currency fluctuations due to its investing and funding activities and its
operations in different foreign currencies. Interest rate risk exposure is
managed by achieving an appropriate balance of fixed and variable rate
funding. As at 31 December 2021, the Group had fixed an average of 97% of its
interest cost on borrowings over the following 12 months.
The Group’s fixed rate debt comprised €250 million 2.75% senior notes due
2025, US$292.3 million 7.50% senior debentures due 2025, €1,000 million
2.875% senior notes due 2026, €750 million 1.5% senior notes due 2027,
€500 million 0.5% senior green notes due 2029 and €500 million 1.0% senior
green notes due 2033. €100 million in interest rate swaps converting
variable rate borrowings to fixed rate matured in January 2021.
The Group’s earnings are affected by changes in short-term interest rates on
its floating rate borrowings and cash balances. If interest rates for these
borrowings increased by one percent, the Group’s interest expense would
increase, and income before taxes would decrease, by approximately €2
million over the following 12 months. Interest income on the Group’s cash
balances would increase by approximately €9 million assuming a one percent
increase in interest rates earned on such balances over the following 12
months.
The Group uses foreign currency borrowings, currency swaps and forward
contracts in the management of its foreign currency exposures.
Principal Risks and Uncertainties
Risk assessment and evaluation is an integral part of the management process
throughout the Group. Risks are identified, evaluated and appropriate risk
management strategies are implemented at each level in the organisation.
The Board in conjunction with senior management identifies major business
risks faced by the Group and determines the appropriate course of action to
manage these risks.
The Board regularly monitors all of the Group’s risks and appropriate
actions are taken to mitigate those risks or address their potential adverse
consequences.
As part of the year-end risk assessment, the Board has considered the impact
of the COVID-19 pandemic on the principal risks of the Group. There has been
no significant disruption to our business during 2021 as a result of the
pandemic.
For a number of years climate change has been recognised as an emerging risk
for the Group. Following further consideration and review during 2021, the
Board has elevated the potential impact of climate change in the long-term to
a principal risk for the Group.
The principal risks and uncertainties facing the Group are summarised below.
* If the current economic climate were to deteriorate, for example as a result
of geopolitical uncertainty, trade tensions and/or the current COVID-19
pandemic, it could result in an increased economic slowdown which if sustained
over any significant length of time, could adversely affect the Group's
financial position and results of operations.
* The cyclical nature of the packaging industry could result in overcapacity and
consequently threaten the Group’s pricing structure.
* If operations at any of the Group’s facilities (in particular its key mills)
were interrupted for any significant length of time, it could adversely affect
the Group’s financial position and results of operations.
* Price fluctuations in energy and raw materials costs could adversely affect
the Group’s manufacturing costs.
* The Group is exposed to currency exchange rate fluctuations.
* The Group may not be able to attract, develop and retain suitably qualified
employees as required for its business.
* Failure to maintain good health, safety and employee wellbeing practices may
have an adverse effect on the Group’s business.
* The Group is subject to a growing number of environmental and climate change
laws and regulations, and the cost of compliance or the failure to comply with
current and future laws and regulations may negatively affect the Group’s
business.
* The Group is subject to anti-trust and similar legislation in the
jurisdictions in which it operates.
* The Group, similar to other large global companies, is susceptible to
cyber-attacks with the threat to the confidentiality, integrity and
availability of data in its systems.
* The global impact of climate change in the long-term could adversely affect
the Group’s business and results of operations.
The principal risks and uncertainties faced by the Group, with the exception
of climate change, were outlined in our 2020 Annual Report on pages 34‑35.
The Annual Report is available on our website; smurfitkappa.com
(https://cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww.smurfitkappa.com&esheet=52576181&newsitemid=20220208006190&lan=en-US&anchor=smurfitkappa.com&index=6&md5=f4cab575b387121004073495057f77bb)
.
Consolidated Income Statement
For the Financial Year Ended 31 December 2021
2021 2020
Unaudited Audited
Pre-exceptional Exceptional Total Pre-exceptional Exceptional Total
€m €m €m €m €m €m
Revenue 10,107 - 10,107 8,530 - 8,530
Cost of sales (7,015) - (7,015) (5,656) - (5,656)
Gross profit 3,092 - 3,092 2,874 - 2,874
Distribution costs (823) - (823) (725) - (725)
Administrative expenses (1,196) - (1,196) (1,227) - (1,227)
Other operating expenses - - - - (31) (31)
Operating profit 1,073 - 1,073 922 (31) 891
Finance costs (148) (31) (179) (179) - (179)
Finance income 17 - 17 35 - 35
Share of associates’ profit (after tax) 2 - 2 1 - 1
Profit before income tax 944 (31) 913 779 (31) 748
Income tax expense (234) (201)
Profit for the financial year 679 547
Attributable to:
Owners of the parent 679 545
Non-controlling interests - 2
Profit for the financial year 679 547
Earnings per share
Basic earnings per share - cent 263.9 227.9
Diluted earnings per share - cent 261.1 225.7
Consolidated Statement of Comprehensive Income
For the Financial Year Ended 31 December 2021
2021 2020
Unaudited Audited
€m €m
Profit for the financial year 679 547
Other comprehensive income:
Items that may be subsequently reclassified to profit or loss
Foreign currency translation adjustments:
- Arising in the financial year 14 (165)
- Recycled to Consolidated Income Statement 1 1
Effective portion of changes in fair value of cash flow hedges:
- Movement out of reserve (3) 1
- Fair value gain on cash flow hedges - 6
- Related tax - (1)
Changes in fair value of cost of hedging:
- Movement out of reserve (1) (1)
- New fair value adjustments into reserve - 1
11 (158)
Items which will not be subsequently reclassified to profit or loss
Defined benefit pension plans:
- Actuarial gain/(loss) 177 (9)
- Related tax (32) 7
145 (2)
Total other comprehensive income/(expense) 156 (160)
Total comprehensive income for the financial year 835 387
Attributable to:
Owners of the parent 835 388
Non-controlling interests - (1)
Total comprehensive income for the financial year 835 387
Consolidated Balance Sheet
At 31 December 2021
2021 2020
Unaudited Audited
€m €m
ASSETS
Non-current assets
Property, plant and equipment 4,265 3,839
Right-of-use assets 346 311
Goodwill and intangible assets 2,722 2,552
Other investments 11 11
Investment in associates 13 12
Biological assets 103 107
Other receivables 26 28
Derivative financial instruments 2 -
Deferred income tax assets 149 172
7,637 7,032
Current assets
Inventories 1,046 773
Biological assets 10 11
Trade and other receivables 2,137 1,535
Derivative financial instruments 8 38
Restricted cash 14 10
Cash and cash equivalents 855 891
4,070 3,258
Total assets 11,707 10,290
EQUITY
Capital and reserves attributable to owners of the parent
Equity share capital - -
Share premium 2,646 2,646
Other reserves 260 207
Retained earnings 1,473 917
Total equity attributable to owners of the parent 4,379 3,770
Non-controlling interests 13 13
Total equity 4,392 3,783
LIABILITIES
Non-current liabilities
Borrowings 3,589 3,122
Employee benefits 630 853
Derivative financial instruments 7 17
Deferred income tax liabilities 175 191
Non-current income tax liabilities 17 14
Provisions for liabilities 35 50
Capital grants 24 21
Other payables 11 9
4,488 4,277
Current liabilities
Borrowings 165 154
Trade and other payables 2,563 1,835
Current income tax liabilities 27 7
Derivative financial instruments 14 13
Provisions for liabilities 58 221
2,827 2,230
Total liabilities 7,315 6,507
Total equity and liabilities 11,707 10,290
Consolidated Statement of Changes in Equity
For the Financial Year Ended 31 December 2021
Attributable to owners of the parent
Equity share capital Share premium Other reserves Retained earnings Total Non-controlling Total equity
interests
€m €m €m €m €m €m €m
Unaudited
At 1 January 2021 - 2,646 207 917 3,770 13 3,783
Profit for the financial year - - - 679 679 - 679
Other comprehensive income
Foreign currency translation adjustments - - 15 - 15 - 15
Defined benefit pension plans - - - 145 145 - 145
Effective portion of changes in fair value of cash flow hedges - - (3) - (3) - (3)
Changes in fair value of cost of hedging - - (1) - (1) - (1)
Total comprehensive income for the financial year - - 11 824 835 - 835
Hyperinflation adjustment - - - 34 34 - 34
Dividends paid - - - (302) (302) - (302)
Share‑based payment - - 64 - 64 - 64
Net shares acquired by SKG Employee Trust - - (22) - (22) - (22)
At 31 December 2021 - 2,646 260 1,473 4,379 13 4,392
Audited
At 1 January 2020 - 1,986 351 615 2,952 41 2,993
Profit for the financial year - - - 545 545 2 547
Other comprehensive income
Foreign currency translation adjustments - - (161) - (161) (3) (164)
Defined benefit pension plans - - - (2) (2) - (2)
Effective portion of changes in fair value of cash flow hedges - - 6 - 6 - 6
Total comprehensive (expense)/income for the financial year - - (155) 543 388 (1) 387
Shares issued - 660 - (12) 648 - 648
Purchase of non-controlling interests - - (8) 12 4 (27) (23)
Hyperinflation adjustment - - - 19 19 - 19
Dividends paid - - - (260) (260) - (260)
Share‑based payment - - 35 - 35 - 35
Net shares acquired by SKG Employee Trust - - (16) - (16) - (16)
At 31 December 2020 - 2,646 207 917 3,770 13 3,783
An analysis of the movements in Other reserves is provided in Note 13.
Consolidated Statement of Cash Flows
For the Financial Year Ended 31 December 2021
2021 2020
Unaudited Audited
€m €m
Cash flows from operating activities
Profit before income tax 913 748
Net finance costs 162 144
Depreciation charge 513 514
Amortisation of intangible assets 40 43
Amortisation of capital grants (3) (2)
Share‑based payment expense 69 35
Profit on sale of property, plant and equipment (8) (2)
Profit on purchase/disposal of businesses - (4)
Share of associates’ profit (after tax) (2) (1)
Net movement in working capital (114) 95
Change in biological assets 7 (6)
Italian Competition Authority fine (124) -
Change in employee benefits and other provisions (81) (7)
Other (primarily hyperinflation adjustments) 5 6
Cash generated from operations 1,377 1,563
Interest paid (152) (122)
Income taxes paid:
Irish corporation tax (net of tax refunds) paid (21) (14)
Overseas corporation tax (net of tax refunds) paid (218) (180)
Net cash inflow from operating activities 986 1,247
Cash flows from investing activities
Interest received 3 3
Business disposals 33 -
Additions to property, plant and equipment and biological assets (594) (493)
Additions to intangible assets (21) (21)
Receipt of capital grants 5 5
(Increase)/decrease in restricted cash (4) 4
Disposal of property, plant and equipment 16 5
Dividends received from associates 1 1
Purchase of subsidiaries (net of acquired cash) (413) (2)
Deferred consideration paid (35) -
Net cash outflow from investing activities (1,009) (498)
Cash flows from financing activities
Proceeds from issue of new ordinary shares (net) - 648
Proceeds from bond issuance 999 -
Purchase of own shares (net) (22) (16)
Purchase of non-controlling interests - (23)
Decrease in other interest-bearing borrowings (107) (329)
Repayment of lease liabilities (88) (91)
Repayment of borrowings (491) -
Derivative termination receipts 9 9
Deferred debt issue costs paid (12) (2)
Dividends paid to shareholders (302) (260)
Net cash outflow from financing activities (14) (64)
(Decrease)/increase in cash and cash equivalents (37) 685
Reconciliation of opening to closing cash and cash equivalents
Cash and cash equivalents at 1 January 876 172
Currency translation adjustment (12) 19
(Decrease)/increase in cash and cash equivalents (37) 685
Cash and cash equivalents at 31 December 827 876
An analysis of the net movement in working capital is provided in Note 11.
Selected Explanatory Notes to the Consolidated Financial Statements
1. General Information
Smurfit Kappa Group plc (‘SKG plc’ or ‘the Company’) and its
subsidiaries (together ‘SKG’ or ‘the Group’) primarily manufacture,
distribute and sell containerboard, corrugated containers and other
paper-based packaging products. The Company is a public limited company with a
premium listing on the London Stock Exchange and a secondary listing on
Euronext Dublin. It is incorporated and domiciled in Ireland. The address of
its registered office is Beech Hill, Clonskeagh, Dublin 4, D04 N2R2, Ireland.
2. Basis of Preparation and Accounting Policies
Basis of preparation and accounting policies
The Consolidated Financial Statements of the Group are prepared in accordance
with International Financial Reporting Standards (‘IFRS’) issued by the
International Accounting Standards Board (‘IASB’) as adopted by the
European Union (‘EU’); and those parts of the Companies Act 2014
applicable to companies reporting under IFRS.
The financial information in this report has been prepared in accordance with
the Group’s accounting policies. Full details of the accounting policies
adopted by the Group are contained in the Consolidated Financial Statements
included in the Group’s Annual Report for the year ended 31 December 2020
which is available on the Group’s website; smurfitkappa.com
(https://cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww.smurfitkappa.com&esheet=52576181&newsitemid=20220208006190&lan=en-US&anchor=smurfitkappa.com&index=7&md5=84a6786e0c5954cbbb82e0c529598839)
. The accounting policies adopted by the Group and the significant accounting
judgements, estimates and assumptions made by management in the preparation of
the Group financial information are consistent with those described and
applied in the Annual Report for the year ended 31 December 2020. No
additional significant accounting judgements, estimates and assumptions were
identified for the Group as a result of the elevation by the Board of the
potential impact of climate change in the long-term to a principal risk for
the Group. A number of changes to IFRS became effective in 2021, however, they
did not have a material effect on the Consolidated Financial Statements
included in this report.
Impact of COVID-19
The Group has again considered the impact of the COVID-19 pandemic with
respect to all judgements and estimates it makes in the application of its
accounting policies. This included assessing the recoverability of trade
receivables and inventory. The Group’s customers primarily operate in the
FMCG sector, which has proved resilient during the COVID-19 pandemic to date.
There has been no significant deterioration in the aging of trade receivables
or extension of debtor days in the period. As a result of these reviews, there
was no material change in the trade receivables or inventory provisions. The
Group also assessed non-financial assets for indicators of impairment. No
impairments were identified. The Group tested goodwill for impairment at 31
December 2021. The impact of COVID-19 was considered when preparing cash flow
forecasts for each cash generating unit (‘CGU’). The testing did not
result in an impairment.
Going concern
The Group is a highly integrated manufacturer of paper-based packaging
solutions with leading market positions, quality assets and broad geographic
reach. The financial position of the Group, its cash generation, capital
resources and liquidity continue to provide a stable financing platform.
The Directors have assessed the principal risks and uncertainties outlined on
page 10, which include the deterioration of the current economic climate due
to the COVID-19 pandemic. There has been no significant disruption to our
business to date as a result of the pandemic. The Group took into
consideration the potential impact of the pandemic and the effect that it
could have on the Group’s financial position and results of operations. The
Group continues to have significant headroom in relation to its financial
covenants.
The Group’s diversified funding base and long-dated maturity profile of 5.8
years at 31 December 2021 provide a stable funding outlook. At 31 December
2021, the Group had a strong liquidity position of approximately €2.52
billion comprising cash balances of €869 million (including €14 million of
restricted cash), undrawn available committed facilities of €1,343 million
under its RCF and €312 million under its sustainability linked
securitisation facilities. At 31 December 2021, the strength of the Group’s
balance sheet, a net debt to EBITDA ratio of 1.7x (31 December 2020: 1.6x) and
its BBB-/BBB-/Baa3 credit rating, continues to secure long-term strategic
flexibility.
2. Basis of Preparation and Accounting Policies (continued)
Having assessed the principal risks facing the Group, together with the
Group’s forecasts and significant financial headroom, the Directors believe
that the Group is well placed to manage these risks successfully and have a
reasonable expectation that the Company, and the Group as a whole, have
adequate resources to continue in operational existence for the foreseeable
future. For this reason, they continue to adopt the going concern basis in
preparing the Consolidated Financial Statements.
Statutory financial statements and audit opinion
The financial information presented in this preliminary release does not
constitute full statutory financial statements. The Annual Report and
Financial Statements will be approved by the Board of Directors and reported
on by the Auditor in due course. Accordingly, the financial information is
unaudited. Full statutory financial statements for the year ended 31 December
2020 have been filed with the Irish Registrar of Companies. The audit report
on those statutory financial statements was unqualified.
This preliminary release was approved by the Board of Directors.
3. Segment and Revenue Information
The Group has identified operating segments based on the manner in which
reports are reviewed by the chief operating decision maker (‘CODM’). The
CODM is determined to be the executive management team responsible for
assessing performance, allocating resources and making strategic decisions.
The Group has identified two operating segments: 1) Europe and 2) the
Americas.
The Europe and the Americas segments are each highly integrated. They include
a system of mills and plants that primarily produce a full line of
containerboard that is converted into corrugated containers within each
segment. In addition, the Europe segment also produces other types of paper,
such as solidboard, sack kraft paper and graphic paper; and other paper-based
packaging, such as solidboard packaging and folding cartons; and bag-in-box
packaging. The Americas segment, which includes a number of Latin American
countries and the United States, also comprises forestry; other types of
paper, such as boxboard, sack paper and graphic paper; and paper-based
packaging, such as folding cartons and paper sacks. Inter‑segment revenue is
not material. No operating segments have been aggregated for disclosure
purposes.
Segment profit is measured based on EBITDA.
3. Segment and Revenue Information (continued)
FY 2021 FY 2020
Europe The Americas Total Europe The Americas Total
€m €m €m €m €m €m
Revenue and results
Revenue 7,847 2,260 10,107 6,645 1,885 8,530
EBITDA 1,302 441 1,743 1,180 372 1,552
Segment exceptional items - - - (19) (12) (31)
EBITDA after exceptional items 1,302 441 1,743 1,161 360 1,521
Unallocated centre costs (41) (42)
Share-based payment expense (69) (37)
Depreciation and depletion (net) (520) (508)
Amortisation (40) (43)
Finance costs (179) (179)
Finance income 17 35
Share of associates’ profit (after tax) 2 1
Profit before income tax 913 748
Income tax expense (234) (201)
Profit for the financial year 679 547
H2 2021 H2 2020
Europe The Americas Total Europe The Americas Total
€m €m €m €m €m €m
Revenue and results
Revenue 4,198 1,230 5,428 3,377 950 4,327
EBITDA 711 230 941 605 194 799
Segment exceptional items - - - (19) (12) (31)
EBITDA after exceptional items 711 230 941 586 182 768
Unallocated centre costs (20) (24)
Share-based payment expense (41) (26)
Depreciation and depletion (net) (263) (256)
Amortisation (21) (21)
Finance costs (106) (94)
Finance income 8 18
Share of associates’ profit (after tax) 2 -
Profit before income tax 500 365
Income tax expense (129) (96)
Profit for the financial period 371 269
3. Segment and Revenue Information (continued)
Revenue information about geographical areas
The Group has a presence in 36 countries worldwide. The following information
is a geographical revenue analysis about country of domicile (Ireland) and
countries with material revenue.
2021 2020
€m €m
Ireland 109 111
Germany 1,403 1,207
France 1,094 969
Mexico 992 850
The Netherlands 924 760
United Kingdom 901 743
Other Europe - eurozone 2,147 1,796
Other Europe - non-eurozone 1,233 1,029
Other Americas 1,304 1,065
Total revenue by geographical area 10,107 8,530
Revenue is derived almost entirely from the sale of goods and is disclosed
based on the location of production.
Disaggregation of revenue
The Group derives revenue from the following major product lines. The economic
factors which affect the nature, amount, timing and uncertainty of revenue and
cash flows from the sub categories of both paper and packaging products are
similar.
2021 2020
Paper Packaging Total Paper Packaging Total
€m €m €m €m €m €m
Europe 1,328 6,519 7,847 1,005 5,640 6,645
The Americas 213 2,047 2,260 207 1,678 1,885
Total revenue by product 1,541 8,566 10,107 1,212 7,318 8,530
Packaging revenue is derived mainly from the sale of corrugated products. The
remainder of packaging revenue is comprised of bag-in-box and other
paper-based packaging products.
4. Exceptional Items
2021 2020
€m €m
The following items are regarded as exceptional in nature:
Redundancy and reorganisation costs - 35
Recognition reward - 11
Gain on UK pension scheme - (15)
Exceptional items included in operating profit - 31
Exceptional finance costs 31 -
Exceptional items included in net finance costs 31 -
Total exceptional items 31 31
There were no exceptional items within operating profit in 2021.
Exceptional finance costs of €31 million in 2021 represented a redemption
premium of €28 million together with the related accelerated write-off of
unamortised debt issue costs of €3 million due to the early redemption of
bonds.
In 2020, exceptional items charged within operating profit amounted to €31
million of which €35 million related to redundancy and reorganisation costs
in both Europe and the Americas and €11 million related to a company-wide
COVID-19 employee recognition reward, partly offset by a €15 million gain on
the UK pension scheme as a result of future pension increases being linked to
CPIH instead of RPI.
There were no exceptional finance items in 2020.
5. Finance Costs and Income
2021 2020
€m €m
Finance costs:
Interest payable on bank loans and overdrafts 25 29
Interest payable on leases 10 10
Interest payable on other borrowings 86 89
Exceptional finance costs associated with debt restructuring 31 -
Foreign currency translation loss on debt 15 36
Fair value loss on derivatives not designated as hedges 2 1
Fair value loss on financial assets/liabilities - 2
Net interest cost on net pension liability 7 12
Non monetary loss - hyperinflation 3 -
Total finance costs 179 179
Finance income:
Other interest receivable (3) (3)
Foreign currency translation gain on debt (12) (29)
Fair value gain on derivatives not designated as hedges - (1)
Fair value gain on financial assets/liabilities (2) (1)
Net monetary gain – hyperinflation - (1)
Total finance income (17) (35)
Net finance costs 162 144
6. Income Tax Expense
Income tax expense recognised in the Consolidated Income Statement
2021 2020
€m €m
Current tax:
Europe 189 127
The Americas 76 49
265 176
Deferred tax (31) 25
Income tax expense 234 201
Current tax is analysed as follows:
Ireland 28 21
Foreign 237 155
265 176
Income tax recognised in the Consolidated Statement of Comprehensive Income
2021 2020
€m €m
Arising on defined benefit pension plans 32 (7)
Arising on derivative cash flow hedges - 1
32 (6)
The income tax expense for the financial year 2021 is €33 million higher
than in the comparable period in 2020. This mainly arises from higher
profitability and other timing items in Europe and the Americas.
The movement in deferred tax from a net expense of €25 million in 2020 to a
credit of €31 million in 2021 includes the effects of the reversal of timing
differences on which deferred tax has been previously recorded, the
recognition of tax benefits on losses and other investment tax credits partly
offset by the negative impact of increases in tax rates in a number of
countries.
In 2021, there is a lower net tax credit of €4 million on exceptional items
compared to a €9 million tax credit in the prior year.
7. Employee Benefits – Defined Benefit Plans
The table below sets out the components of the defined benefit cost for the
year:
2021 2020
€m €m
Current service cost 37 34
Actuarial (gain)/loss arising on other long-term employee benefits (1) 1
Past service cost - UK(1) - (15)
Past service cost - other (4) 3
Gain on settlement (3) (2)
Net interest cost on net pension liability 7 12
Defined benefit cost 36 33
(1 )Future pension increases are now linked to CPIH instead of RPI in the UK
which resulted in an exceptional income in past service cost for the Group of
€15 million in 2020.
Analysis of actuarial gains/(losses) recognised in the Consolidated Statement
of Comprehensive Income:
2021 2020
€m €m
Return on plan assets (excluding interest income) 110 170
Actuarial gain due to experience adjustments 6 34
Actuarial gain/(loss) due to changes in financial assumptions 54 (224)
Actuarial gain due to changes in demographic assumptions 7 11
Total gain/(loss) recognised in the Consolidated Statement of Comprehensive 177 (9)
Income
The amounts recognised in the Consolidated Balance Sheet were as follows:
2021 2020
€m €m
Present value of funded or partially funded obligations (2,384) (2,529)
Fair value of plan assets 2,276 2,224
Deficit in funded or partially funded plans (108) (305)
Present value of wholly unfunded obligations (520) (546)
Amounts not recognised as assets due to asset ceiling (2) (2)
Net pension liability (630) (853)
8. Earnings per Share (‘EPS’)
Basic
Basic EPS is calculated by dividing the profit attributable to owners of the
parent by the weighted average number of ordinary shares in issue during the
year less own shares.
2021 2020
Profit attributable to owners of the parent (€ million) 679 545
Weighted average number of ordinary shares in issue (million) 257 239
Basic EPS (cent) 263.9 227.9
Diluted
Diluted EPS is calculated by adjusting the weighted average number of ordinary
shares outstanding to assume conversion of all dilutive potential ordinary
shares. These comprise deferred and performance shares issued under the
Group’s long-term incentive plans. Where the conditions governing
exercisability and vesting of these shares have been satisfied as at the end
of the reporting period, they are included in the computation of diluted
earnings per ordinary share.
2021 2020
Profit attributable to owners of the parent (€ million) 679 545
Weighted average number of ordinary shares in issue (million) 257 239
Potential dilutive ordinary shares assumed (million) 3 2
Diluted weighted average ordinary shares (million) 260 241
Diluted EPS (cent) 261.1 225.7
Pre-exceptional
2021 2020
Profit attributable to owners of the parent (€ million) 679 545
Exceptional items included in profit before income tax (€ million) 31 31
Income tax on exceptional items (€ million) (4) (9)
Pre-exceptional profit attributable to owners of the parent (€ million) 706 567
Weighted average number of ordinary shares in issue (million) 257 239
Pre-exceptional basic EPS (cent) 274.5 236.9
Diluted weighted average ordinary shares (million) 260 241
Pre-exceptional diluted EPS (cent) 271.6 234.6
9. Dividends
The following dividends were declared and paid by the Group.
2021 2020
€m €m
Final: paid 87.4 cent per ordinary share on 7 May 2021 (2020: no final 226 -
dividend was paid in 2020)
Interim: paid 29.3 cent per ordinary share on 22 October 2021 (2020: paid 80.9 76 260
cent per ordinary share on 11 September 2020 and a further 27.9 cent on 11
December 2020)
302 260
The Board is recommending a 10% increase in the final dividend to 96.1 cent
per share (approximately €250 million). It is proposed to pay this dividend
on 6 May 2022 to all ordinary shareholders on the share register at the close
of business on 8 April 2022, subject to the approval of the shareholders at
the AGM.
10. Property, Plant and Equipment
Land and buildings Plant and equipment Total
€m €m €m
Financial year ended 31 December 2021
Opening net book amount 1,090 2,749 3,839
Reclassifications 63 (64) (1)
Additions 1 570 571
Acquisitions 73 186 259
Depreciation charge (56) (369) (425)
Retirements and disposals (9) (17) (26)
Hyperinflation adjustment 4 10 14
Foreign currency translation adjustment 9 25 34
At 31 December 2021 1,175 3,090 4,265
Financial year ended 31 December 2020
Opening net book amount 1,106 2,814 3,920
Reclassifications 73 (68) 5
Additions 1 465 466
Acquisitions 2 1 3
Depreciation charge (56) (373) (429)
Retirements and disposals (1) (2) (3)
Hyperinflation adjustment 2 6 8
Foreign currency translation adjustment (37) (94) (131)
At 31 December 2020 1,090 2,749 3,839
11. Net Movement in Working Capital
2021 2020
€m €m
Change in inventories (246) 14
Change in trade and other receivables (492) 22
Change in trade and other payables 624 59
Net movement in working capital (114) 95
12. Analysis of Net Debt
2021 2020
€m €m
Revolving credit facility – interest at relevant interbank rate (interest 2 89
rate floor of 0%) + 0.65%((1) (2))
US$292.3 million 7.5% senior debentures due 2025 (including accrued interest) 260 240
Bank loans and overdrafts 101 83
€100 million receivables securitisation VFNs due 2026 (including accrued 4 4
interest)((3))
€230 million receivables securitisation VFNs due 2026((4)) 11 11
€500 million 2.375% senior notes due 2024 (including accrued interest)((5)) - 501
€250 million 2.75% senior notes due 2025 (including accrued interest) 251 251
€1,000 million 2.875% senior notes due 2026 (including accrued interest) 1,007 1,005
€750 million 1.5% senior notes due 2027 (including accrued interest) 747 746
€500 million 0.5% senior green notes due 2029 (including accrued 495 -
interest)((6))
€500 million 1.0% senior green notes due 2033 (including accrued 496 -
interest)((6))
Gross debt before leases 3,374 2,930
Leases 380 346
Gross debt including leases 3,754 3,276
Cash and cash equivalents (including restricted cash) (869) (901)
Net debt including leases 2,885 2,375
1. The Group’s RCF has a maturity of January 2026. At 31 December 2021, the
following amounts were drawn under this facility:
1. Revolver loans - €7 million
2. Drawn under ancillary facilities and facilities supported by letters of
credit
– nil
3. Other operational facilities including letters of credit - nil
2. Drawn under ancillary facilities and facilities supported by letters of credit
– nil
3. Other operational facilities including letters of credit - nil
* Following the upgrade to Baa3 and BBB- by Moody's and Standard & Poor’s
respectively in February 2021, the margin on the RCF reduced from 0.817% to
0.65%.
* In April 2021, the Group amended and extended its €200 million 2022 trade
receivables securitisation programme, which utilises the Group’s receivables
in Austria, Belgium, Italy and the Netherlands. The programme was extended to
January 2026 at a reduced facility size of €100 million and with a margin
reduction from 1.375% to 1.1%. As part of the amendment process, the Group
further aligned its sustainability ambitions and targets into its financing by
embedding its sustainability targets via KPIs into the amended and extended
trade receivables securitisation programme.
* In November 2021, the Group amended and extended its €230 million 2023 trade
receivables securitisation programme, which utilises the Group’s receivables
in France, Germany and the UK. The programme was extended to November 2026 at
the same facility size of €230 million and with a margin reduction from 1.2%
to 1.1%. As part of this amendment process the Group also embedded its
sustainability targets via KPIs into the amended and extended trade
receivables securitisation programme.
* In September 2021, the Group redeemed the €500 million 2.375% senior notes
due 2024.
* In September 2021, following the launch of the Group’s Green Finance
Framework, the Group issued its inaugural green bond. The €1 billion dual
tranche green bond comprised €500 million 0.5% senior notes maturing 2029
and €500 million 1.0% senior notes maturing 2033.
13. Other Reserves
Other reserves included in the Consolidated Statement of Changes in Equity are
comprised of the following:
Reverse acquisition reserve Cash flow hedging reserve Cost of hedging reserve Foreign Share- Own shares FVOCI reserve
currency based
translation payment Total
reserve reserve
€m €m €m €m €m €m €m €m
At 1 January 2021 575 4 2 (556) 241 (49) (10) 207
Other comprehensive income
Foreign currency translation adjustments - - - 15 - - - 15
Effective portion of changes in fair value of cash flow hedges - (3) - - - - - (3)
Changes in fair value of cost of hedging - - (1) - - - - (1)
Total other comprehensive (expense)/income - (3) (1) 15 - - - 11
Share‑based payment - - - - 64 - - 64
Net shares acquired by SKG Employee Trust - - - - - (22) - (22)
Shares distributed by SKG Employee Trust - - - - (12) 12 - -
At 31 December 2021 575 1 1 (541) 293 (59) (10) 260
At 1 January 2020 575 (2) 2 (387) 215 (42) (10) 351
Other comprehensive income
Foreign currency translation adjustments - - - (161) - - - (161)
Effective portion of changes in fair value of cash flow hedges - 6 - - - - - 6
Total other comprehensive income/(expense) - 6 - (161) - - - (155)
Purchase of non-controlling interest - - - (8) - - - (8)
Share‑based payment - - - - 35 - - 35
Net shares acquired by SKG Employee Trust - - - - - (16) - (16)
Shares distributed by SKG Employee Trust - - - - (9) 9 - -
At 31 December 2020 575 4 2 (556) 241 (49) (10) 207
14. Business Combinations
The acquisitions completed by the Group during the year, together with
percentages acquired and completion dates were as follows:
* Cartones del Pacifico, (100%, 1 June 2021) a paper-based packaging company in
Peru;
* Cartonbox, (100%, 5 July 2021), a folding carton company in Mexico; and
* Verzuolo, (100%, 8 October 2021), a containerboard mill in Northern Italy.
The table below reflects the provisional fair values of the identifiable net
assets acquired in respect of the acquisitions completed during the year. The
initial assignment of fair values to identifiable net assets acquired has been
performed on a provisional basis in respect of the Verzuolo acquisition given
the timing of closure of the transaction. Any amendments to fair values will
be made within the twelve month period from the date of acquisition, as
permitted by IFRS 3, Business Combinations and disclosed in the 2022 Annual
Report.
Verzuolo Other Total
€m €m €m
Non-current assets
Property, plant and equipment 231 28 259
Right-of-use assets 1 5 6
Intangible Assets - 19 19
Deferred income tax asset 2 - 2
Current assets
Inventories 14 8 22
Trade and other receivables 3 14 17
Cash and cash equivalents - 1 1
Non-current liabilities
Employee benefits (4) - (4)
Deferred income tax liabilities - (7) (7)
Borrowings - (11) (11)
Current liabilities
Borrowings - (15) (15)
Trade and other payables (9) (18) (27)
Net assets acquired 238 24 262
Goodwill 119 33 152
Consideration 357 57 414
Settled by:
Cash 357 57 414
The principal factors contributing to the recognition of goodwill are the
realisation of cost savings and other synergies with existing entities in the
Group which do not qualify for separate recognition as intangible assets.
None of the goodwill recognised is expected to be deductible for tax purposes.
Net cash outflow arising on acquisition €m
Cash consideration 414
Less cash & cash equivalents acquired (1)
Total 413
The gross contractual value of trade and other receivables as at the
respective dates of acquisition amounted to €17 million. The fair value of
these receivables is estimated at €17 million (all of which is expected to
be recoverable).
Acquisition-related costs of €1 million were incurred and are included
within administrative expenses in the Consolidated Income Statement.
The Group’s acquisitions in 2021 have contributed €73 million to revenue
and a €7 million loss after tax. The proforma revenue and profit after tax
of the Group for the year ended 31 December 2021 would have been €10,358
million and €674 million respectively, had the acquisitions taken place at
the start of the reporting period.
There have been no acquisitions completed subsequent to the balance sheet date
which would be individually material to the Group, thereby requiring
disclosure under either IFRS 3 or IAS 10, Events after the Balance Sheet Date.
Supplementary Financial Information
Alternative Performance Measures
The Group uses certain financial measures as set out below in order to
evaluate the Group’s financial performance. These Alternative Performance
Measures (‘APMs’) are not defined under IFRS and are presented because we
believe that they, and similar measures, provide both SKG management and users
of the Consolidated Financial Statements with useful additional financial
information when evaluating the Group’s operating and financial performance.
These measures may not be comparable to other similarly titled measures used
by other companies, and are not measurements under IFRS or other generally
accepted accounting principles, and they should not be considered in isolation
or as substitutes for the information contained in our Consolidated Financial
Statements.
Please note where referenced ‘CIS’ refers to Consolidated Income
Statement, ‘CBS’ refers to Consolidated Balance Sheet and ‘CSCF’
refers to Consolidated Statement of Cash Flows.
The principal APMs used by the Group, together with reconciliations where the
non-IFRS measures are not readily identifiable from the Consolidated Financial
Statements, are as follows:
A. EBITDA
Definition
EBITDA is earnings before exceptional items, share-based payment expense,
share of associates’ profit (after tax), net finance costs, income tax
expense, depreciation and depletion (net) and intangible assets amortisation.
It is an appropriate and useful measure used to compare recurring financial
performance between periods.
Reconciliation of Profit to EBITDA
Reference 2021 2020
€m €m
Profit for the financial year CIS 679 547
Income tax expense (after exceptional items) CIS 234 201
Exceptional items charged in operating profit CIS - 31
Net finance costs (after exceptional items) Note 5 162 144
Share of associates’ profit (after tax) CIS (2) (1)
Share-based payment expense Note 3 69 37
Depreciation, depletion (net) and amortisation Note 3 560 551
EBITDA 1,702 1,510
B. EBITDA margin
Definition
EBITDA margin is a measure of profitability by taking our EBITDA divided by
revenue.
Reference 2021 2020
€m €m
EBITDA A 1,702 1,510
Revenue CIS 10,107 8,530
EBITDA margin 16.8% 17.7%
Alternative Performance Measures (continued)
C. Operating profit before exceptional items
Definition
Operating profit before exceptional items represents operating profit as
reported in the Consolidated Income Statement before exceptional items.
Exceptional items are excluded in order to assess the underlying financial
performance of our operations.
Reference 2021 2020
€m €m
Operating profit CIS 1,073 891
Exceptional items CIS - 31
Operating profit before exceptional items CIS 1,073 922
D. Pre-exceptional basic earnings per share
Definition
Pre-exceptional basic EPS serves as an effective indicator of our
profitability as it excludes exceptional one‑off items and, in conjunction
with other metrics such as ROCE, is a measure of our financial strength.
Pre‑exceptional basic EPS is calculated by dividing profit attributable to
owners of the parent, adjusted for exceptional items included in profit before
income tax and income tax on exceptional items, by the weighted average number
of ordinary shares in issue. The calculation of pre-exceptional basic EPS is
shown in Note 8.
E. Underlying EBITDA and revenue
Definition
Underlying EBITDA and revenue are arrived at by excluding the incremental
EBITDA and revenue contributions from current and prior year acquisitions and
disposals and the impact of currency translation, hyperinflation and any
non-recurring items.
The Group uses underlying EBITDA and underlying revenue as additional
performance indicators to assess performance on a like-for-like basis each
year.
Europe The Americas Total Europe The Americas Total
2021 2021 2021 2020 2020 2020
EBITDA
Currency 1% (2%) - - (9%) (2%)
Acquisitions/disposals (1%) 1% - - - -
Underlying EBITDA change 10% 20% 13% (11%) 12% (7%)
Reported EBITDA change 10% 19% 13% (11%) 3% (9%)
Revenue
Currency - (3%) - (1%) (10%) (3%)
Hyperinflation - 1% - - - -
Acquisitions/disposals 1% 1% - - - -
Underlying revenue change 17% 21% 18% (4%) 2% (3%)
Reported revenue change 18% 20% 18% (5%) (8%) (6%)
Alternative Performance Measures (continued)
F. Net debt
Definition
Net debt comprises borrowings net of cash and cash equivalents and restricted
cash. We believe that this measure highlights the overall movement resulting
from our operating and financial performance.
Reference 2021 2020
€m €m
Borrowings Note 12 3,754 3,276
Less:
Restricted cash CBS (14) (10)
Cash and cash equivalents CBS (855) (891)
Net debt 2,885 2,375
G. Net debt to EBITDA
Definition
Leverage (ratio of net debt to EBITDA) is an important measure of our overall
financial position.
Reference 2021 2020
€m €m
Net debt F 2,885 2,375
EBITDA A 1,702 1,510
Net debt to EBITDA (times) 1.7 1.6
H. Return on capital employed (‘ROCE’)
Definition
ROCE measures profit from capital employed. It is calculated as operating
profit before exceptional items plus share of associates’ profit (after tax)
divided by the average capital employed (where average capital employed is the
average of total equity and net debt at the current and prior year-end).
Reference 2021 2020
€m €m
Operating profit before exceptional items C 1,073 922
Share of associates’ profit (after tax) CIS 2 1
Operating profit before exceptional items plus share of associates’ profit 1,075 923
(after tax)
Total equity – current year-end CBS 4,392 3,783
Net debt – current year-end F 2,885 2,375
Capital employed – current year-end 7,277 6,158
Total equity – prior year-end CBS 3,783 2,993
Net debt – prior year-end F 2,375 3,483
Capital employed – prior year-end 6,158 6,476
Average capital employed 6,718 6,317
Return on capital employed 16.0% 14.6%
Alternative Performance Measures (continued)
I. Working capital
Definition
Working capital represents total inventories, trade and other receivables and
trade and other payables.
Reference 2021 2020
€m €m
Inventories CBS 1,046 773
Trade and other receivables (current and non-current) CBS 2,163 1,563
Trade and other payables CBS (2,563) (1,835)
Working capital 646 501
J. Working capital as a percentage of sales
Definition
Working capital as a percentage of sales represents working capital as defined
above shown as a percentage of annualised quarterly revenue.
Reference 2021 2020
€m €m
Working capital I 646 501
Annualised quarterly revenue 11,281 8,875
Working capital as a percentage of sales 5.7% 5.6%
Alternative Performance Measures (continued)
K. Summary cash flow
Definition
The summary cash flow is prepared on a different basis to the Consolidated
Statement of Cash Flows and as such the reconciling items between EBITDA and
(increase)/decrease in net debt may differ from amounts presented in the
Consolidated Statement of Cash Flows. The summary cash flow details movements
in net debt. The Consolidated Statement of Cash Flows details movements in
cash and cash equivalents.
Reconciliation of the Summary Cash Flow to the Consolidated Statement of Cash
Flows
2021 2020
Reference €m €m
EBITDA A 1,702 1,510
Exceptional items K.1 - (18)
Cash interest expense K.2 (109) (118)
Working capital change K.3 (114) 94
Capital expenditure K.4 (693) (575)
Change in capital creditors K.4 (14) (18)
Tax paid CSCF (239) (194)
Change in employee benefits and other provisions K.6 (81) (20)
Other K.7 3 14
Free cash flow L 455 675
Italian Competition Authority fine CSCF (124) -
Share issues (net) CSCF - 648
Purchase of own shares (net) CSCF (22) (16)
Sale of businesses and investments K.8 37 -
Purchase of businesses, investments and NCI K.9 (449) (25)
Dividends CSCF (302) (260)
Derivative termination receipts CSCF 9 9
Premium on early repayment of bonds K.2 (28) -
Net cash (outflow)/inflow (424) 1,031
Acquired net debt K.10 (25) (1)
Disposed net cash K.11 (1) -
Deferred debt issue costs amortised (10) (7)
Currency translation adjustment (50) 85
(Increase)/decrease in net debt (510) 1,108
K.1 Exceptional items
Reference 2021 2020
€m €m
Redundancy and reorganisation costs - paid - (7)
Recognition reward - paid Note 4 - (11)
Per summary cash flow - (18)
Alternative Performance Measures (continued)
K.2 Cash interest expense
Reference 2021 2020
€m €m
Interest paid CSCF (152) (122)
Interest received CSCF 3 3
Move in accrued interest 3 1
Initial cost of bonds repaid 9 -
Premium on early repayment of bonds K 28 -
Per summary cash flow (109) (118)
K.3 Working capital change
Reference 2021 2020
€m €m
Net movement in working capital CSCF (114) 95
Other - (1)
Per summary cash flow (114) 94
K.4 Capital expenditure
Reference 2021 2020
€m €m
Additions to property, plant and equipment and biological assets CSCF (594) (493)
Additions to intangible assets CSCF (21) (21)
Additions to right-of-use assets (92) (79)
Change in capital creditors K 14 18
Per summary cash flow (693) (575)
K.5 Capital expenditure as a percentage of depreciation
Reference 2021 2020
€m €m
Capital expenditure K.4 693 575
Depreciation, depletion (net) and amortisation A 560 551
Capital expenditure as a percentage of depreciation 124% 104%
Alternative Performance Measures (continued)
K.6 Change in employee benefits and other provisions
Reference 2021 2020
€m €m
Change in employee benefits and other provisions CSCF (81) (7)
Reorganisation and restructuring costs - unpaid K.6.1 - (28)
Past service cost - UK K.6.2 - 15
Per summary cash flow (81) (20)
K.6.1 Reorganisation and restructuring costs
The change in the provision relating to exceptional reorganisation and
restructuring costs is not included in the summary cash flow as it is not
within EBITDA. Exceptional reorganisation and restructuring costs which were
paid in 2020 are shown as a separate line item within ‘Exceptional items’
in the summary cash flow.
K.6.2 Past service cost - UK
The change in employee benefits relating to the exceptional past service cost
on the UK pension scheme is not included in the summary cash flow as it is not
within EBITDA.
K.7 Other
Reference 2021 2020
€m €m
Other within the summary cash flow comprises the following:
Amortisation of capital grants CSCF (3) (2)
Profit on sale of property, plant and equipment CSCF (8) (2)
Profit on purchase/disposal of businesses CSCF - (4)
Other (primarily hyperinflation adjustments) CSCF 5 6
Receipt of capital grants CSCF 5 5
Disposal of property, plant and equipment CSCF 16 5
Dividends received from associates CSCF 1 1
Lease terminations/modifications L (13) 5
Per summary cash flow 3 14
K.8 Sale of businesses and investments
Reference 2021 2020
€m €m
Disposal of subsidiaries (net of disposed cash) CSCF 33 -
Disposed cash and cash equivalents K.11 4 -
Per summary cash flow 37 -
K.9 Purchase of businesses, investments and NCI
Reference 2021 2020
€m €m
Purchase of subsidiaries (net of acquired cash) CSCF (413) (2)
Purchase of non-controlling interests CSCF - (23)
Deferred consideration paid CSCF (35) -
Acquired cash and cash equivalents K.10 (1) -
Per summary cash flow (449) (25)
Alternative Performance Measures (continued)
K.10 Acquired net debt
Reference 2021 2020
€m €m
Acquired debt (26) (1)
Acquired cash and cash equivalents K.9 1 -
Per summary cash flow (25) (1)
K.11 Disposed net cash
Reference 2021 2020
€m €m
Disposed debt 3 -
Disposed cash and cash equivalents K.8 (4) -
Per summary cash flow (1) -
L. Free cash flow (‘FCF’)
Definition
FCF is the result of the cash inflows and outflows from our operating
activities, and is before those arising from acquisition and disposal of
businesses. We use FCF to assess and understand the total operating
performance of the business and to identify underlying trends.
Reconciliation of Free Cash Flow to Cash Generated from Operations
Reference 2021 2020
€m €m
Free cash flow K 455 675
Reconciling items:
Cash interest expense K.2 109 118
Capital expenditure (net of change in capital creditors) K.4 707 593
Tax payments CSCF 239 194
Disposal of property, plant and equipment CSCF (16) (5)
Lease terminations/modifications K.7 13 (5)
Receipt of capital grants CSCF (5) (5)
Dividends received from associates CSCF (1) (1)
Italian Competition Authority fine CSCF (124) -
Non-cash financing activities - (1)
Cash generated from operations CSCF 1,377 1,563
(1 )Additional information in relation to these Alternative Performance
Measures (‘APMs’) is set out in Supplementary Financial Information on
pages 30 to 37.
(2 )Additional information on underlying performance is set out within
Supplementary Financial Information on pages 30 to 37.
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