Packager Smurfit Kappa points to positive signs in Germany (updated)

WestRock Co

01/11/2023 10:03

(Adds CEO comments on Germany, box prices in paragraphs 7-9)
    By Padraic Halpin
       DUBLIN, Nov 1 (Reuters) - Smurfit Kappa said on
Wednesday that a decline in demand for its boxes slowed further
in the third quarter, while it saw tentative improvements in its
German order books that could bode well for a return to volume
growth.
    The Irish group, which is Europe's largest paper packaging
producer, benefited from a boom in demand for packaging goods
and e-commerce during COVID-19 lockdowns.
    But a fall in volumes when economies reopened and consumers
spent more on travel and other services contributed to an 8%
decline in core profit in the first nine months of 2023. 
    Smurfit Kappa  SKG.I , which agreed an $11 billion deal to
buy U.S. rival WestRock  WRK.N  in September, said in a trading
update that it expects full-year core profit to fall by almost
13% to around 2.05 billion euros ($2.17 billion).
    That would still be up sharply on the 1.7 billion euro
recorded in 2021.
    Smurfit's shares rose 2.8% in early trading on the improved
trend in box demand. It said demand from its customers was
around 2% behind 2022 levels in the third quarter versus -7% and
-5% in the first and second quarters, respectively.
    CEO Tony Smurfit said he expected the trend to continue with
orders in Germany, which had been a "true laggard" this year, up
somewhere between 8% and 10% in the last month or so. 
    "I was at a customer event last week in Germany and there is
certainly more optimism," Smurfit told an analyst call.
    "I don't think we're necessarily seeing any of the durables
coming back yet, but I think you're seeing the normalization of
the food and drink business and the FMCG (fast-moving consumer
goods) business coming back to more normalised levels". 
    Smurfit added that he was reticent to call that a long term
trend in Europe's biggest packaging market after an uptick in
Germany in April fizzled out over the summer.
    After increasing the prices customers pay for its boxes by
up to 40% throughout 2021 and 2022, prices fell for the second
quarter in a row, down around 6% quarter-on-quarter.
    Smurfit's CEO reiterated that he expected box prices to rise
again once demand recovers.
($1 = 0.9460 euros) 

 (Reporting by Padraic Halpin, Editing by Louise Heavens and
Alexander Smith)
 ((padraic.halpin@thomsonreuters.com; +353 1 500 1504; Reuters
Messaging: padraic.halpin.thomsonreuters.com@reuters.net))