Smurfit Kappa reports growth in box market

In an upbeat report, the company said that it had managed to implement a price rise for new cardboard boxes of 40 Euros per tonne in August this year and has also implemented a further 30 Euros per tonne increase from November 1.

The price increases, said the company, come against a background of stabilised prices for recovered fibre with September and October prices flat. The material is used in large volumes by Smurfit Kappa to make board for boxes and other containers.

Gary McGann, Smurfit Kappa Group CEO, commented: The Group is pleased to report EBITDA of 254 million in the quarter. The Americas has been a strong contributor to the EBITDA performance in the third quarter. While Europes performance has been somewhat weaker, it is showing sequential improvement with initial indications of pricing recovery. The Americas provides us with important geographic diversity of earnings and exposure to higher growth markets in the region.”

Signalling an upturn in demand generally, the company said box volumes were up 2% in the year to September on a same day basis.

Townsend Hook

Looking at a longer time period, the nine months to September 2013, the company said that its earnings before tax were 5% higher than the same period in 2012. Figures were hit by the earlier than scheduled closure of Townsend Hook, the companys mill in Snodland, Kent, which cost Smurfit Kappa 12.5 million.

For suppliers of waste or used cardboard for recycling and other grades such as mixed paper, the reopening of the Townsend Hook mill in 2014 will offer a more modern outlet for material. The UK currently has three major domestic users of cardboard and mixed papers: DS Smith, SAICA and Smurfit Kappa although the latter has reduced domestic consumption while the Snodland plant project is undertaken.

Commenting on its infrastructure in todays financial announcements, the company stated: The Group is progressing well with its mill renovations in Townsend Hook (UK) and Roermond (the Netherlands) having completed the re-build of its Hoya recycled containerboard mill (Germany) in June. These two remaining projects with costs of 95 million and 32.7 million respectively and completion dates of fourth quarter of 2014 and first quarter of 2016, will greatly enhance the Groups lightweight capabilities whilst materially reducing on-going operating costs.

And, the company also commented on the recovered fibre market and the market for kraftliner (produced from recovered fibre).

Recovered fibre

On recovered fibre, the company said that prices remained stable in the quarter and at a consistently high level throughout 2013. It stated: Industry commentators continue to believe that prices will trend upwards in coming years as global demand exceeds collection. This has been supported by events in 2013 to date, with a one million short ton addition to US recycled containerboard capacity, steady demand in Europe and a net increase in recycled containerboard capacity of approximately 600,000 tonnes in China outpacing growth in collection rates.

On the material that is makes, Smurfit Kappa said:
In kraftliner, the market has been performing well since the start of 2012 as a result of the closure of 7% of European production capacity and a decline in US imports year-on-year. Following price increases of 90 Euro per tonne over the period, the grade came under some substitution pressure as a result of the increased spread to recycled containerboard. However, rising prices for testliner have reduced this spread to a more typical historical level of approximately 150 Euros per tonne, at which level demand for the grade is robust.