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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
FY FY H2 H2 H1
EURm 2021 2020 Change 2021 2020 Change 2021 Change
Revenue EUR10,107 EUR8,530 18% EUR5,428 EUR4,327 25% EUR4,679 16%
EBITDA (1) EUR1,702 EUR1,510 13% EUR921 EUR775 19% EUR781 18%
EBITDA Margin
(1) 16.8% 17.7% 17.0% 17.9% 16.7%
Operating Profit
before
Exceptional
Items (1) EUR1,073 EUR922 16% EUR596 EUR472 26% EUR477 25%
Profit before
Income Tax EUR913 EUR748 22% EUR500 EUR365 37% EUR413 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) EUR455 EUR675 (33%) EUR338 EUR437 (23%) EUR117 188%
Return on
Capital
Employed (1) 16.0% 14.6% 14.8%
Net Debt (1) EUR2,885 EUR2,375 22% EUR2,549 13%
Net Debt to 1.7x 1.6x 1.6x
EBITDA (LTM)
(1)
Key Points
-- Revenue growth of 18%
-- EBITDA growth of 13% to EUR1,702 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 EUR1,702 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
EUR1,302 million with an EBITDA margin of 16.6% while our Americas
business recorded EBITDA of EUR441 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
EUR500 million 8 year bonds with a coupon of 0.5% and EUR500
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 EUR10.1 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.
Follow us on LinkedIn, Twitter, Facebook, YouTube.
smurfitkappa.com
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 E: smurfitkappa@fticonsulting.com
2021 Full Year | Performance Overview
The Group reported EBITDA for the full year of EUR1,702 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 EUR1,302 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 EUR441
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 EUR440 million in 2021 versus the prior year
while rising energy prices have cost the Group an additional EUR235
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 EUR455 million in the full
year of 2021, down 33% from EUR675 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 EUR10,107 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 EUR1,702 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 EUR1,073 million was 16% higher than EUR922 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 EUR31 million. EUR35 million related to reorganisation
and restructuring costs in Europe and the Americas and EUR11
million related to the unique recognition reward given to all
permanent employees. These were partly offset by a EUR15 million
exceptional gain on the UK pension scheme.
Exceptional finance costs of EUR31 million in 2021 represented a
redemption premium of EUR28 million together with the related
accelerated write-off of unamortised debt issue costs of EUR3
million due to the early redemption of bonds.
There were no exceptional finance items charged in 2020.
Pre-exceptional net finance costs at EUR131 million were EUR13
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 EUR151 million increase in operating profit before
exceptional items, combined with the EUR13 million decrease in net
finance costs, the pre-exceptional profit before income tax was
EUR944 million, EUR165 million higher than in 2020.
After exceptional items of EUR31 million, the profit before tax
for the full year of 2021 was EUR913 million compared to a profit
before tax of EUR748 million in 2020. The income tax expense was
EUR234 million compared to EUR201 million in 2020, resulting in a
profit of EUR679 million for 2021 compared to a profit of EUR547
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 EUR455 million
compared to EUR675 million for 2020, a decrease of EUR220 million.
EBITDA growth of EUR192 million, combined with lower outflows for
cash interest and the absence of an exceptional outflow of EUR18
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 EUR114 million compared
to an inflow of EUR94 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 EUR646 million at December 2021 and represented
5.7% of annualised revenue compared to 5.6% at December 2020.
Capital expenditure in 2021 amounted to EUR693 million (equating
to 124% of depreciation) compared to EUR575 million (equating to
104% of depreciation) in 2020.
Cash interest amounted to EUR109 million in 2021 compared to
EUR118 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 EUR239 million in 2021 were EUR45 million higher
than in 2020 with higher payments in both Europe and the
Americas.
2021 Full Year | Capital Structure
Net debt was EUR2,885 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 EUR500 million of senior
notes due 2029 and EUR500 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 EUR500 million 2.375% senior notes maturing in
2024 and the issuance of our EUR1 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 EUR2.52 billion comprising cash balances
of EUR869 million, undrawn available committed facilities of
EUR1,343 million on our Sustainability Linked Revolving Credit
Facility ('RCF') and EUR312 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 2degC. 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
EURm EURm EURm EURm
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 EUR1,350 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 EUR250 million
2.75% senior notes due 2025, US$292.3 million 7.50% senior
debentures due 2025, EUR1,000 million 2.875% senior notes due 2026,
EUR750 million 1.5% senior notes due 2027, EUR500 million 0.5%
senior green notes due 2029 and EUR500 million 1.0% senior green
notes due 2033.
At 31 December 2021, the Group had outstanding EUR13 million
variable funding notes ('VFNs') issued under the EUR230 million
trade receivables securitisation programme maturing in November
2026 and EUR5 million VFNs issued under the EUR100 million trade
receivables securitisation programme maturing in January 2026.
Funding and Liquidity (continued)
In April 2021, the Group amended and extended its EUR200 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 EUR100 million and with a margin reduction from 1.375% to
1.1%.
In November 2021, the Group amended and extended its EUR230
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 EUR230 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 EUR1 billion dual tranche
inaugural green bond comprising EUR500 million 0.5% notes maturing
2029 and EUR500 million 1.0% notes maturing 2033.
Additionally, in September 2021, the Group redeemed EUR500
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 EUR250 million 2.75%
senior notes due 2025, US$292.3 million 7.50% senior debentures due
2025, EUR1,000 million 2.875% senior notes due 2026, EUR750 million
1.5% senior notes due 2027, EUR500 million 0.5% senior green notes
due 2029 and EUR500 million 1.0% senior green notes due 2033.
EUR100 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 EUR2 million over the
following 12 months. Interest income on the Group's cash balances
would increase by approximately EUR9 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.
Consolidated Income Statement
For the Financial Year Ended 31 December 2021
2021 2020
Unaudited Audited
Pre-exceptional Exceptional Total Pre-exceptional Exceptional Total
EURm EURm EURm EURm EURm EURm
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
EURm EURm
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
EURm EURm
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
Share Other Retained Non-controlling Total
Equity share capital premium reserves earnings Total interests equity
EURm EURm EURm EURm EURm EURm EURm
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
EURm EURm
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. 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 EUR2.52 billion comprising cash balances
of EUR869 million (including EUR14 million of restricted cash),
undrawn available committed facilities of EUR1,343 million under
its RCF and EUR312 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
EURm EURm EURm EURm EURm EURm
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
EURm EURm EURm EURm EURm EURm
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
EURm EURm
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
EURm EURm EURm EURm EURm EURm
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
EURm EURm
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 EUR31 million in 2021 represented a
redemption premium of EUR28 million together with the related
accelerated write-off of unamortised debt issue costs of EUR3
million due to the early redemption of bonds.
In 2020, exceptional items charged within operating profit
amounted to EUR31 million of which EUR35 million related to
redundancy and reorganisation costs in both Europe and the Americas
and EUR11 million related to a company-wide COVID-19 employee
recognition reward, partly offset by a EUR15 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
EURm EURm
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
EURm EURm
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
EURm EURm
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 EUR33
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 EUR25 million
in 2020 to a credit of EUR31 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 EUR4 million on
exceptional items compared to a EUR9 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
EURm EURm
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 EUR15 million in 2020.
Analysis of actuarial gains/(losses) recognised in the
Consolidated Statement of Comprehensive Income:
2021 2020
EURm EURm
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 Income 177 (9)
The amounts recognised in the Consolidated Balance Sheet were as
follows:
2021 2020
EURm EURm
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 (EUR 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 (EUR 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 (EUR million) 679 545
Exceptional items included in profit before income tax (EUR
million) 31 31
Income tax on exceptional items (EUR million) (4) (9)
Pre-exceptional profit attributable to owners of the parent (EUR
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
EURm EURm
Final: paid 87.4 cent per ordinary share on 7 May 2021 (2020: no
final dividend was paid in 2020) 226 -
Interim: paid 29.3 cent per ordinary share on 22 October 2021
(2020: paid 80.9 cent per ordinary share on 11 September 2020 and
a further 27.9 cent on 11 December 2020) 76 260
302 260
The Board is recommending a 10% increase in the final dividend
to 96.1 cent per share (approximately EUR250 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
EURm EURm EURm
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
EURm EURm
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
EURm EURm
Revolving credit facility -- interest at relevant interbank rate
(interest rate floor of 0%) + 0.65%(1) (2) 2 89
US$292.3 million 7.5% senior debentures due 2025 (including
accrued interest) 260 240
Bank loans and overdrafts 101 83
EUR100 million receivables securitisation VFNs due 2026
(including accrued interest)(3) 4 4
EUR230 million receivables securitisation VFNs due 2026(4) 11 11
EUR500 million 2.375% senior notes due 2024 (including accrued
interest)(5) - 501
EUR250 million 2.75% senior notes due 2025 (including accrued
interest) 251 251
EUR1,000 million 2.875% senior notes due 2026 (including accrued
interest) 1,007 1,005
EUR750 million 1.5% senior notes due 2027 (including accrued
interest) 747 746
EUR500 million 0.5% senior green notes due 2029 (including
accrued interest)(6) 495 -
EUR500 million 1.0% senior green notes due 2033 (including
accrued interest)(6) 496 -
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 - EUR7 million
2. Drawn under ancillary facilities and facilities supported by
letters of credit -- nil
3. Other operational facilities including letters of credit - nil
2. 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%.
3. In April 2021, the Group amended and extended its EUR200 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 EUR100 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.
4. In November 2021, the Group amended and extended its EUR230 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 EUR230 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.
5. In September 2021, the Group redeemed the EUR500 million 2.375% senior
notes due 2024.
6. In September 2021, following the launch of the Group's Green Finance
Framework, the Group issued its inaugural green bond. The EUR1 billion
dual tranche green bond comprised EUR500 million 0.5% senior notes
maturing 2029 and EUR500 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:
Cash Foreign Share-
Reverse flow Cost of currency based
acquisition hedging hedging translation payment Own FVOCI
reserve reserve reserve reserve reserve shares reserve Total
EURm EURm EURm EURm EURm EURm EURm EURm
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
EURm EURm EURm
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 EURm
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 EUR17 million. The
fair value of these receivables is estimated at EUR17 million (all
of which is expected to be recoverable).
Acquisition-related costs of EUR1 million were incurred and are
included within administrative expenses in the Consolidated Income
Statement.
The Group's acquisitions in 2021 have contributed EUR73 million
to revenue and a EUR7 million loss after tax. The proforma revenue
and profit after tax of the Group for the year ended 31 December
2021 would have been EUR10,358 million and EUR674 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
2021 2020
Reference EURm EURm
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.
2021 2020
Reference EURm EURm
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.
2021 2020
Reference EURm EURm
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.
The The
Europe Americas Total Europe 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.
2021 2020
Reference EURm EURm
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.
2021 2020
Reference EURm EURm
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).
2021 2020
Reference EURm EURm
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 (after tax) 1,075 923
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.
2021 2020
Reference EURm EURm
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.
2021 2020
Reference EURm EURm
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 EURm EURm
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
2021 2020
Reference EURm EURm
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
2021 2020
Reference EURm EURm
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
2021 2020
Reference EURm EURm
Net movement in working capital CSCF (114) 95
Other - (1)
Per summary cash flow (114) 94
K.4 Capital expenditure
2021 2020
Reference EURm EURm
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
2021 2020
Reference EURm EURm
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
2021 2020
Reference EURm EURm
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
2021 2020
Reference EURm EURm
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
2021 2020
Reference EURm EURm
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
2021 2020
Reference EURm EURm
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
2021 2020
Reference EURm EURm
Acquired debt (26) (1)
Acquired cash and cash equivalents K.9 1 -
Per summary cash flow (25) (1)
K.11 Disposed net cash
2021 2020
Reference EURm EURm
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
2021 2020
Reference EURm EURm
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.
View source version on businesswire.com:
https://www.businesswire.com/news/home/20220208006190/en/
CONTACT:
Smurfit Kappa Group PLC
SOURCE: Smurfit Kappa Group PLC
Copyright Business Wire 2022
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