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Smurfit Kappa Group plc ('SKG' or 'the Group') today announced
results for the half year ending 30 June 2022.
2022 Half Year | Key Financial Performance Measures
H1 H1
EURm 2022 2021 Change
Revenue EUR6,385 EUR4,679 36%
EBITDA (1) EUR1,174 EUR781 50%
EBITDA Margin (1) 18.4% 16.7%
Operating Profit before Exceptional Items (1) EUR839 EUR477 76%
Profit before Income Tax EUR769 EUR413 86%
Basic EPS (cent) 221.9 119.9 85%
Pre-exceptional Basic EPS (cent) (1) 221.9 119.9 85%
Free Cash Flow (1) (EUR28) EUR117 (123%)
Return on Capital Employed (1) 19.3% 14.8%
Net Debt (1) EUR3,309 EUR2,549 30%
Net Debt to EBITDA (LTM) (1) 1.6x 1.6x
Key Points:
-- Revenue growth of 36% to EUR6,385 million
-- EBITDA growth of 50% to EUR1,174 million with an EBITDA margin of 18.4%
-- EPS growth of 85% to 221.9 cent
-- ROCE of 19.3%
-- Interim dividend increased by 8% to 31.6 cent per share
Performance Review and Outlook
Tony Smurfit, Group CEO, commented:
"I am pleased to report a strong first half performance with
revenue growth of 36%, EBITDA of EUR1,174 million, an EBITDA margin
of 18.4%, EPS growth of 85% and ROCE of 19.3%.
"Our strong performance is a result of the many actions we have
taken over a number of years. These actions include significant
customer-focused investments to meet growth, providing the most
innovative and sustainable paper-based packaging in the marketplace
and selective acquisitions ensuring security of supply to our
customers.
"In the first half of 2022, we have overcome many challenges
including sharply increasing input costs, logistics and supply
chain constraints, COVID-19 disruption and the impact of the war in
Ukraine. SKG's integrated model, our geographic diversity, our
continued focus on efficiency through investment and our bespoke
business applications, have enabled us to offset these challenges
together with paper and corrugated price recovery.
"I am especially proud of the tremendous efforts of our people
who continue to deliver for our customers under these
circumstances. Our performance-led culture has allowed us to go
from strength to strength, building on our leadership position in
the markets in which we operate.
"Both our regions performed strongly during the first six
months, with Europe reporting EBITDA of EUR926 million with an
EBITDA margin of 18.7% and the Americas reporting EBITDA of EUR271
million with an EBITDA margin of 18.8%. Box volume growth for the
first six months versus last year was 2.5%.
"During the first half, we completed the acquisition of two
corrugated converting operations in the UK and Argentina and we
announced the development of our new corrugated operation in
Morocco.
"In April, we published our 15(th) Sustainable Development
Report which highlighted the significant progress made in 2021
across our key metrics. These included a further 6% reduction in
carbon intensity, a reduction in water consumption of over 6% and a
decrease in waste to landfill intensity of 7% over the previous
year.
"In Smurfit Kappa, we are very confident about our future
prospects. Inevitably, with the current global issues that surround
us there are greater uncertainties than we have seen for some time.
Nevertheless, we continue to see many opportunities for growth in
the sustainable and innovative packaging solutions that we offer
customers and the unique footprint of the businesses we operate.
Our first half performance has set a strong foundation for the
remainder of 2022 and beyond.
"Reflecting the confidence in the quality of our business and
its future prospects, the Board has approved an 8% increase in the
interim dividend."
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.
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
2022 First Half | Performance Overview
The Group reported EBITDA for the first half of EUR1,174
million, up 50% on 2021. The Group EBITDA margin was 18.4%, up from
16.7% in the first half of 2021. The result reflects the resilience
of the Group's integrated model, the benefits of our capital spend
programme, customer-focused innovation and pricing recovery, partly
offset by higher year-on-year energy, recovered fibre, labour,
distribution and other raw material costs.
In Europe, EBITDA increased by 57% on the first half of 2021 to
EUR926 million. The EBITDA margin was 18.7%, up from 16.2% on the
same period in 2021, delivered against a backdrop of supply chain
disruption and significant cost inflation. Corrugated box demand
was up approximately 1% against strong comparatives. Corrugated
pricing has continued to improve in line with our expectations with
continued progression into the second half.
European pricing for testliner and kraftliner has increased by
EUR450 per tonne and EUR390 per tonne respectively from the low of
September 2020 to June 2022.
Our European business continued to build on its strong operating
platform in the first half with a number of projects across our
paper and corrugated divisions. In our paper division we announced
the completion of a large-scale sustainability project at our
Zülpich mill in Germany, which will reduce CO(2) annually by 55,000
tonnes, a 2% reduction for the Group. We have also approved
projects in our Facture, Wrexen and Verzuolo mills which will
reduce cost, increase efficiencies and improve the Group's
sustainability footprint. In our corrugated division we approved
projects in Belgium, France, Germany, the Netherlands, Poland,
Spain and the UK. The Group also announced an investment in its
first Moroccan facility and the acquisition of a corrugated
business in the UK.
In the Americas, EBITDA increased by 29% on the first half of
2021 to EUR271 million. The EBITDA margin was 18.8% in the first
half of 2022 versus 20.4% in the first half of 2021. Colombia,
Mexico and the US accounted for 80% of the region's earnings with
strong performances in all three countries. Corrugated demand for
the first half was up 8% year-on-year or 5% on an underlying
basis.
We have recently announced the acquisition of a corrugated
business in Argentina and we have approved expansion and
sustainability focused projects in our paper, corrugated and sack
businesses in North, Central and South America.
On 1 April 2022, the Group announced its decision to exit the
Russian market in an orderly manner. While this process is in the
early stages, we hope to conclude it by the end of the year.
Free cash flow for the first six months was a net outflow of
EUR28 million compared to a net inflow of EUR117 million in the
first half of 2021. The average maturity profile of the Group's
debt was 5.3 years at 30 June 2022 with an average interest rate of
2.86%. Net debt to EBITDA was 1.6x at the half year versus 1.7x at
the end of December 2021 and 1.6x at the first half of 2021. The
Group remains strongly positioned within its BBB-/BBB-/Baa3 credit
rating.
2022 First Half | Financial Performance
Revenue for the first half was EUR6,385 million, up 36% on the
first half of 2021 or 32% on an underlying(2) basis.
EBITDA for the first half was EUR1,174 million, up 50% on the
first half of 2021. On an underlying basis, Group EBITDA was up 46%
year-on-year, with Europe up 55% and the Americas up 18%.
Operating profit before exceptional items for the first half of
2022 at EUR839 million was 76% higher than the EUR477 million for
the same period of 2021.
There were no exceptional items charged within operating profit
and no exceptional finance items in the first half of either 2022
and 2021.
Net finance costs at EUR71 million were EUR7 million higher than
2021 primarily due to an increase in net cash interest payable, a
higher foreign currency translation loss on debt and a negative
swing from a fair value gain on financial assets/liabilities in
2021 to a loss in 2022, partly offset by a fair value gain on
derivatives.
The profit before tax of EUR769 million was EUR356 million
higher than the EUR413 million in 2021. The income tax expense was
EUR195 million compared to EUR105 million in 2021, resulting in a
profit of EUR574 million for the half year compared to EUR308
million in 2021.
Basic EPS for the first half of 2022 was 221.9 cent, compared to
119.9 cent in 2021.
2022 First Half | Free Cash Flow
Free cash flow in the first half of 2022 was a net outflow of
EUR28 million compared to a net inflow of EUR117 million for 2021,
a decrease of EUR145 million. The EBITDA increase of EUR393 million
was more than offset by an increase in capital outflows, working
capital outflow and tax payments.
The working capital outflow in 2022 was EUR501 million compared
to EUR195 million in 2021. The outflow in 2022 was a combination of
a significant increase in debtors and to a lesser extent stock,
partly offset by an increase in creditors. The increase in debtors
reflects the combination of higher box and paper prices. The
increase in creditors reflects considerably higher recovered fibre
and energy costs along with higher other raw material costs.
Working capital amounted to EUR1,303 million at 30 June 2022 and
represented 9.7% of annualised revenue compared to 8.1% at 30 June
2021 and 5.7% at 31 December 2021.
Capital expenditure in 2022 amounted to EUR349 million (equating
to 115% of depreciation) compared to EUR175 million (equating to
63% of depreciation) in 2021.
Cash interest amounted to EUR61 million in 2022 compared to
EUR54 million in 2021, with the increase primarily due to the
higher increase in interest rates in currencies where we are in a
net debt position compared to those where we are in a net cash
position.
Tax payments of EUR158 million in 2022 were EUR36 million higher
than in 2021.
2022 First Half | Capital Structure
Net debt was EUR3,309 million at the end of June, resulting in a
net debt to EBITDA ratio of 1.6x compared to 1.7x at the end of
December 2021 and 1.6x at the end of June 2021. The Group's balance
sheet continues to provide considerable long-term strategic and
financial flexibility, subject to the stated leverage range of 1.5x
to 2.0x through the cycle and SKG's BBB-/BBB-/Baa3 credit
rating.
At 30 June 2022, the Group's average interest rate was 2.86%
compared to 2.63% at 31 December 2021. The Group's diversified
funding base and long-dated maturity profile of 5.3 years provide a
stable funding outlook. In terms of liquidity, the Group held cash
balances of EUR491 million at the end of June, which were further
supplemented by available commitments of EUR1,342 million under its
sustainability-linked Revolving Credit Facility ('RCF') and EUR312
million under its sustainability-linked securitisation
programmes.
Dividends
The Board has decided to pay an interim dividend of 31.6 cent
per share, which represents an increase of 8% on the prior year. It
is proposed to pay this dividend on 28 October 2022 to all ordinary
shareholders on the share register at the close of business on 30
September 2022.
2022 First Half | Sustainability
Smurfit Kappa continues to make significant progress on
achieving its sustainability goals as outlined in its 15(th)
Sustainable Development Report ('SDR'). The report highlights the
Group's progress towards its long--standing goal of driving change
and supporting a greener planet through the three main pillars of
Planet, People and Impactful Business. It shows that the Group's
actions are delivering today, and together with its ongoing
investments and continuous improvement, it is well positioned to
deliver on its long-term ambition to have net zero emissions by
2050.
The Group made significant progress in reducing its fossil CO(2)
emission intensity in 2021. SKG is the first in its 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 41.3% by the end of 2021. The reduction in 2021 versus
2020 was 6%, another significant step towards its net zero target.
Other highlights from the 2021 SDR include the reduction in water
consumption of over 6% year-on-year and a reduction in waste to
landfill intensity of 7% year-on-year.
During 2021, the Group delivered several landmark achievements
highlighting its continued leadership in sustainability, these
include:
-- In September, the Group launched its Green Finance Framework followed by
the launch of the Group's inaugural green bond offering which was
over-subscribed multiple times and secured the lowest ever coupon for a
corporate issuer at SKG's credit rating, along with a very strong
participation of 'green' investors including 'dark green' investors.
-- In December, Smurfit Kappa had its emissions reduction targets validated
by the Science Based Target initiative ('SBTi') as consistent with the
objectives of the Paris Agreement, and well below 2degC. This validation
is further evidence of its long-term ambition coupled with delivery
today.
The Group has published a significantly enhanced disclosure
consistent with the Task Force on Climate--Related Financial
Disclosures ('TCFD') recommendations in its 2021 Annual Report,
including a comprehensive top-down identification and process
review of climate-related risks and opportunities and an evaluation
of the potential impact on Smurfit Kappa assets from physical and
transition risks under different climate scenarios.
In February of this year, SKG was recognised as a top ESG
performer by leading research and analytics company Sustainalytics.
Following analysis of more than 4,000 European-based companies, SKG
was named a Regional Top Rated company and is ranked in the top
five of the Paper Packaging category globally.
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.
2022 First Half | Commercial Offering and Innovation
SKG continues to lead the industry in its market offering.
Utilising our unique capabilities and expertise, underpinned by
bespoke, scientifically tested applications and delivered by our
passionate people, our customers, through our packaging, can
increase sales, reduce costs and mitigate risk in an increasingly
disrupted and operationally challenging world.
In January, the Group demonstrated its leadership in innovation
and sustainable packaging by winning 13 WorldStar awards across a
host of categories including e-commerce solutions, point of sale
displays, ground--breaking corrugated packaging for the
transportation of fresh fish and our increasingly popular TopClip
solution for beverage cans. SKG's 13 winning products originated
from Brazil, the Czech Republic, Germany, Mexico, Norway, Poland,
Slovakia and Sweden.
In February, the Group launched the Design2Market Factory to
facilitate the development of rapid prototyping for pilot
production, performance analysis and field lab facilities under one
roof.
In April, the Group launched the child-proof, FSC certified
paper-based TopLock Box for detergent pods and capsules, offering a
40% carbon footprint reduction compared to the traditional rigid
plastics alternative.
The Group developed and launched AquaStop, a sustainable
water-resistant paper, in May of this year. Designed to withstand
exposure to water without being damaged it is suitable for more
demanding supply chains where temporary protection against water is
needed.
Summary Cash Flow
Summary cash flows for the first half are set out in the
following table.
6 months to 6 months to
30-Jun-22 30-Jun-21
EURm EURm
EBITDA 1,174 781
Cash interest expense (61) (54)
Working capital change (501) (195)
Capital expenditure (349) (175)
Change in capital creditors (108) (80)
Tax paid (158) (122)
Change in employee benefits and other provisions (22) (43)
Other (3) 5
Free cash flow (28) 117
Purchase of own shares (net) (27) (22)
Sale of businesses and investments - 37
Purchase of businesses, investments and NCI* (48) (55)
Dividends (250) (226)
Derivative termination receipts - 10
Net cash outflow (353) (139)
Acquired net debt (5) (13)
Disposed net cash - (1)
Deferred debt issue costs amortised (4) (4)
Currency translation adjustment (62) (17)
Increase in net debt (424) (174)
* 'NCI' refers to non-controlling interests
A reconciliation of the Summary Cash Flow to the Condensed
Consolidated Statement of Cash Flows and a reconciliation of Free
Cash Flow to Cash Generated from Operations are included in
sections K and L in Alternative Performance Measures in the
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 30 June 2022, the Group's
drawings on this facility were US$8 million, at an interest rate of
2.264%.
At 30 June 2022, 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.
Funding and Liquidity (continued)
At 30 June 2022, 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. Both
these securitisation programmes 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.
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 30 June 2022, the
Group had fixed an average of 96% 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.
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 EUR5 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, including
emerging risks, and appropriate actions are taken to mitigate those
risks or address their potential adverse consequences. As part of
the half year assessment, the COVID-19 pandemic and current global
uncertainties were also considered.
The principal risks and uncertainties facing the Group for the
remaining six months of the financial year are summarised
below.
-- If the current economic climate were to deteriorate, for example as a
result of geopolitical uncertainty, trade tensions and/or the 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 material 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, were
outlined in our 2021 Annual Report on pages 36 to 38. The Annual
Report is available on our website; smurfitkappa.com.
Condensed Consolidated Income Statement
6 months to 30-Jun-22 6 months to 30-Jun-21
Unaudited Unaudited
Pre- Pre-
exceptional Exceptional Total exceptional Exceptional Total
EURm EURm EURm EURm EURm EURm
Revenue 6,385 - 6,385 4,679 - 4,679
Cost of sales (4,383) - (4,383) (3,226) - (3,226)
Gross profit 2,002 - 2,002 1,453 - 1,453
Distribution
costs (480) - (480) (390) - (390)
Administrative
expenses (683) - (683) (586) - (586)
Operating profit 839 - 839 477 - 477
Finance costs (85) - (85) (73) - (73)
Finance income 14 - 14 9 - 9
Share of
associates'
profit (after
tax) 1 - 1 - - -
Profit before
income tax 769 769 413 - 413
Income tax
expense (195) (105)
Profit for the financial
period 574 308
Attributable to:
Owners of the parent 574 308
Non-controlling
interests - -
Profit for the financial
period 574 308
Earnings per share
Basic earnings per share -
cent 221.9 119.9
Diluted earnings per share -
cent 220.9 119.2
Condensed Consolidated Statement of Comprehensive Income
6 months to 6 months to
30-Jun-22 30-Jun-21
Unaudited Unaudited
EURm EURm
Profit for the financial period 574 308
Other comprehensive income:
Items that may be subsequently reclassified to
profit or loss
Foreign currency translation adjustments:
- Arising in the financial period 109 9
- Recycled to Condensed Consolidated Income
Statement - 1
Effective portion of changes in fair value of
cash flow hedges:
- Movement out of reserve - (2)
- Fair value loss on cash flow hedges (6) -
Changes in fair value of cost of hedging:
- Movement out of reserve (1) -
102 8
Items which will not be subsequently
reclassified to profit or loss
Defined benefit pension plans:
- Actuarial gain 211 125
- Related tax (26) (15)
185 110
Total other comprehensive income 287 118
Total comprehensive income for the financial
period 861 426
Attributable to:
Owners of the parent 861 426
Non-controlling interests - -
Total comprehensive income for the financial
period 861 426
Condensed Consolidated Balance Sheet
30-Jun-22 30-Jun-21 31-Dec-21
Unaudited Unaudited Audited
EURm EURm EURm
ASSETS
Non-current assets
Property, plant and equipment 4,452 3,795 4,265
Right-of-use assets 360 298 346
Goodwill and intangible assets 2,760 2,556 2,722
Other investments 10 11 11
Investment in associates 16 12 13
Biological assets 113 105 103
Other receivables 34 26 26
Employee benefit assets 64 - -
Derivative financial instruments 5 - 2
Deferred income tax assets 116 160 149
7,930 6,963 7,637
Current assets
Inventories 1,296 860 1,046
Biological assets 11 8 10
Trade and other receivables 2,801 1,901 2,137
Derivative financial instruments 26 6 8
Restricted cash 9 16 14
Cash and cash equivalents 482 621 855
4,625 3,412 4,070
Total assets 12,555 10,375 11,707
EQUITY
Capital and reserves attributable to
owners of the parent
Equity share capital - - -
Share premium 2,646 2,646 2,646
Other reserves 375 219 260
Retained earnings 2,002 1,126 1,473
Total equity attributable to owners of
the parent 5,023 3,991 4,379
Non-controlling interests 13 13 13
Total equity 5,036 4,004 4,392
LIABILITIES
Non-current liabilities
Borrowings 3,614 3,033 3,589
Employee benefit liabilities 455 707 630
Derivative financial instruments 5 13 7
Deferred income tax liabilities 193 172 175
Non-current income tax liabilities 37 10 17
Provisions for liabilities 38 49 35
Capital grants 22 21 24
Other payables 8 11 11
4,372 4,016 4,488
Current liabilities
Borrowings 186 153 165
Trade and other payables 2,828 2,006 2,563
Current income tax liabilities 30 15 27
Derivative financial instruments 45 8 14
Provisions for liabilities 58 173 58
3,147 2,355 2,827
Total liabilities 7,519 6,371 7,315
Total equity and liabilities 12,555 10,375 11,707
Condensed Consolidated Statement of Changes in Equity
Attributable to owners of the parent
Equity Non-
share Share Other Retained controlling Total
capital premium reserves earnings Total interests equity
EURm EURm EURm EURm EURm EURm EURm
Unaudited
At 1 January
2022 - 2,646 260 1,473 4,379 13 4,392
Profit for the
financial
period - - - 574 574 - 574
Other
comprehensive
income
Foreign currency
translation
adjustments - - 109 - 109 - 109
Defined benefit
pension plans - - - 185 185 - 185
Effective
portion of
changes in fair
value of cash
flow hedges - - (6) - (6) - (6)
Changes in fair
value of cost
of hedging - - (1) - (1) - (1)
Total
comprehensive
income for the
financial
period - - 102 759 861 - 861
Derecognition of
equity
instruments - - 10 (10) - - -
Hyperinflation
adjustment - - - 30 30 - 30
Dividends paid - - - (250) (250) - (250)
Share--based
payment - - 30 - 30 - 30
Net shares
acquired by SKG
Employee Trust - - (27) - (27) - (27)
At 30 June 2022 - 2,646 375 2,002 5,023 13 5,036
Unaudited
At 1 January
2021 - 2,646 207 917 3,770 13 3,783
Profit for the
financial
period - - - 308 308 - 308
Other
comprehensive
income
Foreign currency
translation
adjustments - - 10 - 10 - 10
Defined benefit
pension plans - - - 110 110 - 110
Effective
portion of
changes in fair
value of cash
flow hedges - - (2) - (2) - (2)
Total
comprehensive
income for the
financial
period - - 8 418 426 - 426
Hyperinflation
adjustment - - - 17 17 - 17
Dividends paid - - - (226) (226) - (226)
Share--based
payment - - 26 - 26 - 26
Net shares
acquired by SKG
Employee Trust - - (22) - (22) - (22)
At 30 June 2021 - 2,646 219 1,126 3,991 13 4,004
An analysis of the movements in Other reserves is provided in
Note 12.
Condensed Consolidated Statement of Cash Flows
6 months to 6 months to
30-Jun-22 30-Jun-21
Unaudited Unaudited
EURm EURm
Cash flows from operating activities
Profit before income tax 769 413
Net finance costs 71 64
Depreciation charge 280 254
Amortisation of intangible assets 25 19
Amortisation of capital grants (1) (1)
Share--based payment expense 31 28
Profit on sale of property, plant and equipment (6) (5)
Share of associates' profit (after tax) (1) -
Net movement in working capital (501) (195)
Change in biological assets (1) 3
Change in employee benefits and other provisions (22) (43)
Other (primarily hyperinflation adjustments) 7 3
Cash generated from operations 651 540
Interest paid (57) (55)
Income taxes paid:
Irish corporation tax (net of tax refunds) paid (11) (9)
Overseas corporation tax (net of tax refunds)
paid (147) (113)
Net cash inflow from operating activities 436 363
Cash flows from investing activities
Interest received 2 1
Business disposals (net of disposed cash) - 33
Additions to property, plant and equipment and
biological assets (418) (228)
Additions to intangible assets (8) (6)
Receipt of capital grants - 1
Decrease/(increase) in restricted cash 5 (6)
Disposal of property, plant and equipment 10 7
Dividends received from associates - 1
Purchase of subsidiaries (net of acquired cash) (36) (20)
Deferred consideration paid (10) (35)
Net cash outflow from investing activities (455) (252)
Cash flows from financing activities
Purchase of own shares (net) (27) (22)
Increase/(decrease) in other interest-bearing
borrowings 7 (100)
Repayment of lease liabilities (56) (41)
Derivative termination receipts - 10
Deferred debt issue costs paid - (1)
Dividends paid to shareholders (250) (226)
Net cash outflow from financing activities (326) (380)
Decrease in cash and cash equivalents (345) (269)
Reconciliation of opening to closing cash and
cash equivalents
Cash and cash equivalents at 1 January 827 876
Currency translation adjustment (17) (2)
Decrease in cash and cash equivalents (345) (269)
Cash and cash equivalents at 30 June 465 605
An analysis of the net movement in working capital is provided
in Note 10.
Notes to the Condensed Consolidated Interim 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 Condensed Consolidated Interim Financial Statements included
in this report have been prepared in accordance with the
Transparency (Directive 2004/109/EC) Regulations 2007, the related
Transparency Rules of the Central Bank of Ireland and with IAS 34,
Interim Financial Reporting as adopted by the European Union. This
report should be read in conjunction with the Consolidated
Financial Statements for the financial year ended 31 December 2021
included in the Group's 2021 Annual Report 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 Condensed Consolidated Interim Financial
Statements are consistent with those described and applied in the
Annual Report for the financial year ended 31 December 2021. A
number of changes to IFRS became effective in 2022, however, they
did not have a material effect on the Condensed Consolidated
Interim Financial Statements included in this report.
Operations in Russia
On 1 April 2022, the Group announced its decision to exit the
Russian market in an orderly manner. Support for the Group's
Russian operations has been suspended including any imports and
exports and short or long-term funding. The Group has appointed
advisors to identify potential purchasers for the Russian
operations. This process is in the early stages and there are a
number of uncertainties surrounding the sales process. As a result,
the conditions required to be met to classify the
assets/liabilities as held for sale have not been satisfied at 30
June 2022.
The Group's Russian operations are not material to the Group
representing approximately 1% of each of Revenue, EBITDA and Profit
before Tax in the six month period to 30 June 2022 and less than 3%
of each of Total Assets and Net Assets as at 30 June 2022.
Accordingly, the Group's significant accounting judgements,
estimates and assumptions did not change.
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 Group's diversified funding base and long-dated maturity
profile of 5.3 years provide a stable funding outlook. At 30 June
2022, the Group had a strong liquidity position of approximately
EUR2.15 billion comprising cash balances of EUR491 million
(including EUR9 million of restricted cash), undrawn available
committed facilities of EUR1,342 million under its RCF and EUR312
million under its sustainability-linked securitisation programmes.
At 30 June 2022, the strength of the Group's balance sheet, a net
debt to EBITDA ratio of 1.6x (31 December 2021: 1.7x) and its
BBB-/BBB-/Baa3 credit rating, continues to provide considerable
long-term strategic flexibility.
Having assessed the principal risks facing the Group on page 9,
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 Condensed Consolidated Interim Financial
Statements.
2. Basis of Preparation and Accounting Policies (continued)
Statutory financial statements and audit opinion
The Group's auditors have not audited or reviewed the Condensed
Consolidated Interim Financial Statements contained in this
report.
The Condensed Consolidated Interim Financial Statements
presented do not constitute full statutory financial statements.
Full statutory financial statements for the year ended 31 December
2021 will be filed with the Irish Registrar of Companies in due
course. The audit report on those statutory financial statements
was unqualified.
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 and sack 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.
6 months to 30-Jun-22 6 months to 30-Jun-21
The The
Europe Americas Total Europe Americas Total
EURm EURm EURm EURm EURm EURm
Revenue and results
Revenue 4,939 1,446 6,385 3,649 1,030 4,679
EBITDA 926 271 1,197 591 211 802
Unallocated centre
costs (23) (21)
Share-based payment
expense (31) (28)
Depreciation and
depletion (net) (279) (257)
Amortisation (25) (19)
Finance costs (85) (73)
Finance income 14 9
Share of
associates'
profit (after
tax) 1 -
Profit before income
tax 769 413
Income tax
expense (195) (105)
Profit for the
financial period 574 308
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.
6 months to 6 months to
30-Jun-22 30-Jun-21
EURm EURm
Ireland 55 55
Germany 936 658
France 773 527
Mexico 634 466
Italy 572 347
Other Europe - eurozone 1,328 1,065
Other Europe - non-eurozone 1,252 980
Other Americas 835 581
Total revenue by geographical area 6,385 4,679
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.
6 months to 30-Jun-22 6 months to 30-Jun-21
Paper Packaging Total Paper Packaging Total
EURm EURm EURm EURm EURm EURm
Europe 978 3,961 4,939 577 3,072 3,649
The Americas 135 1,311 1,446 86 944 1,030
Total
revenue by
product 1,113 5,272 6,385 663 4,016 4,679
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. Finance Costs and Income
6 months to 6 months to
30-Jun-22 30-Jun-21
EURm EURm
Finance costs:
Interest payable on bank loans and overdrafts 19 12
Interest payable on leases 5 5
Interest payable on other borrowings 43 43
Foreign currency translation loss on debt 12 7
Fair value loss on financial assets 1 -
Net interest cost on net pension liability 4 4
Net monetary loss -- hyperinflation 1 2
Total finance costs 85 73
Finance income:
Other interest receivable (2) (1)
Foreign currency translation gain on debt (8) (6)
Fair value gain on derivatives not designated as
hedges (4) -
Fair value gain on financial assets/liabilities - (2)
Total finance income (14) (9)
Net finance costs 71 64
5. Income Tax Expense
Income tax expense recognised in the Condensed Consolidated
Income Statement
6 months to 6 months to
30-Jun-22 30-Jun-21
EURm EURm
Current tax:
Europe 128 89
The Americas 54 37
182 126
Deferred tax 13 (21)
Income tax expense 195 105
Current tax is analysed as follows:
Ireland 8 7
Foreign 174 119
182 126
Income tax recognised in the Condensed Consolidated Statement of
Comprehensive Income
6 months to 6 months to
30-Jun-22 30-Jun-21
EURm EURm
Arising on defined benefit pension plans 26 15
The income tax expense in 2022 is EUR90 million higher than in
the comparable period in 2021, primarily due to higher
profitability.
5. Income Tax Expense (continued)
There is a EUR56 million increase in the current tax expense. In
Europe, the current tax expense is EUR39 million higher and in the
Americas the current tax expense is EUR17 million higher. This is
mainly due to changes in profitability and other timing
differences.
The deferred tax charge is EUR34 million higher than in the
comparable period in 2021. The increase is largely due to the
reversal of timing differences on which deferred tax was previously
recognised and is partly offset by the recognition of tax benefits
on losses and other tax credits.
6. Employee Benefits -- Defined Benefit Plans
The table below sets out the components of the defined benefit
cost for the period:
6 months to 6 months to
30-Jun-22 30-Jun-21
EURm EURm
Current service cost 20 18
Gain on settlement - (3)
Net interest cost on net pension liability 4 4
Defined benefit cost 24 19
Analysis of actuarial (losses)/gains recognised in the Condensed
Consolidated Statement of Comprehensive Income:
6 months to 6 months to
30-Jun-22 30-Jun-21
EURm EURm
Return on plan assets (excluding interest
income) (458) 3
Actuarial gain due to experience adjustments - 2
Actuarial gain due to changes in financial
assumptions 669 120
Total gain recognised in the Condensed
Consolidated Statement of Comprehensive Income 211 125
The amounts recognised in the Condensed Consolidated Balance
Sheet were as follows:
30-Jun-22 31-Dec-21
EURm EURm
Present value of funded or partially funded
obligations (1,786) (2,384)
Fair value of plan assets 1,818 2,276
Surplus/(deficit) in funded or partially funded
plans 32 (108)
Present value of wholly unfunded obligations (422) (520)
Amounts not recognised as assets due to asset
ceiling (1) (2)
Net pension liability (391) (630)
Reconciliation to the Condensed Consolidated Balance Sheet:
30-Jun-22 31-Dec-21
EURm EURm
Employee benefit assets 64 -
Employee benefit liabilities (455) (630)
Net pension liability (391) (630)
The key assumptions relating to discount and inflation rates
were reassessed at 30 June 2022 and updated to reflect market
conditions at that date.
7. 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 period less own shares.
6 months to 6 months to
30-Jun-22 30-Jun-21
Profit attributable to owners of the parent (EUR
million) 574 308
Weighted average number of ordinary shares in
issue (million) 258 257
Basic EPS (cent) 221.9 119.9
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 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.
6 months to 6 months to
30-Jun-22 30-Jun-21
Profit attributable to owners of the parent (EUR
million) 574 308
Weighted average number of ordinary shares in
issue (million) 258 257
Potential dilutive ordinary shares assumed
(million) 1 1
Diluted weighted average ordinary shares
(million) 259 258
Diluted EPS (cent) 220.9 119.2
Pre-exceptional
With no exceptional items reported in the first half of 2022 or
2021, pre-exceptional basic and diluted EPS were 221.9 cent (2021:
119.9 cent) and 220.9 cent (2021: 119.2 cent) respectively.
8. Dividends
During the period, the final dividend for 2021 of 96.1 cent per
share was paid to the holders of ordinary shares. The Board has
decided to pay an interim dividend of 31.6 cent per share
(approximately EUR82 million). It is proposed to pay this dividend
on 28 October 2022 to all ordinary shareholders on the share
register at the close of business on 30 September 2022.
9. Property, Plant and Equipment
Land and Plant and
buildings equipment Total
EURm EURm EURm
Six months ended 30 June 2022
Opening net book amount 1,175 3,090 4,265
Reclassifications 34 (37) (3)
Additions 18 287 305
Acquisitions 27 9 36
Depreciation charge (32) (201) (233)
Retirements and disposals (1) (1) (2)
Hyperinflation adjustment 4 5 9
Foreign currency translation adjustment 23 52 75
At 30 June 2022 1,248 3,204 4,452
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
10. Net Movement in Working Capital
6 months to 6 months to
30-Jun-22 30-Jun-21
EURm EURm
Change in inventories (220) (78)
Change in trade and other receivables (533) (306)
Change in trade and other payables 252 189
Net movement in working capital (501) (195)
11. Analysis of Net Debt
30-Jun-22 31-Dec-21
EURm EURm
Revolving credit facility -- interest at relevant
interbank rate (interest rate floor of 0%) +
0.64%(1) 3 2
US$292.3 million 7.5% senior debentures due 2025
(including accrued interest) 283 260
Bank loans and overdrafts 111 101
EUR100 million receivables securitisation VFNs due
2026 (including accrued interest)(2) 4 4
EUR230 million receivables securitisation VFNs due
2026(3) 11 11
EUR250 million 2.75% senior notes due 2025
(including accrued interest) 252 251
EUR1,000 million 2.875% senior notes due 2026
(including accrued interest) 1,008 1,007
EUR750 million 1.5% senior notes due 2027 (including
accrued interest) 747 747
EUR500 million 0.5% senior green notes due 2029
(including accrued interest) 497 495
EUR500 million 1.0% senior green notes due 2033
(including accrued interest) 499 496
Gross debt before leases 3,415 3,374
Leases 385 380
Gross debt including leases 3,800 3,754
Cash and cash equivalents (including restricted
cash) (491) (869)
Net debt including leases 3,309 2,885
1. The Group's RCF has a maturity of January 2026. At 30 June 2022, the
following amounts were drawn under this facility:
1. Revolver loans - EUR8 million
2. Drawn under ancillary facilities and facilities supported by
letters of credit -- nil
3. Other operational facilities including letters of credit - nil
2. At 30 June 2022, the amount drawn under this facility was EUR5 million.
3. At 30 June 2022, the amount drawn under this facility was EUR13 million.
12. Other Reserves
Other reserves included in the Condensed 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 2022 575 1 1 (541) 293 (59) (10) 260
Other
comprehensive
income
Foreign currency
translation
adjustments - - - 109 - - - 109
Effective portion
of changes in
fair value of
cash flow hedges - (6) - - - - - (6)
Changes in fair
value of cost of
hedging - - (1) - - - - (1)
Total other
comprehensive
(expense)/income - (6) (1) 109 - - - 102
Derecognition of
equity
instruments - - - - - - 10 10
Share-based
payment - - - - 30 - - 30
Net shares
acquired by SKG
Employee Trust - - - - - (27) - (27)
Shares distributed
by SKG Employee
Trust - - - - (21) 21 - -
At 30 June 2022 575 (5) - (432) 302 (65) - 375
At 1 January 2021 575 4 2 (556) 241 (49) (10) 207
Other
comprehensive
income
Foreign currency
translation
adjustments - - - 10 - - - 10
Effective portion
of changes in
fair value of
cash flow hedges - (2) - - - - - (2)
Total other
comprehensive
(expense)/income - (2) - 10 - - - 8
Share--based
payment - - - - 26 - - 26
Net shares
acquired by SKG
Employee Trust - - - - - (22) - (22)
Shares distributed
by SKG Employee
Trust - - - - (12) 12 - -
At 30 June 2021 575 2 2 (546) 255 (59) (10) 219
13. Business Combinations
The acquisitions completed by the Group during the period,
together with percentages acquired and completion dates were as
follows:
-- Argencraft, (100%, 1 April 2022) a corrugated facility in Argentina; and
-- Atlas Packaging, (100%, 29 April 2022), a corrugated packaging company in
the UK.
The table below reflects the provisional fair values of the
identifiable net assets acquired in respect of the acquisitions
completed during the period. 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. None of the business combinations completed
during the year were considered sufficiently material to warrant
separate disclosure of the fair values attributable to those
combinations.
Total*
EURm
Non-current assets
Property, plant and equipment 36
Right-of-use assets 2
Intangible assets 23
Current assets
Inventories 4
Trade and other receivables 14
Cash and cash equivalents 2
Non-current liabilities
Deferred income tax liabilities (14)
Provisions (1)
Borrowings (1)
Current liabilities
Borrowings (6)
Trade and other payables (11)
Current income tax liability (2)
Net assets acquired 46
Goodwill (6)
Consideration 40
Settled by:
Cash 38
Deferred consideration 2
40
* In addition to the 2022 acquisitions, the amounts also include
fair value adjustments in relation to 2021 acquisitions.
During 2022 the Group made an amendment to the fair values
assigned to the Verzuolo acquisition completed in late 2021. Given
the proximity of the transaction to the year-end, the accounting
treatment for the acquisition at 31 December 2021 was provisional,
and on completion of the fair value exercise in 2022 the Group
identified adjustments that were required as outlined below. The
adjustments were not of a material nature and therefore have been
recognised as movements within 2022 acquisitions in the 2022
financial statements.
2022
EURm
Increase in property, plant and equipment 26
Increase in intangible assets 21
Increase in deferred tax liability (12)
Other (1)
Increase in net assets 34
Decrease in purchase price 1
Decrease in goodwill 35
13. Business Combinations (continued)
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 arising on business combinations completed
in the reporting period is expected to be deductible for tax
purposes.
Net cash outflow arising on acquisition EURm
Cash consideration 38
Less cash & cash equivalents acquired (2)
Total 36
The gross contractual value of trade and other receivables as at
the respective dates of acquisition amounted to EUR14 million. The
fair value of these receivables is estimated at EUR14 million (all
of which is expected to be recoverable).
Acquisition-related costs of EUR0.5 million were incurred and
are included within administrative expenses in the Condensed
Consolidated Income Statement.
The Group's acquisitions in 2022 have contributed EUR20 million
to revenue and EUR3 million to profit after tax. The proforma
revenue and profit after tax of the Group for the period ended 30
June 2022 would have been EUR6,410 million and EUR577 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.
14. Fair Value Hierarchy
The following table presents the Group's financial assets and
liabilities that are measured at fair value at 30 June 2022:
Level 1 Level 2 Level 3 Total
EURm EURm EURm EURm
Other investments:
Listed 2 - - 2
Unlisted - 8 - 8
Derivative financial instruments:
Assets at fair value through profit
or loss - 25 - 25
Derivatives used for hedging - 6 - 6
Derivative financial instruments:
Liabilities at fair value through
profit or loss - (38) - (38)
Derivatives used for hedging - (12) - (12)
2 (11) - (9)
The following table presents the Group's financial assets and
liabilities that are measured at fair value at 31 December
2021:
Level 1 Level 2 Level 3 Total
EURm EURm EURm EURm
Other investments:
Listed 2 - - 2
Unlisted - 9 - 9
Derivative financial instruments:
Assets at fair value through profit
or loss - 8 - 8
Derivatives used for hedging - 2 - 2
Derivative financial instruments:
Liabilities at fair value through
profit or loss - (13) - (13)
Derivatives used for hedging - (8) - (8)
2 (2) - -
The fair value of listed investments is determined by reference
to their bid price at the reporting date. Unlisted investments are
valued using recognised valuation techniques for the underlying
security, including discounted cash flows and similar unlisted
equity valuation models.
The fair value of the derivative financial instruments set out
above has been measured in accordance with level 2 of the fair
value hierarchy. All are plain derivative instruments, valued with
reference to observable foreign exchange rates, interest rates or
broker prices.
There were no reclassifications or transfers between the levels
of the fair value hierarchy during the period.
15. Fair Value
The following table sets out the fair value of the Group's
principal financial assets and liabilities. The determination of
these fair values is based on the descriptions set out within Note
2 to the Consolidated Financial Statements of the Group's 2021
Annual Report.
30-Jun-22 31-Dec-21
Carrying Carrying
value Fair value value Fair value
EURm EURm EURm EURm
Trade and other
receivables (1) 2,598 2,598 2,006 2,006
Listed and unlisted
debt
instruments(2) 10 10 11 11
Cash and cash
equivalents (3) 482 482 855 855
Derivative assets
(4) 31 31 10 10
Restricted cash(3) 9 9 14 14
3,130 3,130 2,896 2,896
Trade and other
payables(1) 2,327 2,327 2,082 2,082
Revolving credit
facility(5) 3 3 2 2
2026 EUR100 million
receivables
securitisation(3) 4 4 4 4
2026 EUR230 million
receivables
securitisation(3) 11 11 11 11
Bank overdrafts(3) 111 111 101 101
2025 debentures(6) 283 310 260 318
2025 notes(6) 252 251 251 270
2026 notes(6) 1,008 997 1,007 1,103
2027 notes (6) 747 671 747 786
2029 green notes
(6) 497 398 495 489
2033 green notes
(6) 499 359 496 490
5,742 5,442 5,456 5,656
Derivative
liabilities(4) 50 50 21 21
Deferred
consideration(7) 3 3 10 10
5,795 5,495 5,487 5,687
Total net position (2,665) (2,365) (2,591) (2,791)
(1) The fair value of trade and other receivables and payables is estimated
as the present value of future cash flows, discounted at the market
rate of interest at the reporting date.
(2) The fair value of listed financial assets is determined by reference to
their bid price at the reporting date. Unlisted financial assets are
valued using recognised valuation techniques for the underlying
security including discounted cash flows and similar unlisted equity
valuation models.
(3) The carrying amount reported in the Condensed Consolidated Balance
Sheet is estimated to approximate to fair value because of the
short-term maturity of these instruments and, in the case of the
receivables securitisation, the variable nature of the facility and
repricing dates.
(4) The fair value of forward foreign currency, energy and commodity
contracts is based on their listed market price if available. If a
listed market price is not available, then fair value is estimated by
discounting the difference between the contractual forward price and
the current forward price for the residual maturity of the contract
using a risk-free interest rate (based on government bonds).
(5) The fair value (level 2) of the RCF is based on the present value of
its estimated future cash flows discounted at an appropriate market
discount rate at the balance sheet date.
(6) Fair value (level 2) is based on broker prices at the balance sheet
date.
(7) The fair value of deferred consideration is based on the present value
of the expected payment, discounted using an appropriate market
discount rate as at the balance sheet date.
16. Related Party Transactions
Details of related party transactions in respect of the year
ended 31 December 2021 are contained in Note 30 to the Consolidated
Financial Statements of the Group's 2021 Annual Report. The Group
continued to enter into transactions in the normal course of
business with its associates and other related parties during the
period. There were no transactions with related parties in the
first half of 2022 or changes to transactions with related parties
disclosed in the 2021 Consolidated Financial Statements that had a
material effect on the financial position or the performance of the
Group.
17. Board Approval
This interim report was approved by the Board of Directors on 26
July 2022.
18. Distribution of the Interim Report
This 2022 interim report is available on the Group's website;
smurfitkappa.com.
Responsibility Statement in Respect of the Six Months Ended 30
June 2022
The Directors, whose names and functions are listed on pages 78
to 81 in the Group's 2021 Annual Report, are responsible for
preparing this interim management report and the Condensed
Consolidated Interim Financial Statements in accordance with the
Transparency (Directive 2004/109/EC) Regulations 2007, the related
Transparency Rules of the Central Bank of Ireland and with IAS 34,
Interim Financial Reporting as adopted by the European Union.
The Directors confirm that, to the best of their knowledge:
-- the Condensed Consolidated Interim Financial Statements for the half year
ended 30 June 2022 have been prepared in accordance with the
international accounting standard applicable to interim financial
reporting, IAS 34, adopted pursuant to the procedure provided for under
Article 6 of the Regulation (EC) No. 1606/2002 of the European Parliament
and of the Council of 19 July 2002;
-- the interim management report includes a fair review of the important
events that have occurred during the first six months of the financial
year, and their impact on the Condensed Consolidated Interim Financial
Statements for the half year ended 30 June 2022, and a description of the
principal risks and uncertainties for the remaining six months;
-- the interim management report includes a fair review of related party
transactions that have occurred during the first six months of the
current financial year and that have materially affected the financial
position or the performance of the Group during that period, and any
changes in the related party transactions described in the last Annual
Report that could have a material effect on the financial position or
performance of the Group in the first six months of the current financial
year.
Signed on behalf of the Board
A. Smurfit, Director and Chief Executive Officer
K. Bowles, Director and Chief Financial Officer
26 July 2022.
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 Condensed
Consolidated Interim 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 Condensed Consolidated Interim
Financial Statements.
Please note where referenced 'CIS' refers to Condensed
Consolidated Income Statement, 'CBS' refers to Condensed
Consolidated Balance Sheet and 'CSCF' refers to Condensed
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 Condensed Consolidated Interim 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
6 months to 6 months to
30-Jun-22 30-Jun-21
Reference EURm EURm
Profit for the financial period CIS 574 308
Income tax expense (after
exceptional items) CIS 195 105
Net finance costs (after
exceptional items) Note 4 71 64
Share of associates' profit
(after tax) CIS (1) -
Share-based payment expense Note 3 31 28
Depreciation, depletion (net) and
amortisation Note 3 304 276
EBITDA 1,174 781
B. EBITDA margin
Definition
EBITDA margin is a measure of profitability by taking our EBITDA
divided by revenue.
6 months to 6 months to
30-Jun-22 30-Jun-21
Reference EURm EURm
EBITDA A 1,174 781
Revenue CIS 6,385 4,679
EBITDA margin 18.4% 16.7%
Alternative Performance Measures (continued)
C. Operating profit before exceptional items
Definition
Operating profit before exceptional items represents operating
profit as reported in the Condensed Consolidated Income Statement
before exceptional items. Exceptional items are excluded in order
to assess the underlying financial performance of our
operations.
6 months to 6 months to
30-Jun-22 30-Jun-21
Reference EURm EURm
Operating profit CIS 839 477
Exceptional items CIS - -
Operating profit before
exceptional items CIS 839 477
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 7.
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
30-Jun-22 30-Jun-22 30-Jun-22 30-Jun-21 30-Jun-21 30-Jun-21
EBITDA
Currency - 8% 2% - (7%) (2%)
Acquisitions/disposals 2% 3% 2% - - -
Underlying EBITDA change 55% 18% 46% 3% 26% 8%
Reported EBITDA change 57% 29% 50% 3% 19% 6%
Revenue
Currency - 7% 2% - (9%) (2%)
Hyperinflation - 1% - - - -
Acquisitions/disposals 2% 4% 2% - 1% -
Underlying revenue
change 33% 28% 32% 12% 18% 13%
Reported revenue change 35% 40% 36% 12% 10% 11%
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.
30-Jun-22 30-Jun-21 31-Dec-21
Reference EURm EURm EURm
Borrowings Note 11 3,800 3,186 3,754
Less:
Restricted cash CBS (9) (16) (14)
Cash and cash
equivalents CBS (482) (621) (855)
Net debt 3,309 2,549 2,885
G. Net debt to EBITDA
Definition
Leverage (ratio of net debt to EBITDA for the last twelve months
('LTM')) is an important measure of our overall financial
position.
30-Jun-22 30-Jun-21 30-Dec-21
Reference EURm EURm EURm
Net debt F 3,309 2,549 2,885
EBITDA LTM 2,095 1,556 1,702
Net debt to EBITDA LTM (times) 1.6 1.6 1.7
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) LTM 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).
30-Jun-22 30-Jun-21
Reference EURm EURm
Operating profit before exceptional items plus
share of associates' profit (after tax) LTM 1,436 950
Total equity -- current period-end CBS 5,036 4,004
Net debt -- current period-end F 3,309 2,549
Capital employed -- current period-end 8,345 6,553
Total equity -- prior period-end CBS 4,004 3,063
Net debt -- prior period-end F 2,549 3,257
Capital employed -- prior period-end 6,553 6,320
Average capital employed 7,449 6,436
Return on capital employed 19.3% 14.8%
Alternative Performance Measures (continued)
I. Working capital
Definition
Working capital represents total inventories, trade and other
receivables and trade and other payables.
30-Jun-22 30-Jun-21
Reference EURm EURm
Inventories CBS 1,296 860
Trade and other receivables (current
and non-current) CBS 2,835 1,927
Trade and other payables CBS (2,828) (2,006)
Working capital 1,303 781
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.
30-Jun-22 30-Jun-21
Reference EURm EURm
Working capital I 1,303 781
Annualised quarterly revenue 13,442 9,640
Working capital as a percentage of sales 9.7% 8.1%
Alternative Performance Measures (continued)
K. Summary cash flow
Definition
The summary cash flow is prepared on a different basis to the
Condensed Consolidated Statement of Cash Flows and as such the
reconciling items between EBITDA and increase in net debt may
differ from amounts presented in the Condensed Consolidated
Statement of Cash Flows. The summary cash flow details movements in
net debt. The Condensed Consolidated Statement of Cash Flows
details movements in cash and cash equivalents.
Reconciliation of the Summary Cash Flow to the Condensed
Consolidated Statement of Cash Flows
6 months to 6 months to
30-Jun-22 30-Jun-21
Reference EURm EURm
EBITDA A 1,174 781
Cash interest expense K.1 (61) (54)
Working capital change CSCF (501) (195)
Capital expenditure K.2 (349) (175)
Change in capital creditors K.2 (108) (80)
Tax paid CSCF (158) (122)
Change in employee benefits and
other provisions CSCF (22) (43)
Other K.4 (3) 5
Free cash flow L (28) 117
Purchase of own shares (net) CSCF (27) (22)
Sale of businesses and
investments K.5 - 37
Purchase of businesses,
investments and NCI K.6 (48) (55)
Dividends CSCF (250) (226)
Derivative termination receipts CSCF - 10
Net cash outflow (353) (139)
Acquired net debt K.7 (5) (13)
Disposed net cash K.8 - (1)
Deferred debt issue costs amortised (4) (4)
Currency translation adjustment (62) (17)
Increase in net debt (424) (174)
K.1 Cash interest expense
6 months to 6 months to
30-Jun-22 30-Jun-21
Reference EURm EURm
Interest paid CSCF (57) (55)
Interest received CSCF 2 1
Move in accrued interest (6) -
Per summary cash flow (61) (54)
Alternative Performance Measures (continued)
K.2 Capital expenditure
6 months to 6 months to
30-Jun-22 30-Jun-21
Reference EURm EURm
Additions to property, plant and
equipment and biological assets CSCF (418) (228)
Additions to intangible assets CSCF (8) (6)
Net additions to right-of-use assets (31) (21)
Change in capital creditors K 108 80
Per summary cash flow (349) (175)
K.3 Capital expenditure as a percentage of depreciation
6 months to 6 months to
30-Jun-22 30-Jun-21
Reference EURm EURm
Capital expenditure K.2 349 175
Depreciation, depletion (net) and
amortisation A 304 276
Capital expenditure as a percentage of
depreciation 115% 63%
K.4 Other
6 months to 6 months to
30-Jun-22 30-Jun-21
Reference EURm EURm
Other within the summary cash
flow comprises the following
Amortisation of capital grants CSCF (1) (1)
Profit on sale of property, plant
and equipment CSCF (6) (5)
Other (primarily hyperinflation
adjustments) CSCF 7 3
Receipt of capital grants CSCF - 1
Disposal of property, plant and
equipment CSCF 10 7
Dividends received from
associates CSCF - 1
Lease terminations/modifications L (13) (1)
Per summary cash flow (3) 5
Alternative Performance Measures (continued)
K.5 Sale of businesses and investments
6 months to 6 months to
30-Jun-22 30-Jun-21
Reference EURm EURm
Business disposals (net of
disposed cash) CSCF - 33
Disposed cash and cash
equivalents K.8 - 4
Per summary cash flow - 37
K.6 Purchase of businesses, investments and NCI
6 months to 6 months to
30-Jun-22 30-Jun-21
Reference EURm EURm
Purchase of subsidiaries (net of
acquired cash) CSCF (36) (20)
Deferred consideration paid CSCF (10) (35)
Acquired cash and cash
equivalents K.7 (2) -
Per summary cash flow (48) (55)
K.7 Acquired net debt
6 months to 6 months to
30-Jun-22 30-Jun-21
Reference EURm EURm
Debt acquired (7) (13)
Acquired cash and cash
equivalents K.6 2 -
Per summary cash flow (5) (13)
K.8 Disposed net cash
6 months to 6 months to
30-Jun-22 30-Jun-21
Reference EURm EURm
Disposed debt - 3
Disposed cash and cash
equivalents K.5 - (4)
Per summary cash flow - (1)
Alternative Performance Measures (continued)
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
6 months to 6 months to
30-Jun-22 30-Jun-21
Reference EURm EURm
Free cash flow K (28) 117
Reconciling items:
Cash interest expense K.1 61 54
Capital expenditure (net of
change in capital creditors) K.2 457 255
Tax payments CSCF 158 122
Disposal of property, plant and
equipment CSCF (10) (7)
Lease terminations/modifications K.4 13 1
Receipt of capital grants CSCF - (1)
Dividends received from
associates CSCF - (1)
Cash generated from operations CSCF 651 540
__________________________
(1) Additional information in relation to these Alternative
Performance Measures 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/20220726006163/en/
CONTACT:
Smurfit Kappa Group PLC
SOURCE: Smurfit Kappa Group PLC
Copyright Business Wire 2022
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