TIDMSKG TIDMSK3
Smurfit Kappa Group plc ('SKG', 'Smurfit Kappa' or 'the Group')
today announced results for the full year ending 31 December
2022.
2022 Full Year | Key Financial Performance Measures
EURm FY 2022 FY 2021 Change H2 2022 H2 2021 Change H1 2022 Change
Revenue EUR12,815 EUR10,107 27% EUR6,430 EUR5,428 18% EUR6,385 1%
EBITDA (1) EUR2,355 EUR1,702 38% EUR1,181 EUR921 28% EUR1,174 1%
EBITDA Margin (1) 18.4% 16.8% 18.4% 17.0% 18.4%
Operating Profit
before
Exceptional
Items (1) EUR1,662 EUR1,073 55% EUR823 EUR596 38% EUR839 (2%)
Profit before
Income Tax EUR1,293 EUR913 42% EUR524 EUR500 5% EUR769 (32%)
Basic EPS (cent) 365.3 263.9 38% 143.4 144.0 - 221.9 (35%)
Pre-exceptional
Basic EPS (cent)
(1) 444.1 274.5 62% 222.2 154.6 44% 221.9 -
Free Cash Flow
(1) EUR545 EUR455 20% EUR573 EUR338 70% (EUR28)
Return on Capital
Employed (1) 21.8% 16.0% 19.3%
Net Debt (1) EUR2,992 EUR2,885 4% EUR3,309 (10%)
Net Debt to 1.3x 1.7x 1.6x
EBITDA (LTM)
(1)
Key points:
-- Revenue growth of 27% to EUR12,815 million
-- EBITDA growth of 38% to EUR2,355 million with an EBITDA margin of 18.4%
-- Return on capital employed of 21.8%
-- Net Debt to EBITDA ratio below 1.3x
-- Pre-exceptional EPS growth of 62%
-- Final dividend increased by 12% to 107.6 cent per share
Tony Smurfit, Group CEO, commented:
"Set against a year of extraordinary circumstances, 2022 was
another highly successful year for the Smurfit Kappa Group. Our
performance reflects the ongoing benefits of our investment
programme together with our customer-led innovation and
sustainability initiatives. SKG's integrated model together with
our geographic footprint continue to deliver for all
stakeholders.
"Revenue for the year was up 27% to EUR12.8 billion. EBITDA for
the full year was EUR2,355 million, a 38% increase over 2021, with
an EBITDA margin of 18.4%, ROCE of 21.8% and a net debt to EBITDA
of less than 1.3x. Our balance sheet metrics are the strongest in
the Group's history, providing SKG with significant strategic and
financial flexibility.
"For the full year, box volumes for the Group were down less
than 2%. The rate and pace of inflation clearly had a negative
effect on the demand environment in 2022. As guided by the Group,
this coincided with the partial reversal of the unsustainably high
demand levels seen through the pandemic period. This slowdown was
particularly evidenced in the latter part of the year, especially
in the month of December, where we saw stock reductions and
downtime taken by customers.
"In our European business, box volumes were down 2%
year-on-year. While two of our larger countries, Germany and the
UK, performed below our expectations, others, such as Spain and
France, were less affected.
"Box volumes in the Americas, excluding acquisitions, were
broadly flat year-on-year, with growth in Mexico, Colombia, Brazil
and Argentina offset by a weaker performance in our North American
business.
"The year was characterised by unprecedented cost inflation,
especially in energy, which moderated in the latter part of the
year. As illustrated by our performance in 2022, SKG has
successfully navigated this environment.
"In 2022 we invested close to EUR1 billion to support our
customers and capitalise on long-term demand growth drivers. We
also continue to make progress towards our sustainability goals
with investments to reduce our carbon footprint, reduce our impact
on the environment and help our customers achieve their own carbon
reduction and sustainability goals.
"The Group continued to expand its geographic footprint and
product portfolio through acquisitions in 2022. In Europe, we
purchased operations in Spain and the UK, while in the Americas, we
acquired operations in Argentina and Brazil.
"We are immensely proud of the work of the Group and its
employees in supporting many different social programs across the
world. This includes significant support for the Ukrainian people
impacted by the war. Additionally, we continue to invest in the
communities in which we operate through programs in health,
education and environmental protection while our employees devote
time and energy to social projects.
"In September, the Group published its first Green Bond
Allocation and Impact Report, detailing the use of the proceeds of
the EUR1 billion dual-tranche Green Bonds issued in 2021. Issued
with coupons of 0.5% and 1% respectively, for tenors of 8 and 12
years, these coupons are the lowest in the Group's history.
"Although very early, 2023 has started well. While there are and
always will be challenges, SKG has never been in better shape
strategically, financially and operationally. We have put ourselves
in a position with the steps that we have taken and continue to
take, to deliver high quality performance and to take advantage of
the many opportunities we see around us.
"Reflecting confidence in the strength, quality and performance
of the Smurfit Kappa business, the Board is recommending a 12%
increase in the final dividend to 107.6 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 EUR12.8 billion in 2022. 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 86 401 5250
E: ir@smurfitkappa.com E: smurfitkappa@fticonsulting.com
2022 Full Year | Performance Overview
The Group reported EBITDA for the full year of EUR2,355 million,
up 38% on 2021, with higher earnings in both Europe and the
Americas. The Group EBITDA margin was 18.4%, up from 16.8% in 2021.
This result reflects not only the essential nature of our products
but the demand from our customers for the most sustainable,
reliable and innovative packaging solutions. The result also
demonstrates SKG's ability to recover significant input cost
pressures, the benefits from our investment programmes and the
dedication of our 48,000 employees.
In Europe, EBITDA increased by 42% to EUR1,846 million for the
year. The EBITDA margin was 18.6%, up from 16.6% in 2021,
reflecting the impact of higher paper and corrugated prices partly
offset by higher energy, recovered fibre and other raw material
costs. Corrugated box volumes were down 2% in 2022 against a strong
prior year comparative, with a slowdown in our German and UK
markets in particular, being partly offset by a more robust
performance in countries such as France and Spain.
Our European business continued to build on its strong operating
platform in 2022 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) emissions annually by
55,000 tonnes, a 2% reduction for the Group. We have also approved
projects in our Facture, Nettingsdorf, Parenco, Piteå and Verzuolo
mills which will reduce costs, increase efficiencies and improve
the Group's sustainability footprint. In our corrugated division,
we are investing across the region in the latest high-tech and
energy efficient machinery, including new corrugators, converting
machines and facility expansion projects, which will allow us to
increase production, reduce our environmental footprint and expand
the range of high-value, innovative and sustainable packaging
solutions that we offer our customers. The Group also announced an
investment in its first Moroccan facility along with the
acquisition of a corrugated business in the UK and a bag-in-box
plant in Spain.
Pricing for European containerboard continued an upward trend in
the first half of the year supported by rising recovered fibre and
energy prices and modest corrugated demand growth. In the second
half of the year there was a slowdown in demand for containerboard,
with little support from export channels, combined with a
subsequent sharp decline in recovered fibre prices and a reversal
in energy prices in the latter part of the fourth quarter. The
price of testliner, having increased by EUR100 per tonne in the
first half of the year, reduced by EUR160 per tonne from the high
of June 2022 to January 2023. The price of kraftliner, having risen
by EUR60 per tonne in the first half of the year, has fallen by
EUR120 per tonne from the high of September 2022 to January 2023.
Given the lower levels of demand and the rise in containerboard
inventories, the total commercial downtime taken by our European
mills was approximately 260,000 tonnes in the second half of
2022.
Compared to 2021, the overall increase in recovered fibre prices
in 2022 have cost the Group an additional EUR74 million while the
increase in energy prices have cost the Group an additional EUR592
million.
In the Americas, EBITDA increased by 25% on 2021 to EUR553
million. The EBITDA margin was marginally lower at 19.0% in 2022,
compared to 19.5% in 2021 with Colombia, Mexico and the US
accounting for over 80% of the region's earnings. Box volumes in
the Americas, excluding acquisitions, were broadly flat
year--on--year, again compared with a very strong prior year
comparative.
SKG continued to invest in its Americas business in 2022 with
significant capacity and sustainability related investments in the
corrugated, containerboard and speciality businesses in Central
America, Argentina, Colombia, Mexico and the US. In our paper
division we announced a large scale investment in a biomass boiler
at our Cali paper mill in Colombia which will reduce the Group's
CO(2) emissions by approximately 6%. In our corrugated division, we
are expanding capacity and investing in state-of-the-art converting
equipment across the region and in our specialties business we are
expanding our portfolio in paper sacks and bag--in--box. During the
year, we also acquired corrugated packaging plants in Argentina and
Brazil, expanding both our footprint and customer offering in these
attractive growth markets.
The Group reported free cash flow of EUR545 million in the full
year of 2022, up 20% on the EUR455 million reported in 2021. The
average maturity profile of the Group's debt was 4.9 years at 31
December 2022 with an average interest rate of 2.89%. Net debt to
EBITDA was 1.3x at the year-end versus 1.6x at the half year and
1.7x at the end of December 2021. The Group remains strongly
positioned within its BBB-/BBB-/Baa3 credit rating.
2022 Full Year | Financial Performance
Revenue for the full year was EUR12,815 million, up 27% on the
prior year on a reported basis and up 23% on an underlying basis(2)
. Revenue in Europe was up 26%, driven primarily by input cost
recovery through progressive box price increases. On an underlying
basis, revenue in Europe was up 24%. In the Americas, revenue was
up 29% on 2021, or 16% on an underlying basis.
EBITDA for the full year was EUR2,355 million, up 38% on 2021
and ahead of our stated guidance from the third quarter trading
update. On an underlying basis, Group EBITDA was up 34%
year--on--year, with Europe up 41% and the Americas up 13%.
Operating profit before exceptional items for the full year of
2022 at EUR1,662 million was 55% higher than EUR1,073 million in
2021.
Exceptional items charged within operating profit in 2022
amounted to EUR223 million, of which EUR128 million related to the
impairment of our Russian operations, EUR56 million and EUR11
million respectively for the impairment of goodwill in Argentina
and Peru, EUR14 million for redundancy and reorganisation costs
across the Americas along with EUR14 million for the impairment of
property, plant and equipment in our North American operations.
There were no exceptional items charged within operating profit
in 2021.
There were no exceptional finance items charged in 2022.
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.
Pre-exceptional net finance costs at EUR149 million were EUR18
million higher than 2021 primarily due to an increase in cash
interest, a higher foreign currency translation net 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
positive swing from a fair value loss on derivatives in 2021 to a
gain in 2022 and a positive swing from a net monetary loss on
hyperinflation in 2021 to a net gain in 2022.
With the EUR589 million increase in operating profit before
exceptional items, combined with the EUR18 million increase in net
finance costs, the pre-exceptional profit before income tax was
EUR1,516 million, EUR572 million higher than in 2021.
After exceptional items of EUR223 million, the profit before tax
for the full year of 2022 was EUR1,293 million compared to a profit
before tax of EUR913 million in 2021. The income tax expense was
EUR348 million compared to EUR234 million in 2021, resulting in a
profit of EUR945 million for the year to December 2022 compared to
a profit of EUR679 million in 2021.
Basic EPS for the full year of 2022 was 365.3 cent, compared to
263.9 cent in 2021. On a pre--exceptional basis, EPS was 444.1 cent
in 2022, 62% higher than the 274.5 cent in the full year of
2021.
2022 Full Year | Free Cash Flow
Free cash flow in the full year of 2022 was EUR545 million
compared to EUR455 million for 2021, an increase of EUR90 million.
EBITDA growth of EUR653 million, combined with a lower outflow for
changes in employee benefits and other provisions, was partly
offset by a higher working capital outflow, higher capital
outflows, a higher cash interest expense and higher tax
payments.
The working capital outflow in 2022 was EUR358 million compared
to EUR114 million in 2021. The outflow in 2022 was a combination of
a significant increase in debtors and stock, partly offset by an
increase in creditors. These increases reflect the combination of
higher box prices, higher paper prices and considerably higher
energy costs along with higher other raw material and recovered
fibre costs. Working capital amounted to EUR1,027 million at
December 2022 and represented 8.3% of annualised revenue compared
to 5.7% at December 2021.
Capital expenditure in 2022 amounted to EUR970 million (equating
to 155% of depreciation) compared to EUR693 million (equating to
124% of depreciation) in 2021.
Cash interest amounted to EUR132 million in 2022 compared to
EUR109 million in 2021, with the increase primarily due to the
relative 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. Additionally, our variable rate borrowings in Latin
American countries such as Brazil and Colombia have seen large
interest rate increases during the year, leading to a higher cash
interest expense.
Tax payments of EUR321 million in 2022 were EUR82 million higher
than in 2021 with higher payments in Europe and to a lesser extent
in the Americas.
2022 Full Year | Capital Structure
Net debt was EUR2,992 million at the end of December 2022,
resulting in a net debt to EBITDA ratio of 1.3x compared to 1.6x at
the end of June 2022 and 1.7x at the end of December 2021. With net
debt to EBITDA at 1.3x, the lowest in the Group's history, the
strength of the Group's balance sheet continues to secure long-term
strategic and financial flexibility.
In September, the Group published its first Green Bond
Allocation and Impact Report, which provides details on the use of
the proceeds of its inaugural EUR1 billion dual-tranche Green Bond
issued in September 2021. With interest rates of 0.5% and 1.0%
respectively for 8 and 12 year maturities, these coupons were not
only the lowest in the Group's history but also the lowest achieved
for a corporate issuer in our rating category.
At 31 December 2022, the Group's average interest rate was 2.89%
compared to 2.63% at 31 December 2021. The increase in our average
interest rate is primarily driven by the significant increases in
interest rates in certain of our variable rate debt environments,
most notably Brazil and Colombia. At 31 December 2022, over 95% of
the Group's gross borrowings were at fixed interest rates.
The Group's diversified funding base and long-dated maturity
profile of 4.9 years (31 December 2021: 5.8 years) provide a stable
funding outlook. At 31 December 2022, we had a strong liquidity
position of approximately EUR2.44 billion comprising cash balances
of EUR788 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 12% increase in the final dividend
to 107.6 cent per share. It is proposed to pay this dividend on 12
May 2023 to all ordinary shareholders on the share register at the
close of business on 14 April 2023, subject to the approval of the
shareholders at the AGM.
2022 Full Year | Sustainability
Smurfit Kappa began 2022 strongly with the SBTi validation of
its emissions reduction targets being consistent with levels
required to meet the goals of the Paris Agreement and we continued
to make strong progress across our sustainability targets
throughout the year.
The progress made was built upon the achievements outlined in
our 15(th) annual Sustainable Development Report ('SDR') published
in April. 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.
In the SDR, Smurfit Kappa reported significant progress in
reducing our fossil CO(2) emission intensity having reduced its
emissions by 41.3% by the end of 2021, compared to its baseline
year 2005. This marked a 6% improvement year-on-year, leaving the
Group well on its way to reach its 2030 target of a 55% reduction,
in line with the EU Green Deal and another step forward on our
journey to net zero.
Also in April, the Group 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 June, the Group reached another important milestone with the
completion of a large-scale sustainability project at its Zülpich
paper mill in Germany, which significantly reduces the mill's CO(2)
emissions by 55,000 tonnes or 2% of the Group's emissions each
year.
Following on from the EUR134 million installation of a heat
recovery boiler at the Group's Nettingsdorf paper mill in Austria,
which reduced emissions by 40,000 tonnes annually, the mill
launched a sustainable district heating project in August. The
production process will generate up to 25 megawatts of heat that
will save approximately 21,000 tonnes of CO(2) while also providing
heat to local businesses and schools and benefit 20,000 homes
across three communities.
In October, the Group announced a US$100 million investment in a
sustainable biomass boiler at its paper mill in Cali, Colombia,
which will reduce our global Scope 1 and Scope 2 CO(2) emissions by
approximately 6%. This ambitious project is the latest example of
the circularity that permeates every aspect of the company's
operations as we find another use for our own organic waste and
transition away from fossil fuels.
Also during the year, SKG was further recognised for its strong
ESG credentials and continued improvement by the leading research
and analytics company, Sustainalytics. Following an analysis of
more than 15,000 companies globally, SKG was named as an Industry
Top Rated company where it ranked in the top percentile out of 99
companies, in addition to being awarded Regional Top Rated.
The Group 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 and Solactive
Europe Corporate Social Responsibility index. SKG also performs
strongly across a number of third party certification bodies,
including MSCI, ISS ESG and Sustainalytics.
2022 Full Year | Commercial Offering and Innovation
SKG's leadership in innovation and unrivalled market offering is
a defining characteristic of our business. With over 1,000
designers across the Group, supported by a network of laboratories,
design facilities and unique applications, we continued to deliver
the most innovative and sustainable packaging solutions for our
customers, helping them to increase sales, reduce costs, eliminate
plastics and other less sustainable substrates, protect their brand
and mitigate risk in their supply chains.
The Group demonstrated this leadership by winning eight
WorldStar awards across a host of categories including e-commerce
solutions, bag-in-box, transport packaging with plastic replacement
and innovative food and beverage packaging, with the winning
products originating from the Czech Republic, Poland and Spain.
In February, the Group launched our new Design2Market Factory,
which provides customers with a tangible packaging prototype that
can be tested with consumers and subsequently refined and honed
before moving to large-scale production.
In April, the Group launched the child-proof TopLock Box for
detergent pods and capsules, offering a 40% carbon footprint
reduction compared to the traditional rigid plastic
alternative.
Continuing to innovate for our customers, the Group developed
and launched AquaStop(TM) in May, a sustainable water-resistant
paper. Designed to withstand exposure to water without being
damaged, it is suitable for more complex and demanding supply
chains and can be recycled in the same way as standard paper-based
packaging.
During the year, the Group also launched two unique e-commerce
portfolios to capitalise on the growth of online flower and wine
sales. The eFlower portfolio is a fully customisable collection of
nine packaging solutions ideal for shipping bouquets and potted
plants, offering full protection for the delicate contents and a
unique unboxing experience. The wine sector has also seen a
significant increase in online sales since the beginning of the
pandemic in 2020 and SKG's new wine multi-pack solution holds
Amazon's coveted 'Frustration-Free Packaging' certification,
introduced to reduce over-packing, improve the consumer experience
and enhance sustainability.
In October, the Group won 21 awards for its creative and
innovative packaging solutions at the annual Flexographic Industry
Association ('FIA') UK awards. Since 2013, Smurfit Kappa has
received over 130 FIA awards, consolidating its industry-leading
position in the packaging sector.
Furthermore, SKG was recognised as a top employer again in 2022
and achieved various honours for its environmental credentials
alongside awards for packaging design, innovation and
sustainability, with 74 awards in total in 2022.
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 2022 H2 2021 FY 2022 FY 2021
EURm EURm EURm EURm
EBITDA 1,181 921 2,355 1,702
Exceptional items (3) - (3) -
Cash interest expense (71) (55) (132) (109)
Working capital change 143 81 (358) (114)
Capital expenditure (621) (518) (970) (693)
Change in capital creditors 84 66 (24) (14)
Tax paid (163) (117) (321) (239)
Change in employee benefits and
other provisions (3) (38) (25) (81)
Other 26 (2) 23 3
Free cash flow 573 338 545 455
Italian Competition Authority fine - (124) - (124)
Impairment of cash balances held
in Russia (50) - (50) -
Share buyback (41) - (41) -
Purchase of own shares (net) (1) - (28) (22)
Sale of businesses and investments - - - 37
Purchase of businesses,
investments and NCI* (62) (394) (110) (449)
Dividends (83) (76) (333) (302)
Derivative termination
receipts/(payments) 1 (1) 1 9
Premium on early repayment of
bonds - (28) - (28)
Net cash inflow/(outflow) 337 (285) (16) (424)
Acquired net debt 2 (12) (3) (25)
Disposed net cash - - - (1)
Deferred debt issue costs
amortised (3) (6) (7) (10)
Currency translation adjustment (19) (33) (81) (50)
Decrease/(increase) in net debt 317 (336) (107) (510)
* 'NCI' refers to non-controlling interests
A reconciliation of the Summary Cash Flow to the 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 34 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 2022, the
Group's drawings on this facility were US$8 million, at an interest
rate of 5.024%.
At 31 December 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 31 December 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. At 31 December 2022,
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.
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 EUR8 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. In addition, emerging risks
and the current global uncertainties were also considered as part
of the year-end assessment.
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 a 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.
Consolidated Income Statement
For the Financial Year Ended 31 December 2022
2022 2021
Unaudited Audited
Pre- Pre-
exceptional Exceptional Total exceptional Exceptional Total
EURm EURm EURm EURm EURm EURm
Revenue 12,815 - 12,815 10,107 - 10,107
Cost of sales (8,752) - (8,752) (7,015) - (7,015)
Gross profit 4,063 - 4,063 3,092 - 3,092
Distribution
costs (961) - (961) (823) - (823)
Administrative
expenses (1,440) - (1,440) (1,196) - (1,196)
Other operating
expenses - (223) (223) - - -
Operating profit 1,662 (223) 1,439 1,073 - 1,073
Finance costs (184) - (184) (148) (31) (179)
Finance income 35 - 35 17 - 17
Share of
associates'
profit (after
tax) 3 - 3 2 - 2
Profit before
income tax 1,516 (223) 1,293 944 (31) 913
Income tax
expense (348) (234)
Profit for the
financial year 945 679
Attributable to:
Owners of the
parent 944 679
Non-controlling
interests 1 -
Profit for the
financial year 945 679
Earnings per
share
Basic earnings
per share -
cent 365.3 263.9
Diluted earnings
per share -
cent 361.8 261.1
Consolidated Statement of Comprehensive Income
For the Financial Year Ended 31 December 2022
2022 2021
Unaudited Audited
EURm EURm
Profit for the financial year 945 679
Other comprehensive income:
Items that may be subsequently reclassified to profit
or loss
Foreign currency translation adjustments:
- Arising in the financial year (63) 14
- Recycled to Consolidated Income Statement - 1
Effective portion of changes in fair value of cash
flow hedges:
- Movement out of reserve - (3)
- Fair value loss on cash flow hedges (5) -
Changes in fair value of cost of hedging:
- Movement out of reserve (1) (1)
(69) 11
Items which will not be subsequently reclassified to
profit or loss
Defined benefit pension plans:
- Actuarial gain 51 177
- Related tax (8) (32)
43 145
Total other comprehensive (expense)/income (26) 156
Total comprehensive income for the financial year 919 835
Attributable to:
Owners of the parent 918 835
Non-controlling interests 1 -
Total comprehensive income for the financial year 919 835
Consolidated Balance Sheet
At 31 December 2022
2022 2021
Unaudited Audited
EURm EURm
ASSETS
Non-current assets
Property, plant and equipment 4,631 4,265
Right-of-use assets 345 346
Goodwill and intangible assets 2,672 2,722
Other investments 10 11
Investment in associates 16 13
Biological assets 100 103
Other receivables 39 26
Employee benefits assets 17 -
Derivative financial instruments 2 2
Deferred income tax assets 141 149
7,973 7,637
Current assets
Inventories 1,231 1,046
Biological assets 10 10
Trade and other receivables 2,399 2,137
Derivative financial instruments 46 8
Restricted cash 11 14
Cash and cash equivalents 777 855
4,474 4,070
Assets classified as held for sale 35 -
4,509 4,070
Total assets 12,482 11,707
EQUITY
Capital and reserves attributable to owners of the
parent
Equity share capital - -
Share premium 2,646 2,646
Other reserves 236 260
Retained earnings 2,143 1,473
Total equity attributable to owners of the parent 5,025 4,379
Non-controlling interests 13 13
Total equity 5,038 4,392
LIABILITIES
Non-current liabilities
Borrowings 3,600 3,589
Employee benefits liabilities 534 630
Derivative financial instruments 4 7
Deferred income tax liabilities 190 175
Non-current income tax liabilities 16 17
Provisions for liabilities 37 35
Capital grants 26 24
Other payables 10 11
4,417 4,488
Current liabilities
Borrowings 180 165
Trade and other payables 2,642 2,563
Current income tax liabilities 49 27
Derivative financial instruments 21 14
Provisions for liabilities 100 58
2,992 2,827
Liabilities associated with assets classified as held
for sale 35 -
3,027 2,827
Total liabilities 7,444 7,315
Total equity and liabilities 12,482 11,707
Consolidated Statement of Changes in Equity
For the Financial Year Ended 31 December 2022
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 year - - - 944 944 1 945
Other
comprehensive
income
Foreign currency
translation
adjustments - - (63) - (63) - (63)
Defined benefit
pension plans - - - 43 43 - 43
Effective portion
of changes in
fair value of
cash flow hedges - - (5) - (5) - (5)
Changes in fair
value of cost of
hedging - - (1) - (1) - (1)
Total
comprehensive
(expense)/income
for the financial
year - - (69) 987 918 1 919
Hyperinflation
adjustment - - - 66 66 - 66
Dividends paid - - - (332) (332) (1) (333)
Share--based
payment - - 63 - 63 - 63
Share buyback - - (41) - (41) - (41)
Share cancellation - - 41 (41) - - -
Net shares
acquired by SKG
Employee Trust - - (28) - (28) - (28)
Derecognition of
equity
instruments - - 10 (10) - - -
At 31 December
2022 - 2,646 236 2,143 5,025 13 5,038
Audited
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
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 2022 2022 2021
Unaudited Audited
EURm EURm
Cash flows from operating activities
Profit before income tax 1,293 913
Net finance costs 149 162
Depreciation charge 581 513
Impairment of non-current assets 66 -
Impairment of goodwill 85 -
Amortisation of intangible assets 49 40
Amortisation of capital grants (4) (3)
Share--based payment expense 65 69
Profit on sale of property, plant and equipment (7) (8)
Lease modifications (3) -
Share of associates' profit (after tax) (3) (2)
Net movement in working capital (350) (114)
Change in biological assets (2) 7
Italian Competition Authority fine - (124)
Change in employee benefits and other provisions (19) (81)
Other (primarily hyperinflation adjustments) 8 5
Cash generated from operations 1,908 1,377
Interest paid (135) (152)
Income taxes paid:
Irish corporation tax (net of tax refunds) paid (24) (21)
Overseas corporation tax (net of tax refunds) paid (297) (218)
Net cash inflow from operating activities 1,452 986
Cash flows from investing activities
Interest received 9 3
Business disposals - 33
Additions to property, plant and equipment and
biological assets (873) (594)
Additions to intangible assets (17) (21)
Receipt of capital grants 6 5
Purchase of investments (1) -
Disposal of property, plant and equipment 12 16
Dividends received from associates 1 1
Purchase of subsidiaries (net of acquired cash) (90) (413)
Deferred consideration paid (14) (35)
Net cash outflow from investing activities (967) (1,005)
Cash flows from financing activities
Share buyback (41) -
Proceeds from bond issuance - 999
Purchase of own shares (net) (28) (22)
Increase/(decrease) in other interest-bearing
borrowings 8 (107)
Repayment of lease liabilities (103) (88)
Repayment of borrowings - (491)
Derivative termination receipts 1 9
Deferred debt issue costs paid - (12)
Dividends paid to shareholders (332) (302)
Dividends paid to non-controlling interests (1) -
Net cash outflow from financing activities (496) (14)
Decrease in cash and cash equivalents (11) (33)
Reconciliation of opening to closing cash and cash
equivalents
Cash and cash equivalents at 1 January 841 886
Currency translation adjustment (59) (12)
Decrease in cash and cash equivalents (11) (33)
Cash and cash equivalents at 31 December 771 841
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 2021 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
2021. The Group reassessed the classification of restricted cash
during the year as a result of an agenda decision by the IFRS
Interpretations Committee in 2022. Consequently restricted cash is
now included as cash and cash equivalents in the Consolidated
Statement of Cash Flows. The comparative balances for cash and cash
equivalents within the Consolidated Statement of Cash Flows have
increased at 1 January 2021 by EUR10 million and at 31 December
2021 by EUR14 million. A number of changes to IFRS became effective
in 2022, however, they did not have a material effect on the
Consolidated Financial Statements included in this report.
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 4.9 years at 31 December 2022 provide a stable funding
outlook. At 31 December 2022, the Group had a strong liquidity
position of approximately EUR2.44 billion comprising cash balances
of EUR788 million, undrawn available committed facilities of
EUR1,343 million on its RCF and EUR312 million on its
sustainability-linked securitisation facilities. At 31 December
2022, the strength of the Group's balance sheet, a net debt to
EBITDA ratio of 1.3x (31 December 2021: 1.7x) and its
BBB-/BBB-/Baa3 credit rating, continues to secure long-term
strategic and financial flexibility.
Having assessed the principal risks facing the Group on page 11,
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 2021 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.
FY 2022 FY 2021
The The
Europe Americas Total Europe Americas Total
EURm EURm EURm EURm EURm EURm
Revenue and
results
Revenue 9,900 2,915 12,815 7,847 2,260 10,107
EBITDA 1,846 553 2,399 1,302 441 1,743
Segment
exceptional
items (58) (14) (72) - - -
EBITDA after
exceptional
items 1,788 539 2,327 1,302 441 1,743
Unallocated
centre costs (44) (41)
Share-based
payment
expense (65) (69)
Depreciation
and depletion
(net)* (579) (520)
Amortisation (49) (40)
Impairment of
non-current
assets (66) -
Impairment of
goodwill (85) -
Finance costs (184) (179)
Finance income 35 17
Share of
associates'
profit (after
tax) 3 2
Profit before
income tax 1,293 913
Income tax
expense (348) (234)
Profit for the
financial
year 945 679
* Depreciation and depletion is net of fair value adjustments
arising on biological assets.
3. Segment and Revenue Information (continued)
H2 2022 H2 2021
The The
Europe Americas Total Europe Americas Total
EURm EURm EURm EURm EURm EURm
Revenue and
results
Revenue 4,961 1,469 6,430 4,198 1,230 5,428
EBITDA 920 282 1,202 711 230 941
Segment
exceptional
items (58) (14) (72) - - -
EBITDA after
exceptional
items 862 268 1,130 711 230 941
Unallocated
centre costs (21) (20)
Share-based
payment
expense (34) (41)
Depreciation
and depletion
(net)* (300) (263)
Amortisation (24) (21)
Impairment of
non-current
assets (66) -
Impairment of
goodwill (85) -
Finance costs (99) (106)
Finance income 21 8
Share of
associates'
profit (after
tax) 2 2
Profit before
income tax 524 500
Income tax
expense (153) (129)
Profit for the
financial
period 371 371
* Depreciation and depletion is net of fair value adjustments
arising on biological assets.
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.
2022 2021
EURm EURm
Ireland 118 109
Germany 1,861 1,403
France 1,521 1,094
Mexico 1,296 992
Other Europe* - eurozone 3,787 3,071
Other Europe* - non-eurozone 2,566 2,134
Other Americas* 1,666 1,304
Total revenue by geographical area 12,815 10,107
* No individual country represents greater than 10% of revenue.
Revenue is derived almost entirely from the sale of goods and is
disclosed based on the location of production.
3. Segment and Revenue Information (continued)
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.
2022 2021
Paper Packaging Total Paper Packaging Total
EURm EURm EURm EURm EURm EURm
Europe 1,828 8,072 9,900 1,328 6,519 7,847
The Americas 254 2,661 2,915 213 2,047 2,260
Total revenue
by product 2,082 10,733 12,815 1,541 8,566 10,107
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
2022 2021
EURm EURm
The following items are regarded as exceptional in nature:
Impairment of assets - Russian operations (including goodwill) 128 -
Impairment of goodwill 67 -
Redundancy and reorganisation costs 14 -
Impairment of non-current assets 14 -
Exceptional items included in operating profit 223 -
Exceptional finance costs - 31
Exceptional items included in net finance costs - 31
Total exceptional items 223 31
Exceptional items charged within operating profit in 2022
amounted to EUR223 million, of which EUR128 million related to the
impairment of assets in our Russian operations, EUR56 million and
EUR11 million respectively for the impairment of goodwill in
Argentina and Peru, EUR14 million for redundancy and reorganisation
costs in the Americas along with EUR14 million for the impairment
of property, plant and equipment in our North American
operations.
There were no exceptional items within operating profit in
2021.
There were no exceptional finance items in 2022.
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.
Operations in Russia
Following the announcement by the Group on 1 April 2022 to exit
the Russian market in an orderly manner, the Group has now entered
into an agreement to sell its Russian operations to local
management. At 31 December 2022 completion of the transaction was
conditional on regulatory approval being obtained from the Russian
authorities.
4. Exceptional Items (continued)
After considering the status of the approval to dispose of its
Russian operations including engagement with relevant authorities,
the assets and associated liabilities have been presented as held
for sale in the Consolidated Balance Sheet at 31 December 2022. The
results of the operations in Russia, which represented less than 2%
of any of the Group's key performance indicators, have not been
presented as a discontinued operation as they do not represent a
separate major line of business or geographical location.
In advance of classifying the Russian disposal group as held for
sale, the recoverable value was reassessed based on the terms of
the sales agreement entered into, applying the fair value less
costs to sell method. As a result the Group has recorded an
exceptional impairment charge of EUR128 million in relation to its
Russian operations. The Russian operations form part of the Europe
segment.
The Group has made a number of judgements in arriving at the
exceptional charges recognised relating to its Russian operations.
In determining the exceptional impairment charges the Group had
regard to; the continuing war in Ukraine and the significant
sanctions regime in place which is expected to continue for some
time. Judgements taken, which are not deemed significant judgements
in the context of the scale of the Group, will be reassessed on an
ongoing basis in light of restrictions in place at reporting dates
as required.
The major classes of assets and liabilities reclassified as held
for sale at 31 December 2022 comprise trade receivables of EUR26
million and trade and other payables of EUR30 million (2021:
nil).
5. Finance Costs and Income
2022 2021
EURm EURm
Finance costs:
Interest payable on bank loans and overdrafts 49 25
Interest payable on leases 10 10
Interest payable on other borrowings 91 86
Exceptional finance costs associated with debt restructuring - 31
Foreign currency translation loss on debt 24 15
Fair value loss on derivatives not designated as hedges - 2
Fair value loss on financial assets 2 -
Interest cost on net pension liability 8 7
Net monetary loss - hyperinflation - 3
Total finance costs 184 179
Finance income:
Other interest receivable (9) (3)
Foreign currency translation gain on debt (13) (12)
Fair value gain on derivatives not designated as hedges (4) -
Fair value gain on financial assets/liabilities - (2)
Net monetary gain - hyperinflation (9) -
Total finance income (35) (17)
Net finance cost 149 162
6. Income Tax Expense
Income tax expense recognised in the Consolidated Income
Statement
2022 2021
EURm EURm
Current tax:
Europe 249 189
The Americas 100 76
349 265
Deferred tax (1) (31)
Income tax expense 348 234
Current tax is analysed as follows:
Ireland 31 28
Foreign 318 237
349 265
Income tax recognised in the Consolidated Statement of
Comprehensive Income
2022 2021
EURm EURm
Arising on defined benefit pension plans 8 32
The income tax expense for the financial year 2022 is EUR114
million higher than in the comparable period in 2021, primarily due
to higher profitability.
There is a EUR30 million reduction in the deferred tax credit
compared to the prior year. The movement is largely due to the
reversal of timing differences on which deferred tax was previously
recognised, offset by the recognition of other tax benefits and
credits.
In 2022, there is a tax credit of EUR20 million on exceptional
items compared to a EUR4 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:
2022 2021
EURm EURm
Current service cost 39 37
Actuarial gain arising on other long-term employee benefits (4) (1)
Past service cost - (4)
Gain on settlement - (3)
Net interest cost on net pension liability 8 7
Defined benefit cost 43 36
Analysis of actuarial gains/(losses) recognised in the
Consolidated Statement of Comprehensive Income:
2022 2021
EURm EURm
Return on plan assets (excluding interest income) (660) 110
Actuarial (loss)/gain due to experience adjustments (41) 6
Actuarial gain due to changes in financial assumptions 746 54
Actuarial gain due to changes in demographic assumptions 6 7
Total gain recognised in the Consolidated Statement of
Comprehensive Income 51 177
The amounts recognised in the Consolidated Balance Sheet were as
follows:
2022 2021
EURm EURm
Present value of funded or partially funded obligations (1,713) (2,384)
Fair value of plan assets 1,608 2,276
Deficit in funded or partially funded plans (105) (108)
Present value of wholly unfunded obligations (410) (520)
Amounts not recognised as assets due to asset ceiling (2) (2)
Net pension liability (517) (630)
Reconciliation to the Consolidated Balance Sheet:
2022 2021
EURm EURm
Employee benefit assets 17 -
Employee benefit liabilities (534) (630)
Net pension liability (517) (630)
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.
2022 2021
Profit attributable to owners of the parent (EUR million) 944 679
Weighted average number of ordinary shares in issue
(million) 258 257
Basic EPS (cent) 365.3 263.9
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.
2022 2021
Profit attributable to owners of the parent (EUR million) 944 679
Weighted average number of ordinary shares in issue
(million) 258 257
Potential dilutive ordinary shares assumed (million) 3 3
Diluted weighted average ordinary shares (million) 261 260
Diluted EPS (cent) 361.8 261.1
Pre-exceptional
2022 2021
Profit attributable to owners of the parent (EUR million) 944 679
Exceptional items included in profit before income tax (EUR
million) 223 31
Income tax on exceptional items (EUR million) (20) (4)
Pre-exceptional profit attributable to owners of the parent
(EUR million) 1,147 706
Weighted average number of ordinary shares in issue
(million) 258 257
Pre-exceptional basic EPS (cent) 444.1 274.5
Diluted weighted average ordinary shares (million) 261 260
Pre-exceptional diluted EPS (cent) 439.8 271.6
9. Dividends
The following dividends were declared and paid by the Group.
2022 2021
EURm EURm
Final: paid 96.1 cent per ordinary share on 6 May 2022 (2021:
paid 87.4 cent per ordinary share on 7 May 2021) 250 226
Interim: paid 31.6 cent per ordinary share on 28 October 2022
(2021: paid 29.3 cent per ordinary share on 22 October 2021) 82 76
332 302
The Board is recommending a 12% increase in the final dividend
to 107.6 cent per share (approximately EUR280 million). It is
proposed to pay this dividend on 12 May 2023 to all ordinary
shareholders on the share register at the close of business on 14
April 2023, subject to the approval of the shareholders at the
AGM.
10. Property, Plant and Equipment
Land and Plant and
buildings equipment Total
EURm EURm EURm
Financial year ended 31 December 2022
Opening net book amount 1,175 3,090 4,265
Reclassifications 115 (112) 3
Additions 21 817 838
Acquisitions 43 15 58
Depreciation charge (62) (421) (483)
Impairments (25) (37) (62)
Retirements and disposals (1) (2) (3)
Hyperinflation adjustment 8 36 44
Foreign currency translation adjustment (5) (24) (29)
At 31 December 2022 1,269 3,362 4,631
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
11. Net Movement in Working Capital
2022 2021
EURm EURm
Change in inventories (187) (246)
Change in trade and other receivables (238) (492)
Change in trade and other payables 75 624
Net movement in working capital (350) (114)
12. Analysis of Net Debt
2022 2021
EURm EURm
Revolving credit facility -- interest at relevant interbank
rate + 0.64% (1) 4 2
US$292.3 million 7.5% senior debentures due 2025 (including
accrued interest) 276 260
Bank loans and overdrafts 110 101
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) 748 747
EUR500 million 0.5% senior green notes due 2029 (including
accrued interest) 496 495
EUR500 million 1.0% senior green notes due 2033 (including
accrued interest) 497 496
Gross debt before leases 3,406 3,374
Leases 374 380
Gross debt including leases 3,780 3,754
Cash and cash equivalents (including restricted cash) (788) (869)
Net debt including leases 2,992 2,885
(1) The Group's RCF has a maturity of January 2026. At 31 December 2022,
the following amounts were drawn under this facility:
(a) Revolver loans -- EUR7 million
(b) Drawn under ancillary facilities and facilities supported by
letters of credit -- nil
(c) Other operational facilities including letters of credit -- nil
(2) At 31 December 2022, the amount drawn under this facility was EUR5
million.
(3) At 31 December 2022, the amount drawn under this facility was EUR13
million.
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 2022 575 1 1 (541) 293 (59) (10) 260
Other
comprehensive
income
Foreign currency
translation
adjustments - - - (63) - - - (63)
Effective portion
of changes in
fair value of
cash flow hedges - (5) - - - - - (5)
Changes in fair
value of cost of
hedging - - (1) - - - - (1)
Total other
comprehensive
expense - (5) (1) (63) - - - (69)
Share--based
payment - - - - 63 - - 63
Net shares
acquired by SKG
Employee Trust - - - - - (28) - (28)
Shares distributed
by SKG Employee
Trust - - - - (22) 22 - -
Share buyback - - - - - (41) - (41)
Share cancellation - - - - - 41 - 41
Derecognition of
equity
instruments - - - - - - 10 10
At 31 December
2022 575 (4) - (604) 334 (65) - 236
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
14. Business Combinations
The acquisitions completed by the Group during the year,
together with percentages acquired and completion dates were as
follows:
-- Argencraft, (100%, 1 April 2022) a corrugated facility in Argentina;
-- Atlas Packaging, (100%, 29 April 2022), a corrugated packaging company in
the UK;
-- PaperBox (100%, 3 October 2022) a packaging plant in Brazil; and
-- Pusa Pack (100%, 31 October 2022) a bag-in-box packaging plant in Spain.
The table below reflects the provisional fair values of the
identifiable net assets acquired in respect of the acquisitions
completed during the year. 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
2023 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 58
Right-of-use assets 4
Intangible Assets 37
Current assets
Inventories 7
Trade and other receivables 21
Cash and cash equivalents 6
Non-current liabilities
Deferred income tax liabilities (23)
Provisions (2)
Borrowings (1)
Current liabilities
Borrowings (8)
Trade and other payables (15)
Current income tax liability (2)
Net assets acquired 82
Goodwill 22
Consideration 104
Settled by:
Cash 96
Deferred consideration 8
104
* 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
14. 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 year is expected to be deductible for tax purposes as at 31
December 2022.
Net cash outflow arising on acquisition EURm
Cash consideration 96
Less cash & cash equivalents acquired (6)
Total 90
The gross contractual value of trade and other receivables as at
the respective dates of acquisition amounted to EUR21 million. The
fair value of these receivables is estimated at EUR21 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 2022 have contributed EUR84 million
to revenue and EUR14 million to profit after tax. The proforma
revenue and profit after tax of the Group for the year ended 31
December 2022 would have been EUR12,855 million and EUR951 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
2022 2021
Reference EURm EURm
Profit for the financial year CIS 945 679
Income tax expense (after exceptional items) CIS 348 234
Exceptional items charged in operating profit CIS 223 -
Net finance costs (after exceptional items) Note 5 149 162
Share of associates' profit (after tax) CIS (3) (2)
Share-based payment expense Note 3 65 69
Depreciation, depletion (net) and
amortisation Note 3 628 560
EBITDA 2,355 1,702
B. EBITDA margin
Definition
EBITDA margin is a measure of profitability by taking our EBITDA
divided by revenue.
2022 2021
Reference EURm EURm
EBITDA A 2,355 1,702
Revenue CIS 12,815 10,107
EBITDA margin 18.4% 16.8%
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.
2022 2021
Reference EURm EURm
Operating profit CIS 1,439 1,073
Exceptional items CIS 223 -
Operating profit before exceptional items CIS 1,662 1,073
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
2022 2022 2022 2021 2021 2021
EBITDA
Currency - 7% 2% 1% (2%) -
Acquisitions/disposals 1% 5% 2% (1%) 1% -
Underlying EBITDA change 41% 13% 34% 10% 20% 13%
Reported EBITDA change 42% 25% 38% 10% 19% 13%
Revenue
Currency - 7% 2% - (3%) -
Hyperinflation - 2% - - 1% -
Acquisitions/disposals 2% 4% 2% 1% 1% -
Underlying revenue
change 24% 16% 23% 17% 21% 18%
Reported revenue change 26% 29% 27% 18% 20% 18%
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.
2022 2021
Reference EURm EURm
Borrowings Note 12 3,780 3,754
Less:
Restricted cash CBS (11) (14)
Cash and cash equivalents CBS (777) (855)
Net debt 2,992 2,885
G. Net debt to EBITDA
Definition
Leverage (ratio of net debt to EBITDA) is an important measure
of our overall financial position.
2022 2021
Reference EURm EURm
Net debt F 2,992 2,885
EBITDA A 2,355 1,702
Net debt to EBITDA (times) 1.3 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) 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).
2022 2021
Reference EURm EURm
Operating profit before exceptional items C 1,662 1,073
Share of associates' profit (after tax) CIS 3 2
Operating profit before exceptional items plus share of
associates' profit (after tax) 1,665 1,075
Total equity -- current year-end CBS 5,038 4,392
Net debt -- current year-end F 2,992 2,885
Capital employed -- current year-end 8,030 7,277
Total equity -- prior year-end CBS 4,392 3,783
Net debt -- prior year-end F 2,885 2,375
Capital employed -- prior year-end 7,277 6,158
Average capital employed 7,654 6,718
Return on capital employed 21.8% 16.0%
Alternative Performance Measures (continued)
I. Working capital
Definition
Working capital represents total inventories, trade and other
receivables and trade and other payables.
2022 2021
Reference EURm EURm
Inventories CBS 1,231 1,046
Trade and other receivables (current and
non-current) CBS 2,438 2,163
Trade and other payables CBS (2,642) (2,563)
Working capital 1,027 646
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.
2022 2021
Reference EURm EURm
Working capital I 1,027 646
Annualised quarterly revenue 12,361 11,281
Working capital as a percentage of sales 8.3% 5.7%
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 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
2022 2021
Reference EURm EURm
EBITDA A 2,355 1,702
Exceptional items K.1 (3) -
Cash interest expense K.2 (132) (109)
Working capital change K.3 (358) (114)
Capital expenditure K.4 (970) (693)
Change in capital creditors K.4 (24) (14)
Tax paid CSCF (321) (239)
Change in employee benefits and other
provisions K.6 (25) (81)
Other K.7 23 3
Free cash flow L 545 455
Italian Competition Authority fine CSCF - (124)
Impairment of cash balances held in Russia L (50) -
Share buyback CSCF (41) -
Purchase of own shares (net) CSCF (28) (22)
Sale of businesses and investments K.8 - 37
Purchase of businesses, investments and NCI K.9 (110) (449)
Dividends CSCF (333) (302)
Derivative termination receipts CSCF 1 9
Premium on early repayment of bonds K.2 - (28)
Net cash outflow (16) (424)
Acquired net debt K.10 (3) (25)
Disposed net cash K.11 - (1)
Deferred debt issue costs amortised (7) (10)
Currency translation adjustment (81) (50)
Increase in net debt (107) (510)
K.1 Exceptional items
2022 2021
EURm EURm
Redundancy and reorganisation costs - paid (3) -
Per summary cash flow (3) -
Alternative Performance Measures (continued)
K.2 Cash interest expense
2022 2021
Reference EURm EURm
Interest paid CSCF (135) (152)
Interest received CSCF 9 3
Move in accrued interest (6) 3
Initial cost of bonds repaid - 9
Premium on early repayment of bonds K - 28
Per summary cash flow (132) (109)
K.3 Working capital change
2022 2021
Reference EURm EURm
Net movement in working capital CSCF (350) (114)
Impairment loss on Russian trade receivables L (8) -
Per summary cash flow (358) (114)
K.4 Capital expenditure
2022 2021
Reference EURm EURm
Additions to property, plant and equipment
and biological assets CSCF (873) (594)
Additions to intangible assets CSCF (17) (21)
Additions to right-of-use assets (104) (92)
Change in capital creditors K 24 14
Per summary cash flow (970) (693)
K.5 Capital expenditure as a percentage of depreciation
2022 2021
Reference EURm EURm
Capital expenditure K.4 970 693
Depreciation, depletion (net) and
amortisation A 628 560
Capital expenditure as a percentage of depreciation 155% 124%
Alternative Performance Measures (continued)
K.6 Change in employee benefits and other provisions
2022 2021
Reference EURm EURm
Change in employee benefits and other
provisions CSCF (19) (81)
Reorganisation and restructuring costs -
unpaid K.6.1 (11) -
Right-of-use asset retirement obligation 5 -
Per summary cash flow (25) (81)
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 2022 are
shown as a separate line item within 'Exceptional items' in the
summary cash flow.
K.7 Other
2022 2021
Reference EURm EURm
Other within the summary cash flow comprises
the following:
Amortisation of capital grants CSCF (4) (3)
Profit on sale of property, plant and
equipment CSCF (7) (8)
Other (primarily hyperinflation adjustments) CSCF 8 5
Receipt of capital grants CSCF 6 5
Disposal of property, plant and equipment CSCF 12 16
Dividends received from associates CSCF 1 1
Right-of-use asset terminations/modifications L 7 (13)
Per summary cash flow 23 3
K.8 Sale of businesses and investments
2022 2021
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
2022 2021
Reference EURm EURm
Purchase of subsidiaries (net of acquired
cash) CSCF (90) (413)
Deferred consideration paid CSCF (14) (35)
Acquired cash and cash equivalents K.10 (6) (1)
Per summary cash flow (110) (449)
Alternative Performance Measures (continued)
K.10 Acquired net debt
2022 2021
Reference EURm EURm
Acquired debt (9) (26)
Acquired cash and cash equivalents K.9 6 1
Per summary cash flow (3) (25)
K.11 Disposed net cash
2022 2021
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
2022 2021
Reference EURm EURm
Free cash flow K 545 455
Reconciling items:
Cash interest expense K.2 132 109
Capital expenditure (net of change in capital
creditors) K.4 994 707
Tax payments CSCF 321 239
Disposal of property, plant and equipment CSCF (12) (16)
Right-of-use asset terminations/modifications K.7 (7) 13
Receipt of capital grants CSCF (6) (5)
Dividends received from associates CSCF (1) (1)
Italian Competition Authority fine CSCF - (124)
Impairment loss on Russian trade receivables K.3 (8) -
Impairment of cash balances held in Russia K (50) -
Cash generated from operations CSCF 1,908 1,377
_________________________________
(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/20230207006154/en/
CONTACT:
Smurfit Kappa Group PLC
SOURCE: Smurfit Kappa Group PLC
Copyright Business Wire 2023
(END) Dow Jones Newswires
February 08, 2023 02:00 ET (07:00 GMT)
Smurfit Kappa (LSE:SKG)
Historical Stock Chart
From Jun 2024 to Jul 2024
Smurfit Kappa (LSE:SKG)
Historical Stock Chart
From Jul 2023 to Jul 2024
