TIDMSKG TIDMSK3
Smurfit Kappa Group plc ('SKG' or 'the Group') today announced
results for the half year ending 30 June 2021.
2021 Half Year | Key Financial Performance Measures
H1 H1
EURm 2021 2020 Change
Revenue EUR4,679 EUR4,203 11%
EBITDA (1) EUR781 EUR735 6%
EBITDA Margin (1) 16.7% 17.5%
Operating Profit before Exceptional Items (1) EUR477 EUR450 6%
Profit before Income Tax EUR413 EUR383 8%
Basic EPS (cent) 119.9 116.9 3%
Pre-exceptional Basic EPS (cent) (1) 119.9 116.9 3%
Free Cash Flow (1) EUR117 EUR238 (51%)
Return on Capital Employed (1) 14.8% 14.8%
Net Debt (1) EUR2,549 EUR3,257
Net Debt to EBITDA (LTM) (1) 1.6x 2.1x
Key Points:
-- Revenue growth of 11%
-- EBITDA of EUR781 million with an EBITDA margin of 16.7%
-- Corrugated growth of over 10% and over 9% versus 2020 and 2019
respectively
-- Accelerating investment plans to meet customer needs and capitalise on
growth
-- Agreement to acquire 600,000 tonne recycled containerboard mill
-- Strong and progressive corrugated price recovery offsetting significant
input cost increases
-- Interim dividend increased by 5% to 29.3 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 11%, EBITDA of EUR781 million and an EBITDA
margin of 16.7%. Growth in corrugated was over 10% against the same
period in 2020 and over 9% on 2019 and we continue to see strong
demand for our core products.
"As a result of our past and current capital investments in our
integrated business model, we have, for the most part, been able to
fulfil our customers' needs during this period of exceptionally
strong demand. It has also been a period of significant input cost
pressures which we have and will continue to recover through
corrugated price increases.
"Against this backdrop our European business delivered a strong
performance with EBITDA of EUR591 million and an EBITDA margin of
16.2%. Our Americas business equally delivered a strong performance
with EBITDA of EUR211 million and an EBITDA margin of 20.4%. These
performances reflect the benefits of our integrated business model,
our investment programmes, strong market positions and our
performance culture which has come to the fore during these high
pressured times. I would like to pay a special tribute to all our
people who are going the extra mile to satisfy customer
demands.
"To further strengthen the integration of the Group and the
security of supply for our customers we are pleased to announce
today the acquisition, subject to customary closing conditions, of
a world-class recycled containerboard mill with a capacity of
600,000 tonnes. This mill is strategically well positioned in
Northern Italy, it is highly complementary to our existing
operational footprint and will support the acceleration of the
significant investments we are making in our converting
operations.
"In addition to our announced acquisition in Italy we were also
delighted to complete the acquisition of two operations in our
Americas region in Peru and Mexico. These two businesses further
add to our geographic footprint, including a new market through
Peru, and customer offering, and I am delighted to welcome a
further 608 employees to Smurfit Kappa. We continue to be excited
by the opportunities presented by this region.
"We are accelerating our investment plans to capitalise on the
significant growth opportunities available to us. This growth is
coming from the structural drivers of paper-based packaging, as the
sustainable product of choice by consumers and customers alike, as
well as the continued strong growth in e-commerce. I am very proud
of our product development teams in SKG who have ensured our
product offering in innovation and design is the best in the
industry globally.
"During the first half we also published our 14(th) Sustainable
Development Report, independently assured for over 10 years.
Amongst the highlights of the 2020 report was significant action
across our key metrics, such as, a further 7% reduction in our
carbon intensity, an 18% reduction in waste to landfill intensity
and a 29% improvement in safety performance.
"I am also happy to report that both Moody's and Standard &
Poor's have upgraded our credit rating to Baa3 and BBB-
respectively, in addition to Fitch's BBB- rating.
"The second half has continued the trend of strong demand and
corrugated price recovery. SKG remains very confident in our
prospects and excited about the opportunities for our business. Our
first half performance has established a platform for strong and
accelerated earnings growth through the remainder of 2021.
"Reflecting this and the future prospects of the business the
Board is recommending a 5% 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 46,000 employees in over 350 production sites across
36 countries and with revenue of EUR8.5 billion in 2020. 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 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 can 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
2021 First Half | Performance Overview
The Group reported EBITDA for the first half of EUR781 million,
up 6% on 2020. The Group EBITDA margin was 16.7%, down from 17.5%
in the first half of 2020. The result reflects the resilience of
the Group's integrated model and the benefits of our
customer-focused innovation and capital spend programme, offset by
higher year-on-year recovered fibre, energy and other raw material
costs.
The second half has continued the trend of strong demand and
corrugated price recovery.
In Europe, EBITDA increased by 3% on the first half of 2020 to
EUR591 million. The EBITDA margin was 16.2%, down from 17.6% on the
same period in 2020. Corrugated demand was up approximately 10% on
2020 and 9% on 2019. Corrugated pricing has continued to improve in
line with expectations with continued progression into the second
half.
European pricing for testliner and kraftliner has increased by
EUR220 per tonne and EUR200 per tonne respectively from the low of
September 2020 to June 2021. As we begin the second half of the
year, inventories remain extremely tight and demand remains
strong.
Our European business continued to strengthen its operating
platform in the first half with the commencement of a number of
significant projects across our paper and corrugated divisions. In
our paper division we announced growth projects in Germany and a
significant sustainability investment, also in Germany, which upon
completion will reduce our Group CO(2) emissions intensity by 2%.
In our corrugated division we announced significant expansion
projects in France, Czech Republic, Slovakia, Poland, and the UK.
We have also recently announced the completion of an increased
capacity investment in our Spanish bag-in-box plant.
In the Americas, EBITDA increased by 19% on the first half of
2020 to EUR211 million. The EBITDA margin increased from 19.0% in
the first half of 2020 to 20.4% in the first half of 2021,
delivered against a backdrop of difficult weather conditions in the
Southern US in the first quarter and a challenging second quarter
in Colombia due to national strikes. Colombia, Mexico and the US
accounted for over 78% of the region's earnings with strong
performances in all three countries. Corrugated demand for the
first half was up 11% year-on-year.
We have recently announced the acquisition of two operations in
the Americas, in Peru and Mexico. We have also recently announced
significant expansion and sustainability focused projects in our
paper, corrugated and sack businesses in Colombia, North America
and Central America.
The Group reported free cash flow of EUR117 million in the first
half of 2021 compared to EUR238 million in the first half of 2020.
The average maturity profile of the Group's debt was 4.4 years at
30 June 2021 with an average interest rate of 3.17%. Net debt to
EBITDA was 1.6x at the half year, in line with the year end. The
Group remains strongly positioned within its BBB-/BBB-/Baa3 credit
rating.
2021 First Half | Financial Performance
Revenue for the first half was EUR4,679 million, up 11% on the
first half of 2020 or 13% on an underlying (2) basis.
EBITDA for the first half was EUR781 million, 6% up on the first
half of 2020. On an underlying basis, Group EBITDA was up 8%
year-on-year, with Europe up 3% and the Americas up 26%.
Operating profit before exceptional items for the first half of
2021 at EUR477 million was 6% higher than the EUR450 million for
the same period of 2020.
There were no exceptional items charged within operating profit
and no exceptional finance items in the first half of both 2021 and
2020.
Net finance costs at EUR64 million were EUR4 million lower than
2020, reflecting a decrease in both cash interest and interest cost
on net pension liabilities along with the positive swing from a
fair value loss on financial assets/liabilities in 2020 to a gain
in 2021, partly offset by a negative swing from a foreign currency
translation gain on debt in 2020 to a loss in 2021.
With the EUR27 million increase in operating profit together
with the EUR4 million decrease in net finance costs, partly offset
by a EUR1 million move in share of associates' profit, the profit
before income tax was EUR413 million, EUR30 million higher than in
2020.The income tax expense of EUR105 million was in line with
2020, resulting in a profit of EUR308 million for 2021 compared to
a profit of EUR278 million in 2020.
Basic EPS for the first half of 2021 was 119.9 cent, compared to
116.9 cent in 2020.
2021 First Half | Free Cash Flow
Free cash flow in the first half of 2021 was EUR117 million
compared to EUR238 million for 2020, a decrease of EUR121 million.
An EBITDA increase of EUR46 million and lower capital outflows of
EUR26 million was more than offset by higher outflows for working
capital and tax payments of EUR163 million and EUR24 million
respectively.
Working capital increased by EUR280 million in the half year
mainly due to the significant increase in debtors and to a lesser
extent, stock, partly offset by the increase in creditors. Working
capital amounted to EUR781 million at June 2021, representing 8.1%
of annualised revenue compared to 8.4% at June 2020 and 5.6% at
December 2020.
Capital expenditure in 2021 amounted to EUR175 million (equating
to 63% of depreciation) compared to EUR230 million (equating to 84%
of depreciation) in 2020.
Cash interest amounted to EUR54 million in 2021 compared to
EUR61 million in 2020, with the decrease primarily relating to a
lower average level of borrowing.
Tax payments of EUR122 million in 2021 were EUR24 million higher
than in 2020.
2021 First Half | Capital Structure
Net debt was EUR2,549 million at the end of June, resulting in a
net debt to EBITDA ratio of 1.6x compared to 1.6x at the end of
December 2020 and 2.1x at the end of June 2020. The Group's balance
sheet continues to provide considerable financial strategic
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 2021, the Group's average interest rate was 3.17%
compared to 3.13% at 31 December 2020. The Group's diversified
funding base and long-dated maturity profile of 4.4 years provide a
stable funding outlook. In terms of liquidity, the Group held cash
balances of EUR637 million at the end of June, which were further
supplemented by available commitments of EUR1.34 billion under its
Sustainability Linked Revolving Credit Facility ('RCF') and EUR312
million under its securitisation programmes.
Dividends
The Board has decided to pay an interim dividend of 29.3 cent
per share (approximately EUR76 million). It is proposed to pay this
dividend on 22 October 2021 to all ordinary shareholders on the
share register at the close of business on 24 September 2021.
2021 First Half | Sustainability
Smurfit Kappa continues to make significant and tangible
progress on achieving its sustainability targets as outlined in its
14(th) Sustainable Development Report ('SDR'). It highlights the
Group's long-standing objective to drive change and nurture a
greener planet through the three key pillars of Planet, People and
Impactful Business. Furthermore, Smurfit Kappa's end-to-end
approach to sustainability is evident in its innovative products
and processes that support customers and positively impact the
entire value chain.
In our 2020 SDR Smurfit Kappa reported significant progress in
reducing its fossil CO(2) emission intensity. The Group 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 37.3% by the end of 2020. The
reduction in 2020 versus 2019 was 7% which is an acceleration
compared with the previous year. The Group is well on its way to
reach its intermediate 2030 target of 55% reduction, in line with
the EU Green Deal objectives.
Compared with 2019, the Group also made continued progress
during 2020 on a number of its other key sustainability
targets:
-- Water discharge quality improved by 5%
-- Waste to landfill intensity decreased by 18%
-- Chain of Custody certified packaging deliveries to customers increased by
2%
-- Safety performance improved by 29%
-- Social projects received EUR7.7 million in donations, including EUR3
million in various COVID-related projects during the financial year
While the SDR has been independently assured since 2009, the
2020 SDR is the Group's first to report in line with
recommendations of the Taskforce for Climate related Financial
Disclosures ('TCFD') and the Sustainable Accounting Standards Board
('SASB') criteria.
Smurfit Kappa also aligned its sustainability ambitions and
targets into its financing by embedding its sustainability targets
via Key Performance Indicators ('KPIs') into its existing EUR1.35
billion RCF, creating a Sustainability Linked RCF, at the end of
2020.
Smurfit Kappa has been contributing to making the UN 2030
Sustainable Development Goals ('SDGs') a reality since 2015. This
contribution was recognised by the Support the Goals movement in
2021 when the Group became the first FTSE 100 company to receive a
five-star rating.
By committing to these sustainability targets, the Group's
Better Planet Packaging portfolio of sustainable products will
continue to help its customers to deliver on their own short and
long-term sustainability goals.
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,
Ethibel's sustainable investment register, CDP, SEDEX and EcoVadis.
SKG also performs strongly across a number of third party
certification bodies, including MSCI, ISS ESG and
Sustainalytics.
2021 First Half | Commercial Offering and Innovation
SKG continues to lead the industry in its market offering,
helping our customers win in their marketplace. Our unique insights
and capabilities allow our customers to increase sales, reduce
costs and mitigate risk in an ever more complex world where
reputation is key.
The Group continued to deliver innovation for our customers
through the pandemic, adapting ways of working and moving most of
our activity onto virtual platforms. This was best captured by our
first virtual Better Planet Packaging event held in March which
hosted over 2,700 attendees.
During the first half the Group launched a world first, a
pre-certified, Frustration Free Packaging ('FFP') compliant
packaging for Amazon supply-chains. This means customers can access
one of the world's leading trading platforms quicker and in
confidence of meeting Amazon's strict packaging requirements, a
significant advantage as global e-commerce sales continue to
grow.
In April the Group's Brazilian business won a prestigious Red
Dot Award in the area of product design. The packaging challenge
came from Wine & Bite Box to secure and protect bottles of wine
and food for a growing trend of tasting boxes being delivered to
customers for an at home gourmet experience. The award recognises
this packaging as one of the most innovative design projects in the
world.
The Group continues to experience intense levels of pipeline
development across our business as customers strive for more
sustainable packaging solutions. This structural trend towards more
sustainable solutions is expected to be a multi-year trend given
the need in many cases for changes to our customers' manufacturing
halls to accommodate a move to paper-based packaging. Some examples
are outlined below.
The unique TopClip product that was launched last year continues
to grow with the first fully automated packing line being
commissioned at a customer's site in the second quarter. This
provides an exciting proof of concept for other prospective
customers as they look for more sustainable packaging
solutions.
The launch of our Safe & Closed product, a sustainable
corrugated alternative to rigid plastic tubs has also generated
significant interest through the first half and we expect to
deliver proof of concept to the market by the end of the year.
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-21 30-Jun-20
EURm EURm
EBITDA 781 735
Cash interest expense (54) (61)
Working capital change (195) (32)
Capital expenditure (175) (230)
Change in capital creditors (80) (51)
Tax paid (122) (98)
Change in employee benefits and other provisions (43) (26)
Other 5 1
Free cash flow 117 238
Purchase of own shares (net) (22) (16)
Sale of businesses and investments 37 -
Purchase of businesses, investments and NCI* (55) (21)
Dividends (226) -
Derivative termination receipts 10 9
Net cash (outflow)/inflow (139) 210
Acquired net (debt)/cash (13) (1)
Disposed net (cash)/debt (1) -
Deferred debt issue costs amortised (4) (4)
Currency translation adjustment (17) 21
(Increase)/decrease in net debt (174) 226
* '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 36.
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.
Borrowings under the RCF are available to fund the Group's
working capital requirements, capital expenditure and other general
corporate purposes.
At 30 June 2021, the Group had outstanding, EUR500 million
2.375% senior notes due 2024, 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 and EUR750 million 1.5% senior
notes due 2027.
At 30 June 2021, the Group had outstanding EUR12.6 million
variable funding notes issued under the EUR230 million trade
receivables securitisation programme maturing in June 2023 and EUR5
million variable funding notes issued under the EUR100 million
trade receivables securitisation programme maturing in January
2026.
In April 2021, the Group amended and extended its EUR200 million
2022 trade receivables securitisation programme, which utilises the
Group's receivables in Austria, Belgium, Italy and the Netherlands.
The programme was extended to January 2026 at a reduced facility
size of EUR100 million and with a margin reduction from 1.375% to
1.1%.
Funding and Liquidity (continued)
As part of the amendment process, the Group further aligned its
sustainability ambitions and targets into its financing by
embedding its sustainability targets via KPIs into the amended and
extended trade receivables programme. The 2026 trade receivables
securitisation programme 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 programme.
The Group also has a EUR1,350 million Sustainability Linked RCF
with a maturity date of 28 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. At 30 June
2021, the Group's drawings on this facility were US$8 million, at
an interest rate of 0.732%.
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 2021, the
Group had fixed an average of 97% of its interest cost on
borrowings over the following 12 months.
The Group's fixed rate debt comprised EUR500 million 2.375%
senior notes due 2024, 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 and EUR750 million 1.5% senior notes
due 2027. EUR100 million in interest rate swaps converting variable
rate borrowings to fixed rate matured in January 2021.
The Group's earnings are affected by changes in short-term
interest rates on its floating rate borrowings and cash balances.
If interest rates for these borrowings increased by one percent,
the Group's interest expense would increase, and income before
taxes would decrease, by approximately EUR2 million over the
following 12 months. Interest income on the Group's cash balances
would increase by approximately EUR6 million assuming a one percent
increase in interest rates earned on such balances over the
following 12 months.
The Group uses foreign currency borrowings, currency swaps and
forward contracts in the management of its foreign currency
exposures.
Principal Risks and Uncertainties
Risk assessment and evaluation is an integral part of the
management process throughout the Group. Risks are identified,
evaluated and appropriate risk management strategies are
implemented at each level in the organisation.
The Board, in conjunction with senior management, identifies
major business risks faced by the Group and determines the
appropriate course of action to manage these risks.
The Board regularly monitors all of the Group's risks and
appropriate actions are taken to mitigate those risks or address
their potential adverse consequences. As part of the half year risk
assessment, the Board has again considered the impact of the
COVID-19 pandemic on the principal risks of the Group.
The Group is an integral part of the supply chain for essential
and critical supplies and as a result there has been no significant
impact on any of our risks for the half year ended 30 June 2021.
The measures and mitigations introduced as a result of the pandemic
continue to be maintained and further enhanced across the Group's
operations to ensure the ongoing safety of our employees.
Our assessment has concluded that our principal risks remain
unchanged. The Board will continue to monitor any future impact of
the COVID-19 pandemic.
The principal risks and uncertainties 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 current
COVID-19 pandemic, it could result in an increased economic slowdown
which, if sustained over any significant length of time, could adversely
affect the Group's financial position and results of operations.
-- The cyclical nature of the packaging industry could result in
overcapacity and consequently threaten the Group's pricing structure.
-- If operations at any of the Group's facilities (in particular its key
mills) were interrupted for any significant length of time, it could
adversely affect the Group's financial position and results of
operations.
-- Price fluctuations in energy and raw materials costs could adversely
affect the Group's manufacturing costs.
-- The Group is exposed to currency exchange rate fluctuations.
-- The Group may not be able to attract, develop and retain suitably
qualified employees as required for its business.
-- Failure to maintain good health and safety practices may have an adverse
effect on the Group's business.
-- The Group is subject to a growing number of environmental 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 principal risks and uncertainties faced by the Group were
outlined in our 2020 Annual Report on pages 34--35. The Annual
Report is available on our website; smurfitkappa.com.
Condensed Consolidated Income Statement
6 months to 30-Jun-21 6 months to 30-Jun-20
Unaudited Unaudited
Pre-exceptional Exceptional Total Pre-exceptional Exceptional Total
EURm EURm EURm EURm EURm EURm
Revenue 4,679 - 4,679 4,203 - 4,203
Cost of sales (3,226) - (3,226) (2,794) - (2,794)
Gross profit 1,453 - 1,453 1,409 - 1,409
Distribution
costs (390) - (390) (357) - (357)
Administrative
expenses (586) - (586) (602) - (602)
Operating profit 477 - 477 450 - 450
Finance costs (73) - (73) (85) - (85)
Finance income 9 - 9 17 - 17
Share of
associates'
profit (after
tax) - - - 1 - 1
Profit before
income tax 413 - 413 383 - 383
Income tax
expense (105) (105)
Profit for the financial period 308 278
Attributable to:
Owners of the parent 308 277
Non-controlling
interests - 1
Profit for the financial period 308 278
Earnings per
share
Basic earnings per share - cent 119.9 116.9
Diluted earnings per share - cent 119.2 116.4
Condensed Consolidated Statement of Comprehensive Income
6 months to 6 months to
30-Jun-21 30-Jun-20
Unaudited Unaudited
EURm EURm
Profit for the financial period 308 278
Other comprehensive income:
Items that may be subsequently reclassified to
profit or loss
Foreign currency translation adjustments:
- Arising in the financial period 9 (181)
- Recycled to Condensed Consolidated Income
Statement 1 1
Effective portion of changes in fair value of cash
flow hedges:
- Movement out of reserve (2) 1
- Fair value gain on cash flow hedges - 8
- Movement in deferred tax - (1)
Changes in fair value of cost of hedging:
- New fair value adjustments into reserve - (1)
8 (173)
Items which will not be subsequently reclassified to
profit or loss
Defined benefit pension plans:
- Actuarial gain/(loss) 125 (29)
- Movement in deferred tax (15) 9
110 (20)
Total other comprehensive income/(expense) 118 (193)
Total comprehensive income for the financial period 426 85
Attributable to:
Owners of the parent 426 87
Non-controlling interests - (2)
Total comprehensive income for the financial period 426 85
Condensed Consolidated Balance Sheet
30-Jun-21 30-Jun-20 31-Dec-20
Unaudited Unaudited Audited
EURm EURm EURm
ASSETS
Non-current assets
Property, plant and equipment 3,795 3,779 3,839
Right-of-use assets 298 321 311
Goodwill and intangible assets 2,556 2,572 2,552
Other investments 11 10 11
Investment in associates 12 12 12
Biological assets 105 96 107
Other receivables 26 29 28
Deferred income tax assets 160 220 172
6,963 7,039 7,032
Current assets
Inventories 860 832 773
Biological assets 8 10 11
Trade and other receivables 1,901 1,585 1,535
Derivative financial instruments 6 29 38
Restricted cash 16 7 10
Cash and cash equivalents 621 639 891
3,412 3,102 3,258
Total assets 10,375 10,141 10,290
EQUITY
Capital and reserves attributable to owners
of the parent
Equity share capital - - -
Share premium 2,646 1,986 2,646
Other reserves 219 169 207
Retained earnings 1,126 894 917
Total equity attributable to owners of the
parent 3,991 3,049 3,770
Non-controlling interests 13 14 13
Total equity 4,004 3,063 3,783
LIABILITIES
Non-current liabilities
Borrowings 3,033 3,729 3,122
Employee benefits 707 900 853
Derivative financial instruments 13 3 17
Deferred income tax liabilities 172 212 191
Non-current income tax liabilities 10 25 14
Provisions for liabilities 49 76 50
Capital grants 21 16 21
Other payables 11 9 9
4,016 4,970 4,277
Current liabilities
Borrowings 153 174 154
Trade and other payables 2,006 1,767 1,835
Current income tax liabilities 15 19 7
Derivative financial instruments 8 8 13
Provisions for liabilities 173 140 221
2,355 2,108 2,230
Total liabilities 6,371 7,078 6,507
Total equity and liabilities 10,375 10,141 10,290
Condensed Consolidated Statement of Changes in Equity
Attributable to owners of the parent
Equity
share Share Other Retained Non-controlling Total
capital premium reserves earnings Total interests equity
EURm EURm EURm EURm EURm EURm EURm
Unaudited
At 1 January 2021 - 2,646 207 917 3,770 13 3,783
Profit for the
financial 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
Unaudited
At 1 January 2020 - 1,986 351 615 2,952 41 2,993
Profit for the
financial period - - - 277 277 1 278
Other
comprehensive
income
Foreign currency
translation
adjustments - - (177) - (177) (3) (180)
Defined benefit
pension plans - - - (20) (20) - (20)
Effective portion
of changes in
fair value of
cash flow hedges - - 8 - 8 - 8
Changes in fair
value of cost of
hedging - - (1) - (1) - (1)
Total
comprehensive
(expense)/income
for the financial
period - - (170) 257 87 (2) 85
Purchase of
non-controlling
interests - - (7) 12 5 (25) (20)
Hyperinflation
adjustment - - - 10 10 - 10
Share--based
payment - - 11 - 11 - 11
Net Shares
acquired by SKG
Employee Trust - - (16) - (16) - (16)
At 30 June 2020 - 1,986 169 894 3,049 14 3,063
An analysis of Other reserves is provided in Note 12
Condensed Consolidated Statement of Cash Flows
6 months to 6 months to
30-Jun-21 30-Jun-20
Unaudited Unaudited
EURm EURm
Cash flows from operating activities
Profit before income tax 413 383
Net finance costs 64 68
Depreciation charge 254 251
Amortisation of intangible assets 19 22
Amortisation of capital grants (1) (2)
Share--based payment expense 28 11
Profit on sale of property, plant and equipment (5) -
Profit on purchase of businesses - (4)
Share of associates' profit (after tax) - (1)
Net movement in working capital (195) (33)
Change in biological assets 3 1
Change in employee benefits and other provisions (43) (26)
Other (primarily hyperinflation adjustments) 3 3
Cash generated from operations 540 673
Interest paid (55) (63)
Income taxes paid:
Irish corporation tax (net of tax refunds) paid (9) (6)
Overseas corporation tax (net of tax refunds) paid (113) (92)
Net cash inflow from operating activities 363 512
Cash flows from investing activities
Interest received 1 1
Business disposals (net of disposed cash) 33 -
Additions to property, plant and equipment and
biological assets (228) (246)
Additions to intangible assets (6) (9)
Receipt of capital grants 1 -
(Increase)/decrease in restricted cash (6) 7
Disposal of property, plant and equipment 7 1
Dividends received from associates 1 -
Purchase of subsidiaries (net of acquired cash) (20) (1)
Deferred consideration paid (35) -
Net cash outflow from investing activities (252) (247)
Cash flows from financing activities
Purchase of own shares (net) (22) (16)
Purchase of non-controlling interests - (20)
(Decrease)/increase in other interest-bearing
borrowings (100) 241
Repayment of lease liabilities (41) (35)
Derivative termination receipts 10 9
Deferred debt issue costs paid (1) (1)
Dividends paid to shareholders (226) -
Net cash (outflow)/inflow from financing activities (380) 178
(Decrease)/increase in cash and cash equivalents (269) 443
Reconciliation of opening to closing cash and cash
equivalents
Cash and cash equivalents at 1 January 876 172
Currency translation adjustment (2) 12
(Decrease)/increase in cash and cash equivalents (269) 443
Cash and cash equivalents at 30 June 605 627
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 2020
included in the Group's 2020 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 2020. A
number of changes to IFRS became effective in 2021, however, they
did not have a material effect on the Condensed Consolidated
Interim Financial Statements included in this report.
Impact of COVID-19
The Group has again considered the impact of the COVID-19
pandemic with respect to all judgements and estimates it makes in
the application of its accounting policies. This included assessing
the recoverability of trade receivables and inventory. The Group's
customers primarily operate in the FMCG sector, which has proved
resilient during the COVID-19 pandemic to date. There has been no
significant deterioration in the aging of trade receivables or
extension of debtor days in the period. As a result of these
reviews, there was no material increase in the trade receivables or
inventory provisions. The Group also assessed non-financial assets
for indicators of impairment. No impairments were identified.
Going concern
The Group is a highly integrated manufacturer of paper-based
packaging solutions with leading market positions, quality assets
and broad geographic reach. The financial position of the Group,
its cash generation, capital resources and liquidity continue to
provide a stable financing platform.
The Directors have assessed the principal risks and
uncertainties outlined on page 10, which include the deterioration
of the current economic climate due to the COVID-19 pandemic. The
Group is an integral part of the supply chain for essential and
critical supplies and as a result there continues to be no
significant disruption to our business to date. The measures and
mitigations introduced as a result of the pandemic continue to be
maintained and further enhanced across the Group's operations to
ensure the ongoing safety of our employees. The Group took into
consideration the potential impact of the pandemic and the effect
that it could have on the Group's financial position and results of
operations. The Group continues to have significant headroom in
relation to its financial covenants.
The Group's diversified funding base and long dated maturity
profile of 4.4 years provide a stable funding outlook. At 30 June
2021, the Group had a very strong liquidity position of
approximately EUR2.3 billion comprising cash balances of EUR637
million (including EUR16 million of restricted cash), undrawn
available committed facilities of EUR1.34 billion under its RCF and
EUR312 million under its securitisation programmes. At 30 June
2021, the strength of the Group's balance sheet, a net debt to
EBITDA ratio of 1.6x (31 December 2020: 1.6x) and the upgrading by
Moody's and Standard & Poor's of our credit rating to Baa3 and
BBB- respectively, in addition to Fitch's BBB- rating, continues to
secure long-term strategic flexibility.
Having assessed the principal risks facing the Group, together
with the Group's forecasts and significant financial headroom, the
Directors believe that the Group is well placed to manage these
risks successfully and have a reasonable expectation that the
Company, and the Group as a whole, have adequate resources to
continue in operational existence for the foreseeable future. For
this reason, they continue to adopt the going concern basis in
preparing the 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
2020 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, 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.
6 months to 30-Jun-21 6 months to 30-Jun-20
Europe The Americas Total Europe The Americas Total
EURm EURm EURm EURm EURm EURm
Revenue and results
Revenue 3,649 1,030 4,679 3,268 935 4,203
EBITDA 591 211 802 575 178 753
Unallocated centre costs (21) (18)
Share-based payment
expense (28) (11)
Depreciation and depletion
(net) (257) (252)
Amortisation (19) (22)
Finance costs (73) (85)
Finance income 9 17
Share of
associates'
profit (after
tax) - 1
Profit before income tax 413 383
Income tax expense (105) (105)
Profit for the financial
period 308 278
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 30-Jun-21 6 months to 30-Jun-20
EURm EURm
Ireland 55 52
Germany 658 604
France 527 474
Mexico 466 418
The Netherlands 421 373
United Kingdom 416 355
Rest of world 2,136 1,927
Total revenue by geographical
area 4,679 4,203
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-21 6 months to 30-Jun-20
Paper Packaging Total Paper Packaging Total
EURm EURm EURm EURm EURm EURm
Europe 577 3,072 3,649 499 2,769 3,268
The Americas 86 944 1,030 106 829 935
Total revenue by product 663 4,016 4,679 605 3,598 4,203
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-21 30-Jun-20
EURm EURm
Finance costs:
Interest payable on bank loans and overdrafts 12 16
Interest payable on leases 5 5
Interest payable on other borrowings 43 45
Foreign currency translation loss on debt 7 10
Fair value loss on derivatives not designated as
hedges - 1
Fair value loss on financial assets - 1
Net interest cost on net pension liability 4 6
Net monetary loss - hyperinflation 2 1
Total finance costs 73 85
Finance income:
Other interest receivable (1) (1)
Foreign currency translation gain on debt (6) (15)
Fair value gain on derivatives not designated as
hedges - (1)
Fair value gain on financial assets/liabilities (2) -
Total finance income (9) (17)
Net finance costs 64 68
5. Income Tax Expense
Income tax expense recognised in the Condensed Consolidated
Income Statement
6 months to 6 months to
30-Jun-21 30-Jun-20
EURm EURm
Current tax:
Europe 89 74
The Americas 37 30
126 104
Deferred tax (21) 1
Income tax expense 105 105
Current tax is analysed as follows:
Ireland 7 8
Foreign 119 96
126 104
Income tax recognised in the Condensed Consolidated Statement of
Comprehensive Income
6 months to 6 months to
30-Jun-21 30-Jun-20
EURm EURm
Arising on defined benefit pension plans (15) (9)
Arising on derivative cash flow hedges - 1
(15) (8)
The income tax expense in 2021 is the same as the income tax
expense in the comparable period in 2020.
There is a EUR22 million increase in the current tax expense. In
Europe the expense is EUR15 million higher and in the Americas the
current tax expense is EUR7 million higher. This mainly reflects
the tax effects of higher profitability and other timing
differences.
The EUR22 million reduction in deferred tax includes the effects
from the reversal of timing differences on which deferred tax has
been previously recorded, the recognition of tax benefits on losses
and other tax credits which were partly offset by a non-recurring
deferred tax expense as a result of tax law changes.
6. Employee Benefits -- Defined Benefit Plans
Analysis of the defined benefit cost charged in the Condensed
Consolidated Income Statement:
6 months to 6 months to
30-Jun-21 30-Jun-20
EURm EURm
Current service cost 18 17
Actuarial loss arising on other long-term employee
benefits - 1
Gain on settlement (3) -
Net interest cost on net pension liability 4 6
Defined benefit cost 19 24
Analysis of actuarial gains/(losses) recognised in the Condensed
Consolidated Statement of Comprehensive Income:
6 months to 6 months to
30-Jun-21 30-Jun-20
EURm EURm
Return on plan assets (excluding interest income) 3 22
Actuarial gain due to experience adjustments 2 -
Actuarial gain/(loss) due to changes in financial
assumptions 120 (50)
Actuarial loss due to changes in demographic
assumptions - (1)
Total gain/(loss) recognised in the Condensed
Consolidated Statement of Comprehensive Income 125 (29)
The amounts recognised in the Condensed Consolidated Balance
Sheet were as follows:
30-Jun-21 31-Dec-20
EURm EURm
Present value of funded or partially funded obligations (2,325) (2,529)
Fair value of plan assets 2,138 2,224
Deficit in funded or partially funded plans (187) (305)
Present value of wholly unfunded obligations (518) (546)
Amounts not recognised as assets due to asset ceiling (2) (2)
Net pension liability (707) (853)
The key assumptions relating to discount and inflation rates
were reassessed at 30 June 2021 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-21 30-Jun-20
Profit attributable to owners of the parent (EUR
million) 308 277
Weighted average number of ordinary shares in issue
(million) 257 237
Basic EPS (cent) 119.9 116.9
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 convertible and
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-21 30-Jun-20
Profit attributable to owners of the parent (EUR
million) 308 277
Weighted average number of ordinary shares in issue
(million) 257 237
Potential dilutive ordinary shares assumed (million) 1 1
Diluted weighted average ordinary shares (million) 258 238
Diluted EPS (cent) 119.2 116.4
Pre-exceptional
With no exceptional items reported in the first half of 2021 or
2020, pre-exceptional basic and diluted EPS were 119.9 cent (2020:
116.9 cent) and 119.2 cent (2020: 116.4 cent) respectively.
8. Dividends
During the period, the final dividend for 2020 of 87.4 cent per
share was paid to the holders of ordinary shares. The Board has
decided to pay an interim dividend of 29.3 cent per share for 2021
(approximately EUR76 million) and it is proposed to pay this
dividend on 22 October 2021 to all ordinary shareholders on the
share register at the close of business on 24 September 2021.
9. Property, Plant and Equipment
Land and buildings Plant and equipment Total
EURm EURm EURm
Six months ended 30
June 2021
Opening net book
amount 1,090 2,749 3,839
Reclassifications 22 (22) -
Additions - 143 143
Acquisitions 5 11 16
Depreciation charge (27) (184) (211)
Retirements and
disposals (4) (16) (20)
Hyperinflation
adjustment 2 5 7
Foreign currency
translation
adjustment 5 16 21
At 30 June 2021 1,093 2,702 3,795
Financial year ended
31 December 2020
Opening net book
amount 1,106 2,814 3,920
Reclassifications 73 (68) 5
Additions 1 465 466
Acquisitions 2 1 3
Depreciation charge (56) (373) (429)
Retirements and
disposals (1) (2) (3)
Hyperinflation
adjustment 2 6 8
Foreign currency
translation
adjustment (37) (94) (131)
At 31 December 2020 1,090 2,749 3,839
10. Net Movement in Working Capital
6 months to 6 months to
30-Jun-21 30-Jun-20
EURm EURm
Change in inventories (78) (37)
Change in trade and other receivables (306) 2
Change in trade and other payables 189 2
Net movement in working capital (195) (33)
11. Analysis of Net Debt
30-Jun-21 31-Dec-20
EURm EURm
Revolving credit facility -- interest at relevant
interbank rate (interest rate floor of 0%) + 0.65%(1)
(2) 1 89
US$292.3 million 7.5% senior debentures due 2025
(including accrued interest) 248 240
Bank loans and overdrafts 82 83
EUR230 million receivables securitisation variable
funding notes due 2023 12 11
EUR100 million receivables securitisation variable
funding notes due 2026 (including accrued interest)(3) 4 4
EUR500 million 2.375% senior notes due 2024 (including
accrued interest) 502 501
EUR250 million 2.75% senior notes due 2025 (including
accrued interest) 251 251
EUR1,000 million 2.875% senior notes due 2026 (including
accrued interest) 1,006 1,005
EUR750 million 1.5% senior notes due 2027 (including
accrued interest) 746 746
Gross debt before leases 2,852 2,930
Leases 334 346
Gross debt including leases 3,186 3,276
Cash and cash equivalents (including restricted cash) (637) (901)
Net debt including leases 2,549 2,375
1. The Group's RCF has a maturity date of January 2026. At 30 June 2021, the
following amounts were drawn under this facility:
1. Revolver loans - EUR7 million
2. Drawn under ancillary facilities and facilities supported by
letters of credit -- nil
3. Other operational facilities including letters of credit - nil
2. Following the upgrade to Baa3 and BBB- by Moody's and Standard & Poor's
respectively in February 2021, the margin on the RCF reduced from 0.817%
to 0.65%.
3. In April 2021, the Group amended and extended its EUR200 million 2022
trade receivables securitisation programme, which utilises the Group's
receivables in Austria, Belgium, Italy and the Netherlands. The programme
was extended to January 2026 at a reduced facility size of EUR100 million
and with a margin reduction from 1.375% to 1.1%. As part of the amendment
process, the Group further aligned its sustainability ambitions and
targets into its financing by embedding its sustainability targets via
KPIs into the amended and extended trade receivables programme. The 2026
trade receivables securitisation programme 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 programme.
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 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
At 1 January 2020 575 (2) 2 (387) 215 (42) (10) 351
Other
comprehensive
income
Foreign currency
translation
adjustments - - - (177) - - - (177)
Effective portion
of changes in
fair value of
cash flow
hedges - 8 - - - - - 8
Changes in fair
value of cost of
hedging - - (1) - - - - (1)
Total other
comprehensive
income/(expense) - 8 (1) (177) - - - (170)
Purchase of
non-controlling
interest - - - (7) - - - (7)
Share--based
payment - - - - 11 - - 11
Net shares
acquired by SKG
Employee Trust - - - - - (16) - (16)
Shares
distributed by
SKG Employee
Trust - - - - (9) 9 - -
At 30 June 2020 575 6 1 (571) 217 (49) (10) 169
13. Fair Value Hierarchy
The following table presents the Group's financial assets and
liabilities that are measured at fair value at 30 June 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 Condensed
Consolidated Income Statement - 4 - 4
Derivatives used for hedging - 2 - 2
Derivative financial instruments:
Liabilities at fair value through Condensed
Consolidated Income Statement - (7) - (7)
Derivatives used for hedging - (14) - (14)
2 (6) - (4)
The following table presents the Group's financial assets and
liabilities that are measured at fair value at 31 December
2020:
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 Condensed
Consolidated Income Statement - 19 - 19
Derivatives used for hedging - 19 - 19
Derivative financial instruments:
Liabilities at fair value through Condensed
Consolidated Income Statement - (9) - (9)
Derivatives used for hedging - (21) - (21)
Deferred contingent consideration - - (35) (35)
2 17 (35) (16)
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.
Deferred contingent consideration arose in relation to the put
option on our Serbian acquisition in 2019. During the second
quarter of 2021, the Group purchased the remaining 25% of the
company to which the put option related. A fair value gain of EUR1
million has been recognised in the Condensed Consolidated Income
Statement in 2021 in respect of this deferred contingent
consideration and is included within finance income.
There were no reclassifications or transfers between the levels
of the fair value hierarchy during the period.
14. 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 2020
Annual Report.
30-Jun-21 31-Dec-20
Carrying value Fair value Carrying value Fair value
EURm EURm EURm EURm
Trade and other
receivables (1) 1,759 1,759 1,465 1,465
Listed and unlisted
debt instruments(2) 11 11 11 11
Cash and cash
equivalents (3) 621 621 891 891
Derivative assets (4) 6 6 38 38
Restricted cash(3) 16 16 10 10
2,413 2,413 2,415 2,415
Trade and other
payables(1) 1,557 1,557 1,408 1,408
Revolving credit
facility(5) 1 1 89 89
2026 receivables
securitisation(3) 4 4 4 4
2023 receivables
securitisation(3) 12 12 11 11
Bank overdrafts(3) 82 82 83 83
2025 debentures(6) 248 308 240 298
2024 notes(6) 502 532 501 535
2025 notes(6) 251 274 251 274
2026 notes(6) 1,006 1,115 1,005 1,118
2027 notes (6) 746 792 746 786
4,409 4,677 4,338 4,606
Derivative
liabilities(4) 21 21 30 30
Deferred
consideration(7) 11 11 12 12
Deferred contingent
consideration(8) - - 35 35
4,441 4,709 4,415 4,683
Total net position (2,028) (2,296) (2,000) (2,268)
(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). The fair value of
interest rate swaps is based on discounting estimated future cash flows
based on the terms and maturity of each contract and using market
interest rates for a similar instrument at the measurement date.
(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.
(8) The fair value of deferred contingent consideration at 31 December 2020
was based on the present value of the expected payment, discounted using
a risk-adjusted discount rate. During the second quarter of 2021, the
Group purchased the remaining 25% of the company to which the deferred
contingent consideration related.
15. Related Party Transactions
Details of related party transactions in respect of the year
ended 31 December 2020 are contained in Note 30 to the Consolidated
Financial Statements of the Group's 2020 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 2021 or changes to transactions with related parties
disclosed in the 2020 Consolidated Financial Statements that had a
material effect on the financial position or the performance of the
Group.
16. Events after the Balance Sheet date
On 28 July, the Group announced its agreement to acquire
Verzuolo, a recycled containerboard business in Northern Italy, for
a cash consideration of EUR360 million. It is expected that the
acquisition will complete during the fourth quarter, subject to
customary closing conditions including regulatory approval.
17. Board Approval
This interim report was approved by the Board of Directors on 27
July 2021.
18. Distribution of the Interim Report
This 2021 interim report is available on the Group's website;
smurfitkappa.com.
Responsibility Statement in Respect of the Six Months Ended 30
June 2021
The Directors, whose names and functions are listed on pages 64
to 67 in the Group's 2020 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 2021 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 2021, 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
27 July 2021.
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-21 30-Jun-20
Reference EURm EURm
Profit for the financial period CIS 308 278
Income tax expense (after exceptional
items) CIS 105 105
Net finance costs (after exceptional
items) Note 4 64 68
Share of associates' profit (after tax) CIS - (1)
Share-based payment expense Note 3 28 11
Depreciation, depletion (net) and
amortisation Note 3 276 274
EBITDA 781 735
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-21 30-Jun-20
Reference EURm EURm
EBITDA A 781 735
Revenue CIS 4,679 4,203
EBITDA margin 16.7% 17.5%
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-21 30-Jun-20
Reference EURm EURm
Operating profit CIS 477 450
Exceptional items CIS - -
Operating profit before exceptional
items CIS 477 450
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.
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-21 30-Jun-21 30-Jun-21 30-Jun-20 30-Jun-20 30-Jun-20
EBITDA
Currency - (7%) (2%) - (6%) (1%)
Underlying EBITDA
change 3% 26% 8% (16%) 5% (12%)
Reported EBITDA change 3% 19% 6% (16%) (1%) (13%)
Revenue
Currency - (9%) (2%) - (8%) (2%)
Acquisitions/disposals - 1% - - - -
Underlying revenue
change 12% 18% 13% (9%) (3%) (7%)
Reported revenue change 12% 10% 11% (9%) (11%) (9%)
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-21 30-Jun-20 31-Dec-20
Reference EURm EURm EURm
Borrowings Note 11 3,186 3,903 3,276
Less:
Restricted cash CBS (16) (7) (10)
Cash and cash equivalents CBS (621) (639) (891)
Net debt 2,549 3,257 2,375
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-21 30-Jun-20 30-Dec-20
Reference EURm EURm EURm
Net debt F 2,549 3,257 2,375
EBITDA LTM 1,556 1,538 1,510
Net debt to EBITDA (times) 1.6 2.1 1.6
H. Return on capital employed ('ROCE')
Definition
ROCE measures profit from capital employed. It is calculated as
operating profit before exceptional items plus share of associates'
profit (after tax) 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 period-end).
30-Jun-21 30-Jun-20
Reference EURm EURm
Operating profit before exceptional items plus share
of associates' profit (after tax) LTM 950 957
Total equity -- current period-end CBS 4,004 3,063
Net debt -- current period-end F 2,549 3,257
Capital employed -- current period-end 6,553 6,320
Total equity -- prior period-end CBS 3,063 2,902
Net debt -- prior period-end F 3,257 3,751
Capital employed -- prior period-end 6,320 6,653
Average capital employed 6,436 6,486
Return on capital employed 14.8% 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-21 30-Jun-20
Reference EURm EURm
Inventories CBS 860 832
Trade and other receivables (current and
non-current) CBS 1,927 1,614
Trade and other payables CBS (2,006) (1,767)
Working capital 781 679
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-21 30-Jun-20
Reference EURm EURm
Working capital I 781 679
Annualised revenue 9,640 8,038
Working capital as a percentage of sales 8.1% 8.4%
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)/decrease 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-21 30-Jun-20
Reference EURm EURm
EBITDA A 781 735
Cash interest expense K.1 (54) (61)
Working capital change K.2 (195) (32)
Capital expenditure K.3 (175) (230)
Change in capital creditors K.3 (80) (51)
Tax paid CSCF (122) (98)
Change in employee benefits and other
provisions CSCF (43) (26)
Other K.5 5 1
Free cash flow L 117 238
Purchase of own shares (net) CSCF (22) (16)
Sale of businesses and investments K.6 37 -
Purchase of businesses, investments and
NCI K.7 (55) (21)
Dividends CSCF (226) -
Derivative termination receipts CSCF 10 9
Net cash (outflow)/inflow (139) 210
Acquired net (debt)/cash (13) (1)
Disposed net (cash)/debt K.8 (1) -
Deferred debt issue costs amortised (4) (4)
Currency translation adjustment (17) 21
(Increase)/decrease in net debt (174) 226
K.1 Cash interest expense
6 months to 6 months to
30-Jun-21 30-Jun-20
Reference EURm EURm
Interest paid CSCF (55) (63)
Interest received CSCF 1 1
Move in accrued interest - 1
Per summary cash flow (54) (61)
Alternative Performance Measures (continued)
K.2 Working capital change
6 months to 6 months to
30-Jun-21 30-Jun-20
Reference EURm EURm
Net movement in working capital CSCF (195) (33)
Other - 1
Per summary cash flow (195) (32)
K.3 Capital expenditure
6 months to 6 months to
30-Jun-21 30-Jun-20
Reference EURm EURm
Additions to property, plant and
equipment and biological assets CSCF (228) (246)
Additions to intangible assets CSCF (6) (9)
Additions to right-of-use assets (21) (26)
Change in capital creditors K 80 51
Per summary cash flow (175) (230)
K.4 Capital expenditure as a percentage of depreciation
6 months to 6 months to
30-Jun-21 30-Jun-20
Reference EURm EURm
Capital expenditure K.3 175 230
Depreciation, depletion (net) and
amortisation A 276 274
Capital expenditure as a percentage of depreciation 63% 84%
K.5 Other
6 months to 6 months to
30-Jun-21 30-Jun-20
Reference EURm EURm
Other within the summary cash flow
comprises the following
Amortisation of capital grants CSCF (1) (2)
Profit on sale of property, plant and
equipment CSCF (5) -
Profit on purchase of businesses CSCF - (4)
Other (primarily hyperinflation
adjustments) CSCF 3 3
Receipt of capital grants CSCF 1 -
Disposal of property, plant and
equipment CSCF 7 1
Dividends received from associates CSCF 1 -
Lease terminations/modifications L (1) 3
Per summary cash flow 5 1
Alternative Performance Measures (continued)
K.6 Sale of businesses and investments
6 months to 6 months to
30-Jun-21 30-Jun-20
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.7 Purchase of businesses, investments and NCI
6 months to 6 months to
30-Jun-21 30-Jun-20
Reference EURm EURm
Purchase of subsidiaries (net of
acquired cash) CSCF (20) (1)
Purchase of non-controlling interests CSCF - (20)
Deferred consideration paid CSCF (35) -
Per summary cash flow (55) (21)
K.8 Disposed net (cash)/debt
6 months to 6 months to
30-Jun-21 30-Jun-20
Reference EURm EURm
Disposed debt 3 -
Disposed cash and cash equivalents K.6 (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
6 months to 6 months to
30-Jun-21 30-Jun-20
Reference EURm EURm
Free cash flow K 117 238
Reconciling items:
Cash interest expense K.1 54 61
Capital expenditure (net of change in
capital creditors) K.3 255 281
Tax payments CSCF 122 98
Disposal of property, plant and
equipment CSCF (7) (1)
Lease terminations/modifications K.5 1 (3)
Receipt of capital grants CSCF (1) -
Dividends received from associates CSCF (1) -
Non-cash financing activities - (1)
Cash generated from operations CSCF 540 673
(1) Additional information in relation to these Alternative
Performance Measures ('APMs') is set out in Supplementary Financial
Information on pages 30 to 36.
(2) Additional information on underlying performance is set out
within Supplementary Financial Information on pages 30 to 36.
View source version on businesswire.com:
https://www.businesswire.com/news/home/20210727006163/en/
CONTACT:
Smurfit Kappa Group PLC
SOURCE: Smurfit Kappa Group PLC
Copyright Business Wire 2021
(END) Dow Jones Newswires
July 28, 2021 02:00 ET (06:00 GMT)
Smurfit Kappa (LSE:SKG)
Gráfica de Acción Histórica
De Feb 2024 a Mar 2024
Smurfit Kappa (LSE:SKG)
Gráfica de Acción Histórica
De Mar 2023 a Mar 2024