TIDMSKG TIDMSK3
Smurfit Kappa Group plc ('SKG' or 'the Group') today announced
results for the 6 months ending 30 June 2020.
2020 First Half | Key Financial Performance Measures
H1 H1
EURm 2020 2019 Change
Revenue EUR4,203 EUR4,622 (9%)
EBITDA (1) EUR735 EUR847 (13%)
EBITDA Margin (1) 17.5% 18.3%
Operating Profit before Exceptional Items (1) EUR450 EUR558 (19%)
Profit before Income Tax EUR383 EUR456 (16%)
Basic EPS (cent) 116.9 140.6 (17%)
Pre-exceptional Basic EPS (cent) (1) 116.9 141.6 (17%)
Free Cash Flow (1) EUR238 EUR159 50%
Return on Capital Employed (1) 14.8% 18.7%
Net Debt (1) EUR3,257 EUR3,751
Net Debt to EBITDA (LTM) (1) 2.1x 2.2x
_____________________
(1) Additional information in relation to our Alternative
Performance Measures ('APMs') is set out in Supplementary Financial
Information on page 29.
Key Points
-- Strong performance against key metrics
-- EBITDA of EUR735 million, with an EBITDA margin of 17.5%
-- Free cash flow of EUR238 million
-- ROCE of 14.8%
-- Leverage of 2.1x
-- Dividend payment of 80.9 cent per share
Performance Review and Outlook
Tony Smurfit, Group CEO, commented:
"We are very pleased to report another strong performance across
all our key metrics for the first half of 2020. Our EBITDA of
EUR735 million with a margin of 17.5%, together with strong free
cash flow of EUR238 million, demonstrate the strength of the
Group.
"I remain incredibly proud of the entire SKG team who have
delivered these results against the backdrop of COVID-19, which
created an extremely challenging operating environment. Our key
priorities have been, and continue to be, the health, safety and
well-being of our 46,000 employees and the continuity of supply to
our 65,000 customers. The strength and scale of our integrated
system and our supply chain expertise meant we were able to ensure
the continuity of supply of essential products for everyday life
across multiple sectors. We are again proving that our business
model, geographic diversity and our commitment to innovation and
sustainability continue to deliver.
"Our European business performed strongly in the first six
months with an EBITDA margin of 17.6% and flat corrugated box
volumes.
"The EBITDA margin of the Americas business improved again
year-on-year from 17.1% to 19.0%.
"During the first six months, the Group completed its largest
ever investment, EUR134 million, in a recovery boiler in Austria. I
am happy to report that this will reduce our CO(2) emissions by
40,000 tonnes or a further 1.5% towards the Group's sustainability
emissions target.
"Paper-based packaging is renewable, recyclable and
bio-degradable. Together with the mega-trends of e-commerce and the
consumers' desire for sustainable packaging solutions, corrugated
is the most innovative and sustainable transport and merchandising
solution. SKG is uniquely positioned to capitalise on these
long-term trends with its unrivalled market offering and SMART
business applications that enable our customers to increase sales,
reduce costs and mitigate risk. In an increasingly complex world,
SKG is the packaging partner of choice.
"SKG has again demonstrated its strength and the consistency of
its delivery through these results. This performance reflects:
targeted capital investment; effective acquisitions; a continued
focus on innovation and sustainability; and, above all else, the
quality of our people. SKG will remain agile and resilient,
continuing to deliver, and while known macro and economic risks
remain, we are confident in our future prospects.
"In April, in light of the macro uncertainty due to the COVID-19
pandemic, the Board acted prudently in withdrawing its
recommendation to pay a final dividend of 80.9 cent per share. We
stated at that time that the Board remained committed to providing
shareholders with an attractive dividend stream. Consequently, the
Board has now decided to pay an interim dividend of 80.9 cent per
share, the equivalent amount of the withdrawn final dividend. This
decision underscores the Board's belief in the inherent strengths
of the SKG business, its balance sheet, free cash flow generation
and its long-term prospects and our recognition of the importance
of dividends to shareholders."
This announcement contains inside information. The person
responsible for arranging for the release of this announcement on
behalf of Smurfit Kappa Group plc is Gillian Carson-Callan, Company
Secretary. The date and time of this announcement is the same as
the date and time that it has been communicated to the media, at
7am on 29 July 2020.
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
35 countries and with revenue of EUR9.0 billion in 2019. We are
located in 23 countries in Europe, and 12 in the Americas. We are
the only large-scale pan-regional player in Latin America.
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.
Our products, which are 100% renewable and produced sustainably,
improve the environmental footprint of our customers. 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
Garrett Quinn Melanie Farrell
Smurfit Kappa FTI Consulting
T: +353 1 202 71 80 T: +353 1 765 08 00
E: ir@smurfitkappa.com E: smurfitkappa@fticonsulting.com
2020 First Half | Performance Overview
The Group reported EBITDA for the first half of EUR735 million,
down 13% on 2019. The Group EBITDA margin was 17.5%, down from
18.3% in the first half of 2019. The result reflects the resilience
of the Group's integrated model and the benefits of our
customer-focused innovation, capital spend programme, rigorous cost
management and lower year-on-year recovered fibre costs.
In Europe, EBITDA decreased by 16% to EUR575 million. The EBITDA
margin was 17.6%, down from 19.3% in 2019. Box demand was up
approximately 1% on an absolute basis and flat on an organic basis,
up 2% in the first quarter and off 2% in the second quarter,
negatively impacted by the pandemic. Corrugated pricing was in line
with expectations.
The Group continued to strengthen its operating platform in the
first half with the implementation of a number of significant
projects across our corrugated and paper divisions. Of note was the
successful start-up of the new recovery boiler at the Nettingsdorf
kraftliner mill in Austria; a EUR134 million investment that will
cut CO(2) emissions by 40,000 tonnes, a reduction of 1.5% towards
the Group's CO(2) emissions reduction target. During the half, the
Group also completed the upgrade of PM5 at its kraftliner mill in
Bordeaux, France which will add 44,000 tonnes of capacity.
European pricing for testliner and kraftliner has reduced by
EUR120 per tonne and EUR165 per tonne respectively from the high of
October 2018 to June 2020. The price of testliner and kraftliner
increased by EUR30 per tonne in March and April respectively before
falling by EUR30 per tonne in July.
In the Americas, EBITDA decreased by 1% on the first half of
2019 to EUR178 million. However, the EBITDA margin improved from
17.1% in the first half of 2019 to 19.0% in the first half of 2020.
Colombia, Mexico and the US accounted for over 85% of the region's
earnings with strong performances in all three countries. After a
strong start to the year, volumes in the region were heavily
impacted by COVID-19 during the second quarter. As a result,
volumes for the first half were down 2.6% year-on-year.
The Group reported free cash flow of EUR238 million in the first
half of 2020 compared to EUR159 million in the first half of 2019.
The average maturity profile of the Group's debt was 5.0 years at
30 June 2020 with an average interest rate of 2.82%. Net debt to
EBITDA was 2.1x at the half year, in line with the year end. The
Group remains strongly positioned within its Ba1/BB+/BB+ credit
rating. On 13 January 2020, the Group secured the agreement of all
lenders in its Revolving Credit Facility ('RCF') to extend the
maturity date by a further year to 28 January 2025.
2020 First Half | Financial Performance
Revenue for the first half was EUR4,203 million, down 9% on the
first half of 2019 or 7% on an underlying basis. This result
reflects the negative impact of COVID-19 on demand, the adverse
impact of currency, and the fall in box prices.
EBITDA for the first half was EUR735 million, 13% down on the
first half of 2019. The impact of COVID-19 was reflected in the
results of both Europe and the Americas. On an underlying basis,
Group EBITDA was down 12% year-on-year, with Europe down 16% and
the Americas up 5%.
Operating profit before exceptional items for the first half of
2020 at EUR450 million was 19% lower than EUR558 million for the
same period of 2019.
There were no exceptional items charged within operating profit
in the first half of both 2020 and 2019.
There were no exceptional finance costs charged in the first
half of 2020. Exceptional finance costs charged in the first half
of 2019 amounted to EUR3 million reflecting the accelerated
amortisation of the debt issue costs relating to the refinancing of
the senior credit facility.
Pre-exceptional net finance costs at EUR68 million were EUR32
million lower in 2020 reflecting a decrease in cash interest and a
positive swing from a foreign currency translation loss on debt of
EUR3 million in 2019 to a gain of EUR5 million in 2020.
With the EUR108 million decrease in operating profit before
exceptional items partly offset by the EUR32 million decrease in
net finance costs, the pre-exceptional profit before income tax was
EUR383 million, EUR76 million lower than in 2019.
With no exceptional items, the profit before tax for the first
half of 2020 was EUR383 million compared to a profit of EUR456
million in 2019. The income tax expense was EUR105 million compared
to EUR118 million in 2019, resulting in a profit of EUR278 million
for 2020 compared to a profit of EUR338 million in 2019.
Basic EPS for the first half of 2020 was 116.9 cent, compared to
140.6 cent in 2019. On a pre-exceptional basis, EPS was 116.9 cent
in 2020, 17% lower than the 141.6 cent in the first half of
2019.
2020 First Half | Free Cash Flow
Free cash flow in the first half of 2020 was EUR238 million
compared to EUR159 million for 2019 -- an increase of EUR79
million. An EBITDA reduction of EUR112 million was more than offset
by lower outflows for capital expenditure, cash interest expense
and other items and a lower working capital outflow.
The working capital outflow in 2020 was EUR32 million compared
to EUR169 million in 2019. The outflow in 2020 was primarily driven
by an increase in stocks, partly offset by a decrease in debtors
and an increase in creditors. Working capital amounted to EUR679
million at June 2020, representing 8.4% of annualised revenue
compared to 9.8% at June 2019 and 7.2% at December 2019.
Capital expenditure amounted to EUR230 million (equating to 84%
of depreciation) compared to EUR272 million (equating to 103%) for
the same period in 2019.
Cash interest amounted to EUR61 million in 2020 compared to
EUR82 million in 2019 with the decrease primarily relating to the
lower coupon on our more recent bonds, the proceeds of which were
used to redeem higher coupon bonds.
Tax payments in the first half of 2020 of EUR98 million were
EUR6 million higher than in 2019.
2020 First Half | Capital Structure
Net debt was EUR3,257 million at the end of June, resulting in a
net debt to EBITDA ratio of 2.1x compared to 2.1x at the end of
December 2019 and 2.2x at the end of June 2019. The Group's balance
sheet continues to provide considerable financial strategic
flexibility, subject to the stated leverage range of 1.75x to 2.5x
through the cycle and SKG's Ba1/BB+/BB+ credit rating.
At 30 June 2020, the Group's average interest rate was 2.82%
compared to 3.18% at 31 December 2019. The Group's diversified
funding base and long-dated maturity profile of 5.0 years provide a
stable funding outlook. In terms of liquidity, the Group held cash
balances of EUR646 million at the end of June, which were further
supplemented by available commitments of EUR931 million under its
RCF and EUR156 million under its securitisation programmes.
Dividends
The Board has decided to pay an interim dividend of 80.9 cent
per share (approximately EUR193 million). It is proposed to pay
this dividend on 11 September 2020 to all ordinary shareholders on
the share register at the close of business on 14 August 2020.
2020 First Half | Sustainability
In May, the Group released its 13(th) annual Sustainable
Development Report ('SDR'). The Group reported a 32.9% reduction in
fossil CO(2) emission intensity from its 2005 baseline. The Group's
target is to reduce relative CO(2) emissions by 40% by 2030,
relative to the 2005 baseline.
SKG has also committed to align its CO(2) target with the
Science Based Target ('SBT') initiative. This is confirmation that
not only is the Group's target ambitious in its own right, but it
will be aligned with the Paris Agreement and the recommendations of
the latest climate science findings.
In addition to SBT validation, we are building on more than a
decade of sustainability reporting by supporting the
recommendations of the Taskforce on Climate-related Financial
Disclosures.
The latest SDR, which is structured on the three strategic focus
areas of People, Planet and Impactful Business, provides
comprehensive detail on the contributing factors in the reduction
of emissions.
On People, these include the considerable progress that was made
in the area of safety with a 17% reduction in the Group's Total
Recordable Injury Rate. On Planet, these include a strategic focus
on energy efficiency and the use of renewable sources of fuel such
as biomass. On Impactful Business, these include EUR3.5 million of
investment in social initiatives including children's education and
health in 2019.
During the first half of 2020, a significant achievement in our
CO(2) reduction programme was made with the successful start-up of
the new recovery boiler at the Nettingsdorf kraftliner mill in
Austria; a EUR134 million investment that will cut CO(2) emissions
by 40,000 tonnes, a further 1.5% towards the Group's total CO(2)
emissions reduction target.
In May, the Group further demonstrated its thought leadership in
sustainability with the publication of the "Balancing
Sustainability and Profitability Survey", which was conducted among
200 senior executives and 1,500 consumers in the UK, examining the
business community's and consumers' views on sustainability and how
they are adapting to create a more sustainable future.
With the growing impact of COVID-19 and its impact on our
employees, a number of Group-wide initiatives were put in place
including; multiple local employee safety and engagement
programmes, a global employee survey to help better understand the
challenges being faced by our employees and shape an appropriate
response, a health and safety day dedicated to staying safe during
the pandemic, weekly updates to help keep people informed, as well
as leadership webinars to help our managers deal with the
inevitable consequences of the pandemic on our people. SKG has also
looked outside of our organisation and made additional charitable
donations of over EUR2 million to support the local communities in
which we operate.
SKG continues to be listed on various environmental, social and
governance indices, such as FTSE4Good, the Green Economy Mark from
the London Stock Exchange, Euronext Vigeo Europe 120, STOXX Global
ESG Leaders, ISS Solactive and Ethibel's sustainable investment
register. SKG also performs strongly across a number of third party
certification bodies, including MSCI and Sustainalytics.
2020 First Half | Commercial Offering and Innovation
SKG has continued to deliver value to our customers even during
COVID-19. We adapted our ways of working across our operations with
most of our commercial activities going virtual. During the first
half the Group, led by their packaging engineers and sales people,
delivered virtual webinars on e-commerce packaging, Better Planet
Packaging, our Smart Applications, and many more, to over 1,000
customers.
As a result of an increased focus from our customers on carbon
footprint reduction and margin improvement, SKG's SupplySmart
application is being used more and more across our operations.
Through the combination of unique tools, data and expertise,
SupplySmart enables our customers to optimise their supply chain
using improved packaging solutions, with the full assurance that
they are making risk assessed decisions that will deliver
measurable cost savings and targeted CO(2) reduction.
The recently launched TopClip product is an example of our
innovative packaging expertise in addressing the consumer desire
for more sustainable packaging solutions. Smurfit Kappa is
partnering with KHS, the largest supplier of filling and packaging
systems in the world, to deliver a multipack solution that
eliminates the need for shrink wrap on cans and bottles. The
TopClip solution was launched on the market during the second
quarter with Royal Grolsch (part of the global food and beverage
giant Asahi) with significant interest generated among other
beverage manufacturers.
Summary Cash Flow
Summary cash flows for the six months are set out in the
following table.
6 months to 6 months to
30-Jun-20 30-Jun-19
EURm EURm
EBITDA 735 847
Cash interest expense (61) (82)
Working capital change (32) (169)
Current provisions (6) (17)
Capital expenditure (230) (272)
Change in capital creditors (51) (34)
Tax paid (98) (92)
Sale of property, plant and equipment 1 2
Other (20) (24)
Free cash flow 238 159
Purchase of own shares (net) (16) (25)
Purchase of businesses, investments and NCI* (21) (204)
Dividends - (175)
Derivative termination receipts 9 -
Net cash inflow/(outflow) 210 (245)
Net debt acquired (1) (4)
Adjustment on initial application of IFRS 16 - (361)
Deferred debt issue costs amortised (4) (7)
Currency translation adjustment 21 (12)
Decrease/(increase) in net debt 226 (629)
* NCI refers to non-controlling interests
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.
At 30 June 2020, 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.
The Group had outstanding EUR148.3 million and STGGBP10 million
variable funding notes issued under the EUR230 million accounts
receivable securitisation programme maturing in June 2023, together
with EUR115 million variable funding notes issued under the EUR200
million accounts receivable securitisation programme maturing in
February 2022.
The Group also has a EUR1,350 million RCF with a maturity date
of 28 January 2025. At 30 June 2020, the Group's drawings on this
facility comprised EUR124 million and US$323.6 million, with a
further EUR6 million drawn in operational facilities including
letters of credit drawn under various ancillary facilities.
Funding and Liquidity (continued)
The following table provides the interest rates at 30 June 2020
for each of the drawings under the RCF loans:
Borrowing Arrangement Currency Interest Rate
Revolving Credit Facility EUR 0.900%
USD 1.660% - 2.211%
Borrowings under the RCF are available to fund the Group's
working capital requirements, capital expenditures and other
general corporate purposes.
In January 2020, the Group secured the agreement of all lenders
in its RCF of EUR1,350 million to extend the maturity date by a
further year to 28 January 2025.
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 2020, the
Group had fixed an average of 82% of its interest cost on
borrowings over the following twelve 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. In addition the Group had EUR174 million in interest rate
swaps converting variable rate borrowings to fixed rate with
maturity dates ranging from October 2020 to January 2021.
The Group's earnings are affected by changes in short-term
interest rates as a result of its floating rate borrowings. If
LIBOR/EURIBOR interest rates for these borrowings increased by one
percent, the Group's interest expense would increase, and income
before taxes would decrease, by approximately EUR7 million over the
following twelve 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 twelve months.
The Group uses foreign currency borrowings, currency swaps,
options 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 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
disruption to our business to date. In addition, a number of
measures and mitigations have been introduced to ensure the ongoing
safety of our employees.
Our assessment has concluded that our principal risks remain
unchanged. The Board will continue to monitor the potential impact
of the COVID-19 pandemic as the Group progresses through the
remaining six months of the year.
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 as a result of
geopolitical uncertainty (including Brexit), 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 raw materials and energy 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 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 2019 Annual Report on pages 32-33. The Annual
Report is available on our website; smurfitkappa.com.
Condensed Consolidated Income Statement -- Six Months
6 months to 30-Jun-20 6 months to 30-Jun-19
Unaudited Unaudited
Pre- Pre-
exceptional Exceptional Total exceptional Exceptional Total
2020 2020 2020 2019 2019 2019
EURm EURm EURm EURm EURm EURm
Revenue 4,203 - 4,203 4,622 - 4,622
Cost of sales (2,794) - (2,794) (3,089) - (3,089)
Gross profit 1,409 - 1,409 1,533 - 1,533
Distribution
costs (357) - (357) (363) - (363)
Administrative
expenses (602) - (602) (612) - (612)
Operating profit 450 - 450 558 - 558
Finance costs (85) - (85) (107) (3) (110)
Finance income 17 - 17 7 - 7
Share of
associates'
profit (after
tax) 1 - 1 1 - 1
Profit before
income tax 383 - 383 459 (3) 456
Income tax
expense (105) (118)
Profit for the financial
period 278 338
Attributable to:
Owners of the parent 277 332
Non-controlling
interests 1 6
Profit for the financial
period 278 338
Earnings per
share
Basic earnings per share - cent 116.9 140.6
Diluted earnings per share - cent 116.4 139.8
Condensed Consolidated Statement of Comprehensive Income -- Six
Months
6 months to 6 months to
30-Jun-20 30-Jun-19
Unaudited Unaudited
EURm EURm
Profit for the financial period 278 338
Other comprehensive income:
Items that may be subsequently reclassified to
profit or loss
Foreign currency translation adjustments:
- Arising in the period (181) 4
- Recycled to Condensed Consolidated Income
Statement 1 -
Effective portion of changes in fair value of
cash flow hedges:
- Movement out of reserve 1 4
- Fair value gain/(loss) on cash flow hedges 8 (1)
- Movement in deferred tax (1) -
Changes in fair value of cost of hedging:
- New fair value adjustments into reserve (1) (1)
(173) 6
Items which will not be subsequently
reclassified to profit or loss
Defined benefit pension plans:
- Actuarial loss (29) (78)
- Movement in deferred tax 9 9
(20) (69)
Total other comprehensive expense (193) (63)
Total comprehensive income for the financial
period 85 275
Attributable to:
Owners of the parent 87 268
Non-controlling interests (2) 7
Total comprehensive income for the financial
period 85 275
Condensed Consolidated Balance Sheet
30-Jun-20 30-Jun-19 31-Dec-19
Unaudited Unaudited Audited
EURm EURm EURm
ASSETS
Non-current assets
Property, plant and equipment 3,779 3,724 3,920
Right-of-use assets 321 331 346
Goodwill and intangible assets 2,572 2,672 2,616
Other investments 10 21 10
Investment in associates 12 15 16
Biological assets 96 103 106
Other receivables 29 36 40
Derivative financial instruments - 4 6
Deferred income tax assets 220 149 185
7,039 7,055 7,245
Current assets
Inventories 832 856 819
Biological assets 10 11 11
Trade and other receivables 1,585 1,845 1,634
Derivative financial instruments 29 11 13
Restricted cash 7 13 14
Cash and cash equivalents 639 234 189
3,102 2,970 2,680
Total assets 10,141 10,025 9,925
EQUITY
Capital and reserves attributable to
owners of the parent
Equity share capital - - -
Share premium 1,986 1,984 1,986
Other reserves 169 331 351
Retained earnings 894 549 615
Total equity attributable to owners of
the parent 3,049 2,864 2,952
Non-controlling interests 14 38 41
Total equity 3,063 2,902 2,993
LIABILITIES
Non-current liabilities
Borrowings 3,729 3,393 3,501
Employee benefits 900 865 899
Derivative financial instruments 3 13 9
Deferred income tax liabilities 212 164 175
Non-current income tax liabilities 25 39 27
Provisions for liabilities 76 98 78
Capital grants 16 18 18
Other payables 9 16 10
4,970 4,606 4,717
Current liabilities
Borrowings 174 605 185
Trade and other payables 1,767 1,832 1,863
Current income tax liabilities 19 41 13
Derivative financial instruments 8 12 7
Provisions for liabilities 140 27 147
2,108 2,517 2,215
Total liabilities 7,078 7,123 6,932
Total equity and liabilities 10,141 10,025 9,925
Condensed Consolidated Statement of Changes in Equity
Attributable to owners of the parent
Equity Non-
share Share Other Retained controlling Total
capital premium reserves earnings Total interests equity
EURm EURm EURm EURm EURm EURm EURm
Unaudited
At 1 January 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
Unaudited
At 1 January 2019 - 1,984 355 399 2,738 131 2,869
Profit for the
financial period - - - 332 332 6 338
Other
comprehensive
income
Foreign currency
translation
adjustments - - 3 - 3 1 4
Defined benefit
pension plans - - - (69) (69) - (69)
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 period - - 5 263 268 7 275
Purchase of
non-controlling
interests - - (29) 45 16 (97) (81)
Hyperinflation
adjustment - - - 14 14 - 14
Dividends paid - - - (172) (172) (3) (175)
Share-based
payment - - 25 - 25 - 25
Net Shares
acquired by SKG
Employee Trust - - (25) - (25) - (25)
At 30 June 2019 - 1,984 331 549 2,864 38 2,902
An analysis of the movements in Other reserves is provided in
Note 13.
Condensed Consolidated Statement of Cash Flows
6 months to 6 months to
30-Jun-20 30-Jun-19
Unaudited Unaudited
EURm EURm
Cash flows from operating activities
Profit before income tax 383 456
Net finance costs 68 103
Depreciation charge 251 238
Amortisation of intangible assets 22 21
Amortisation of capital grants (2) (1)
Equity settled share-based payment expense 11 25
Profit on sale of property, plant and equipment - (2)
Profit on purchase of businesses (4) -
Share of associates' profit (after tax) (1) (1)
Net movement in working capital (33) (169)
Change in biological assets 1 5
Change in employee benefits and other provisions (26) (44)
Other (primarily hyperinflation adjustments) 3 3
Cash generated from operations 673 634
Interest paid (63) (98)
Income taxes paid:
Irish corporation tax (net of tax refunds) paid (6) (7)
Overseas corporation tax (net of tax refunds)
paid (92) (85)
Net cash inflow from operating activities 512 444
Cash flows from investing activities
Interest received 1 2
Additions to property, plant and equipment and
biological assets (246) (282)
Additions to intangible assets (9) (8)
Receipt of capital grants - 1
Decrease/(increase) in restricted cash 7 (3)
Disposal of property, plant and equipment 1 4
Purchase of subsidiaries (1) (99)
Deferred consideration paid - (14)
Net cash outflow from investing activities (247) (399)
Cash flows from financing activities
Proceeds from bond issue - 403
Proceeds from issue of other debt - 417
Purchase of own shares (net) (16) (25)
Purchase of non-controlling interests (20) (81)
Repayment of borrowings - (399)
Increase/(decrease) in other interest-bearing
borrowings 241 (306)
Repayment of lease liabilities (35) (39)
Derivative termination receipts 9 -
Deferred debt issue costs paid (1) (13)
Dividends paid to shareholders - (172)
Dividends paid to non-controlling interests - (3)
Net cash inflow/(outflow) from financing
activities 178 (218)
Increase/(decrease) in cash and cash equivalents 443 (173)
Reconciliation of opening to closing cash and
cash equivalents
Cash and cash equivalents at 1 January 172 390
Currency translation adjustment 12 (5)
Increase/(decrease) in cash and cash equivalents 443 (173)
Cash and cash equivalents at 30 June 627 212
An analysis of the Net movement in working capital is provided
in Note 11.
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 whose shares are publicly traded. 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. The
balance sheet as at 30 June 2019 has been included in this report;
this information is supplementary and not required by IAS 34. This
report should be read in conjunction with the Consolidated
Financial Statements for the financial year ended 31 December 2019
included in the Group's 2019 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 2019 with
the addition of assessing the impact of the COVID-19 pandemic as
set out below. A number of changes to IFRS became effective in
2020, 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 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 and none is expected given
the profile of the Group's customers. As a result of these reviews,
there was no material increase in the impairment losses for trade
receivables or inventory provisions. The Group also assessed
non-financial assets for indicators of impairment. No impairments
were identified.
Management reassessed the carrying value of goodwill (EUR2.4
billion) for indicators of impairment at 30 June 2020. The cash
flow forecasts were updated to incorporate future COVID-19
scenarios and discount rates were adjusted to reflect risks
associated with each cash generating unit ('CGU'). The testing did
not result in an impairment. While the headroom in our Brazil CGU
has not decreased from 31 December 2019, it is sensitive to changes
in underlying assumptions and we will continue to monitor this CGU
due to continuing difficult conditions in the country.
Going concern
The Group is a highly integrated manufacturer of paper-based
packaging products 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 9, 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 has been no significant
disruption to our business to date. In addition, a number of
measures and mitigations have been introduced to ensure the ongoing
safety of our employees. The Group took into consideration the
potential impact of the pandemic and the range of outcomes that it
could have on the Group's financial position and results of
operations. In the scenarios reviewed, the Group continues to have
significant headroom in relation to our financial covenants.
The Group's diversified funding base and long dated maturity
profile of 5.0 years provide a stable funding outlook. At 30 June
2020, the Group had a very strong liquidity position of over EUR1.7
billion comprising cash balances of EUR646 million, undrawn
available committed facilities of EUR931 million under its RCF and
EUR156 million under its securitisation programmes.
Going concern (continued)
Having assessed the principal risks facing the Group, together
with the Group's forecasts and significant financial headroom, the
Directors believe that the Group is well placed to manage these
risks successfully and have a reasonable expectation that the
Company, and the Group as a whole, have adequate resources to
continue in operational existence for the foreseeable future. For
this reason, they continue to adopt the going concern basis in
preparing the Condensed Consolidated Interim Financial
Statements.
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
2019 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 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-20 6 months to 30-Jun-19
The The
Europe Americas Total Europe Americas Total
EURm EURm EURm EURm EURm EURm
Revenue and results
Revenue 3,268 935 4,203 3,574 1,048 4,622
EBITDA 575 178 753 688 179 867
Unallocated centre
costs (18) (20)
Share-based payment
expense (11) (25)
Depreciation and
depletion (net) (252) (243)
Amortisation (22) (21)
Finance costs (85) (110)
Finance income 17 7
Share of
associates'
profit (after
tax) 1 1
Profit before income
tax 383 456
Income tax
expense (105) (118)
Profit for the
financial period 278 338
3. Segment and Revenue Information (continued)
Revenue information about geographical areas
The Group has a presence in 35 countries worldwide. The
following is a geographical analysis presented in accordance with
IFRS 8, Operating Segments, which requires disclosure of
information about country of domicile (Ireland) and countries with
material revenue.
6 months to 6 months to
30-Jun-20 30-Jun-19
EURm EURm
Ireland 52 55
Germany 604 658
France 474 571
Mexico 418 451
The Netherlands 373 377
Spain 362 393
United Kingdom 355 388
Rest of the world 1,565 1,729
Revenue 4,203 4,622
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-20 6 months to 30-Jun-19
Paper Packaging Total Paper Packaging Total
EURm EURm EURm EURm EURm EURm
Europe 499 2,769 3,268 600 2,974 3,574
The Americas 106 829 935 146 902 1,048
Revenue by
product 605 3,598 4,203 746 3,876 4,622
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
6 months to 6 months to
The following items are regarded as exceptional
in nature: 30-Jun-20 30-Jun-19
EURm EURm
Exceptional finance costs - 3
Total exceptional items - 3
There were no exceptional items charged within operating profit
in either year
Exceptional finance costs charged in 2019 amounted to EUR3
million, representing the accelerated amortisation of the debt
issue costs relating to the refinancing of the senior credit
facility.
5. Finance Costs and Income
6 months to 6 months to
30-Jun-20 30-Jun-19
EURm EURm
Finance costs:
Interest payable on bank loans and overdrafts 16 23
Interest payable on leases 5 6
Interest payable on other borrowings 45 59
Exceptional finance costs associated with debt
restructuring - 3
Unwinding of discount element of provisions - 1
Foreign currency translation loss on debt 10 6
Fair value loss on derivatives not designated as
hedges 1 3
Fair value loss on financial assets 1 -
Net interest cost on net pension liability 6 9
Net monetary loss - hyperinflation 1 -
Total finance costs 85 110
Finance income:
Other interest receivable (1) (2)
Foreign currency translation gain on debt (15) (3)
Fair value gain on derivatives not designated as
hedges (1) -
Fair value gain on financial assets - (1)
Net monetary gain - hyperinflation - (1)
Total finance income (17) (7)
Net finance costs 68 103
6. Income Tax Expense
Income tax expense recognised in the Condensed Consolidated
Income Statement
6 months to 6 months to
30-Jun-20 30-Jun-19
EURm EURm
Current tax:
Europe 74 81
The Americas 30 30
104 111
Deferred tax 1 7
Income tax expense 105 118
Current tax is analysed as follows:
Ireland 8 4
Foreign 96 107
104 111
Income tax recognised in the Condensed Consolidated Statement of
Comprehensive Income
6 months to 6 months to
30-Jun-20 30-Jun-19
EURm EURm
Arising on defined benefit pension plans (9) (9)
Arising on derivative cash flow hedges 1 -
(8) (9)
The income tax expense in 2020 is EUR13 million lower than in
the comparable period in 2019, primarily due to lower
profitability.
There is a EUR7 million decrease in the current tax expense. In
Europe, the expense is EUR7 million lower, mainly due to changes in
profitability and timing differences. In the Americas, the current
tax expense is in line with 2019.
The deferred tax charge is EUR6 million lower than in the
comparable period in 2019. The decrease is largely due to the
reversal of timing differences on which deferred tax was previously
recognised.
There is no income tax expense or credit associated with
exceptional items in either 2020 or 2019.
7. Employee Benefits -- Defined Benefit Plans
The table below sets out the components of the defined benefit
cost for the period:
6 months to 6 months to
30-Jun-20 30-Jun-19
EURm EURm
Current service cost 17 14
Actuarial loss arising on other long-term
employee benefits 1 -
Gain on settlement - (1)
Net interest cost on net pension liability 6 9
Defined benefit cost 24 22
Included in cost of sales, distribution costs and administrative
expenses is a defined benefit cost of EUR18 million (2019: EUR13
million). Net interest cost on net pension liability of EUR6
million (2019: EUR9 million) is included in finance costs in the
Condensed Consolidated Income Statement.
Analysis of actuarial (losses)/gains recognised in the Condensed
Consolidated Statement of Comprehensive Income:
6 months to 6 months to
30-Jun-20 30-Jun-19
EURm EURm
Return on plan assets (excluding interest
income) 22 167
Actuarial gain due to experience adjustments - 1
Actuarial loss due to changes in financial
assumptions (50) (253)
Actuarial (loss)/gain due to changes in
demographic assumptions (1) 7
Total loss recognised in the Condensed
Consolidated Statement of Comprehensive Income (29) (78)
The amounts recognised in the Condensed Consolidated Balance
Sheet were as follows:
30-Jun-20 31-Dec-19
EURm EURm
Present value of funded or partially funded
obligations (2,443) (2,473)
Fair value of plan assets 2,070 2,109
Deficit in funded or partially funded plans (373) (364)
Present value of wholly unfunded obligations (526) (534)
Amounts not recognised as assets due to asset
ceiling (1) (1)
Net pension liability (900) (899)
The key assumptions relating to discount and inflation rates
were reassessed at 30 June 2020 and updated to reflect market
conditions at that date.
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 period less own shares.
6 months to 6 months to
30-Jun-20 30-Jun-19
Profit attributable to owners of the parent (EUR
million) 277 332
Weighted average number of ordinary shares in
issue (million) 237 236
Basic EPS (cent) 116.9 140.6
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.
When 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-20 30-Jun-19
Profit attributable to owners of the parent (EUR
million) 277 332
Weighted average number of ordinary shares in
issue (million) 237 236
Potential dilutive ordinary shares assumed
(million) 1 1
Diluted weighted average ordinary shares
(million) 238 237
Diluted EPS (cent) 116.4 139.8
Pre-exceptional 6 months to 6 months to
30-Jun-20 30-Jun-19
Profit attributable to owners of the parent (EUR
million) 277 332
Exceptional items included in profit before
income tax (Note 4) (EUR million) - 3
Pre-exceptional profit attributable to owners of
the parent (EUR million) 277 335
Weighted average number of ordinary shares in
issue (million) 237 236
Pre-exceptional basic EPS (cent) 116.9 141.6
Diluted weighted average ordinary shares
(million) 238 237
Pre-exceptional diluted EPS (cent) 116.4 140.8
9. Dividends
The Board has decided to pay an interim dividend of 80.9 cent
per share (approximately EUR193 million). It is proposed to pay
this dividend on 11 September 2020 to all ordinary shareholders on
the share register at the close of business on 14 August 2020.
10. Property, Plant and Equipment
Land and Plant and
buildings equipment Total
EURm EURm EURm
Six months ended 30 June 2020
Opening net book amount 1,106 2,814 3,920
Reclassifications 18 (23) (5)
Additions - 190 190
Acquisitions 2 1 3
Depreciation charge (28) (180) (208)
Retirements and disposals - (1) (1)
Hyperinflation adjustment 1 3 4
Foreign currency translation adjustment (33) (91) (124)
At 30 June 2020 1,066 2,713 3,779
Financial year ended 31 December 2019
Opening net book amount 1,050 2,544 3,594
Reclassifications 57 (58) (1)
Additions 2 618 620
Acquisitions 42 47 89
Depreciation charge (54) (355) (409)
Impairments - (4) (4)
Retirements and disposals (1) (3) (4)
Hyperinflation adjustment 3 8 11
Foreign currency translation adjustment 7 17 24
At 31 December 2019 1,106 2,814 3,920
11. Net Movement in Working Capital
6 months to 6 months to
30-Jun-20 30-Jun-19
EURm EURm
Change in inventories (37) 2
Change in trade and other receivables 2 (132)
Change in trade and other payables 2 (39)
Net movement in working capital (33) (169)
12. Analysis of Net Debt
30-Jun-20 31-Dec-19
EURm EURm
Revolving credit facility -- interest at relevant
interbank rate (interest rate floor of 0%) +
0.9%(1) 407 333
US$292.3 million 7.5% senior debentures due 2025
(including accrued interest) 263 262
Bank loans and overdrafts 100 118
EUR200 million receivables securitisation variable
funding notes due 2022 (including accrued
interest) 114 29
EUR230 million receivables securitisation variable
funding notes due 2023 158 69
EUR500 million 2.375% senior notes due 2024
(including accrued interest) 501 500
EUR250 million 2.75% senior notes due 2025
(including accrued interest) 250 250
EUR1,000 million 2.875% senior notes due 2026
(including accrued interest) 1,004 1,004
EUR750 million 1.5% senior notes due 2027 (including
accrued interest) 745 744
Gross debt before leases 3,542 3,309
Leases 361 377
Gross debt including leases 3,903 3,686
Cash and cash equivalents (including restricted
cash) (646) (203)
Net debt including leases 3,257 3,483
1. In January 2020, the Group secured the agreement of all lenders in its
RCF of EUR1,350 million to extend the maturity date by a further year to
28 January 2025.
1. Revolver loans - EUR413 million
2. Drawn under ancillary facilities and facilities supported by
letters of credit -- nil
3. Other operational facilities including letters of credit - EUR6
million
13. 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 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
At 1 January 2019 575 (14) 3 (367) 185 (28) 1 355
Other
comprehensive
income
Foreign currency
translation
adjustments - - - 3 - - - 3
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
income/(expense) - 3 (1) 3 - - - 5
Purchase of
non-controlling
interest - - - (29) - - - (29)
Share-based
payment - - - - 25 - - 25
Net shares
acquired by SKG
Employee Trust - - - - - (25) - (25)
Shares distributed
by SKG Employee
Trust - - - - (9) 9 - -
At 30 June 2019 575 (11) 2 (393) 201 (44) 1 331
14. Fair Value Hierarchy
The following table presents the Group's financial assets and
liabilities that are measured at fair value at 30 June 2020:
Level 1 Level 2 Level 3 Total
EURm EURm EURm EURm
Other investments:
Listed 2 - - 2
Unlisted - 8 - 8
Derivative financial instruments:
Assets at fair value through
Condensed Consolidated Income
Statement - 11 - 11
Derivatives used for hedging - 18 - 18
Derivative financial instruments:
Liabilities at fair value through
Condensed Consolidated Income
Statement - (7) - (7)
Derivatives used for hedging - (4) - (4)
Deferred contingent consideration - - (33) (33)
2 26 (33) (5)
The following table presents the Group's financial assets and
liabilities that are measured at fair value at 31 December
2019:
Level 1 Level 2 Level 3 Total
EURm EURm EURm EURm
Other investments:
Listed 2 - - 2
Unlisted - 8 - 8
Derivative financial instruments:
Assets at fair value through
Condensed Consolidated Income
Statement - 6 - 6
Derivatives used for hedging - 13 - 13
Derivative financial instruments:
Liabilities at fair value through
Condensed Consolidated Income
Statement - (3) - (3)
Derivatives used for hedging - (13) - (13)
Deferred contingent consideration - - (33) (33)
2 11 (33) (20)
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.
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 is in relation to the put
option on our Serbian acquisition. The valuation model for the
deferred contingent consideration, measured in accordance with
level 3 of the fair value hierarchy, is based on the present value
of the expected payment discounted using a risk adjusted rate. The
unobservable input in determining the fair value is the underlying
profitability of the business unit to which the consideration
relates. A reasonable change to the unobservable inputs would have
an immaterial impact on the fair value of the deferred contingent
consideration.
There were no changes to the fair values of the level 3
instruments during the period.
There were no reclassifications or transfers between the levels
of the fair value hierarchy during the period.
15. Fair Value
The following table sets out the fair value of the Group's
principal financial assets and liabilities. The determination of
these fair values is based on the descriptions set out within Note
2 to the Consolidated Financial Statements of the Group's 2019
Annual Report.
30-Jun-20 31-Dec-19
Carrying Carrying
value Fair value value Fair value
EURm EURm EURm EURm
Trade and other
receivables (1) 1,483 1,483 1,559 1,559
Listed and unlisted
debt
instruments(2) 10 10 10 10
Cash and cash
equivalents (3) 639 639 189 189
Derivative assets
(4) 29 29 19 19
Restricted cash(3) 7 7 14 14
2,168 2,168 1,791 1,791
Trade and other
payables(1) 1,354 1,354 1,465 1,465
Revolving credit
facility(5) 407 407 333 333
2022 receivables
securitisation(3) 114 114 29 29
2023 receivables
securitisation(3) 158 158 69 69
Bank overdrafts(3) 100 100 118 118
2025 debentures(6) 263 309 262 328
2024 notes(6) 501 516 500 540
2025 notes(6) 250 260 250 277
2026 notes(6) 1,004 1,046 1,004 1,110
2027 notes (6) 745 719 744 759
4,896 4,983 4,774 5,028
Derivative
liabilities(4) 11 11 16 16
Deferred
consideration(7) 12 12 12 12
Deferred contingent
consideration(8) 33 33 33 33
4,952 5,039 4,835 5,089
Total net position (2,784) (2,871) (3,044) (3,298)
(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.
(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 and energy 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 a risk-adjusted discount
rate.
(8) The fair value of deferred contingent consideration is based on the
present value of the expected payment, discounted using a risk-adjusted
discount rate.
16. Related Party Transactions
Details of related party transactions in respect of the year
ended 31 December 2019 are contained in Note 31 to the Consolidated
Financial Statements of the Group's 2019 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 2020 or changes to transactions with related parties
disclosed in the 2019 Consolidated Financial Statements that had a
material effect on the financial position or the performance of the
Group.
17. Board Approval
This interim report was approved by the Board of Directors on 28
July 2020.
18. Distribution of the Interim Report
This 2020 interim report is available on the Group's website;
smurfitkappa.com.
Responsibility Statement in Respect of the Six Months Ended 30
June 2020
The Directors, whose names and functions are listed on pages 54
to 56 in the Group's 2019 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 2020 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 2020, 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
28 July 2020.
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 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 Financial
Statements.
The principal APMs used by the Group, together with
reconciliations where the non-IFRS measures are not readily
identifiable from the Condensed Consolidated Financial Statements,
are as follows:
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. A reconciliation of profit to EBITDA is included
below:
Reconciliation of profit to EBITDA
6 months to 6 months to
30-Jun-20 30-Jun-19
EURm EURm
Profit for the financial period 278 338
Income tax expense (after exceptional items) 105 118
Net finance costs (after exceptional items) 68 103
Share of associates' profit (after tax) (1) (1)
Share-based payment expense 11 25
Depreciation, depletion (net) and amortisation 274 264
EBITDA 735 847
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-20 30-Jun-19
EURm EURm
EBITDA 735 847
Revenue 4,203 4,622
EBITDA margin 17.5% 18.3%
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-20 30-Jun-19
EURm EURm
Operating profit 450 558
Exceptional items - -
Operating profit before exceptional items 450 558
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.
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 activities. We use FCF to assess and understand the
total operating performance of the business and to identify
underlying trends.
The summary cash flow is prepared on a different basis to the
Condensed Consolidated Statement of Cash Flows under IFRS ('IFRS
cash flow') and as such the reconciling items between EBITDA and
(increase)/decrease in net debt may differ from amounts presented
in the IFRS cash flow. The principal differences are as
follows:
1. The summary cash flow details movements in net debt. The IFRS cash flow
details movements in cash and cash equivalents.
2. FCF reconciles to cash generated from operations in the IFRS cash flow as
shown in the table below. The main adjustments are in respect of cash
interest, capital expenditure, tax payments and the sale of property,
plant and equipment.
3. The IFRS cash flow has different sub-headings to those used in the
summary cash flow.
-- Current provisions in the summary cash flow are included within
'change in employee benefits and other provisions' in the IFRS
cash flow.
-- The total of capital expenditure and change in capital creditors
in the summary cash flow includes additions to intangible assets
which are shown separately in the IFRS cash flow. It also includes
right-of-use assets which are excluded from additions to property,
plant and equipment and biological assets in the IFRS cash flow.
-- 'Other' in the summary cash flow includes changes in employee
benefits and other provisions (excluding current provisions),
amortisation of capital grants, receipt of capital grants and
dividends received from associates which are shown separately in
the IFRS cash flow.
Reconciliation of Free Cash Flow to Cash Generated from
Operations
6 months to 6 months to
30-Jun-20 30-Jun-19
EURm EURm
Free cash flow 238 159
Reconciling items:
Cash interest 61 82
Capital expenditure (net of change in capital
creditors) 281 306
Tax payments 98 92
Sale of property, plant and equipment (1) (2)
Lease terminations/modifications (in 'Other' in
summary cash flow) (3) -
Profit on sale of property, plant and equipment
-- non-exceptional - (2)
Receipt of capital grants (in 'Other' in summary
cash flow) - (1)
Non-cash financing activities (1) -
Cash generated from operations 673 634
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) for the last twelve months ('LTM') divided by
the average capital employed (where average capital employed is the
average of total equity and net debt at the beginning and end of
the LTM).
30-Jun-20 30-Jun-19
EURm EURm
Operating profit before exceptional items plus share
of associates' profit (after tax) LTM 957 1,134
Total equity -- current period end 3,063 2,902
Net debt -- current period end 3,257 3,751
Capital employed -- current period end 6,320 6,653
Total equity -- prior period end 2,902 2,628
Net debt -- prior period end 3,751 2,871
Capital employed -- prior period end 6,653 5,499
Average capital employed 6,486 6,076
Return on capital employed 14.8% 18.7%
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-20 30-Jun-19 31-Dec-19
EURm EURm EURm
Borrowings (see Note 12) 3,903 3,998 3,686
Less:
Restricted cash (7) (13) (14)
Cash and cash equivalents (639) (234) (189)
Net debt 3,257 3,751 3,483
Net debt to EBITDA
Definition
Leverage (ratio of net debt to EBITDA) is an important measure
of our overall financial position.
30-Jun-20 30-Jun-19 31-Dec-19
EURm EURm EURm
Net debt 3,257 3,751 3,483
EBITDA LTM 1,538 1,668 1,650
Net debt to EBITDA (times) 2.1 2.2 2.1
Cash interest expense
Definition
Cash interest is interest paid net of interest received,
movements in accrued interest and outflows which are not due to
normal operating activities.
6 months to 6 months to
30-Jun-20 30-Jun-19
EURm EURm
Interest paid per IFRS cash flow 63 98
Interest received per IFRS cash flow (1) (2)
Move in accrued interest (1) 4
Initial cost of bonds repaid - (18)
Cash interest expense 61 82
Capital expenditure
Definition
Capital expenditure comprises additions to property, plant and
equipment, right-of-use assets, biological assets and intangible
assets.
6 months to 6 months to
30-Jun-20 30-Jun-19
EURm EURm
Property, plant and equipment 190 243
Right-of-use assets 26 16
Biological assets 5 5
Intangible assets 9 8
Total capital expenditure 230 272
Capital expenditure (continued)
6 months to 6 months to
30-Jun-20 30-Jun-19
EURm EURm
Capital expenditure as above 230 272
Change in capital creditors 51 34
Less additions to right-of-use assets (26) (16)
Per IFRS cash flow 255 290
Capital expenditure as a percentage of depreciation
Definition
Capital expenditure as defined above as a percentage of total
depreciation. Total depreciation includes depreciation of property,
plant and equipment, right-of-use assets, change in biological
assets and amortisation of intangible assets.
6 months to 6 months to
30-Jun-20 30-Jun-19
EURm EURm
Capital expenditure 230 272
Depreciation 274 264
Capital expenditure as a percentage of
depreciation 84% 103%
Working capital
Definition
Working capital represents total inventories, trade and other
receivables and trade and other payables.
30-Jun-20 30-Jun-19
EURm EURm
Inventories 832 856
Trade and other receivables (current and
non-current) 1,614 1,881
Trade and other payables (1,767) (1,832)
Working capital 679 905
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-20 30-Jun-19
EURm EURm
Working capital 679 905
Annualised revenue 8,038 9,224
Working capital as a percentage of sales 8.4% 9.8%
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-20 30-Jun-20 30-Jun-20 30-Jun-19 30-Jun-19 30-Jun-19
EBITDA
Currency - (6%) (1%) (1%) - -
Hyperinflation - - - - (2%) (1%)
Acquisitions/disposals - - - 6% (3%) 4%
IFRS 16 - - - 5% 10% 6%
Underlying EBITDA change (16%) 5% (12%) 7% 9% 8%
Reported EBITDA change (16%) (1%) (13%) 17% 14% 17%
Revenue
Currency - (8%) (2%) - - -
Acquisitions/disposals - - - 4% (7%) -
Underlying revenue
change (9%) (3%) (7%) 1% 9% 4%
Reported revenue change (9%) (11%) (9%) 5% 2% 4%
View source version on businesswire.com:
https://www.businesswire.com/news/home/20200728006053/en/
CONTACT:
Smurfit Kappa Group PLC
SOURCE: Smurfit Kappa Group PLC
Copyright Business Wire 2020
(END) Dow Jones Newswires
July 29, 2020 02:00 ET (06:00 GMT)
Smurfit Kappa (LSE:SKG)
Gráfica de Acción Histórica
De Mar 2024 a Abr 2024
Smurfit Kappa (LSE:SKG)
Gráfica de Acción Histórica
De Abr 2023 a Abr 2024
