Smurfit Kappa invests €600m to chase demand as its cardboard system is ‘sold out’

Cardboard box-maker Smurfit Kappa said it has approved €600 million of investments in projects over the first nine months of the year as it seeks to keep up with growing demand for sustainable packaging.

Tony Smurfit, chief executive of the Dublin-based company, said in a trading update on Wednesday that the group's integrated paper and corrugated – or cardboard – system "is effectively sold out". Yet he said that the company "for the most part" continued to supply customers "efficiently despite many supply chain disruptions" as the global economy continues to emerge from the pandemic.

“To meet growing customer demand in the first nine months of the year we approved approximately €600 million in projects across the group,” he said. “In our corrugated business we have approved 48 new converting machines and six new corrugators across Europe and the Americas.”

Last month Smurfit Kappa completed the acquisition of an Italian maker of containerboard for €360 million. In addition it also approved two major paper projects in Germany and Mexico this year.

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Smurfit Kappa’s revenues rose 15 per cent to €7.29 billion over the first nine months of the year, with earnings before interest, tax, depreciation and amortisation rising 10 per cent to €1.24 billion.

“Materially higher input costs, principally, but not limited to, recovered fibre and energy are being progressively recovered through corrugated price increases,” Mr Smurfit said.

The company previously forecast that the cost of recovered fibre from recycled cardboard, used to make new boxes, will be €450 million higher this year than in 2020. Company executives said on an analysts call on Wednesday that the group’s energy bill will be €180 million higher than last year, driven by a spike in global gas and electricity prices in recent months.

Share sale

Corrugated sales volumes rose 9 per cent over the period in Europe and were 11 per cent ahead on the Americas, according to the group.

The group also raised €660 million in a share sale last November to give it more firepower for investment to take advantage of a surge in ecommerce and a shift across the consumer goods industry towards sustainable packaging.

However, while Mr Smurfit said that big customers remained “hugely engaged” on the topic of replacing plastic with paper-based packaging, the main priority for many at the moment was securing containers to get their products to consumers as supply chain issues have dogged the global economy since it started to reopen following Covid-19 crisis.

“Getting product to market is the primary objective right now [for companies],” he said, adding that the urgency around switching to sustainable packaging “is not as it was two years ago”.