Back in your box: Smurfit Kappa bumps up divi after record-breaking earnings

Smurfit Kappa has recommended a 20 per cent increase in the dividend as Europe’s biggest paper and packaging company reported record earnings for 2016.

The cardboard box manufacturer, which joined the FTSE 100 in December, reported a 9 per cent jump in pre tax profits from €599m to €654m. Revenues were up 1 per cent at €8.16bn.

It said it enjoyed “solid volume” in all its markets, buoyed by “resilient box pricing”.

Earnings before interest, tax, depreciation and amortisation – a common measure of profitability – reached a record €1.24bn up 5 per cent on 2015..

Smurfit Kappa shares rose slightly on the news but have rallied 26 per cent in the last year and are up 14 per cent since the start of the year.

Tony Smurfit, chief executive, said the results were achieved “despite the significant headwinds in higher raw material input costs and adverse currency impacts”.

He added: “This once again highlights the strength of the Group’s integrated business model, our geographically diverse portfolio of businesses and our performance based culture.”

The board recommended a final dividend of 57.6 cent per share, a 20 per cent increase year on year. Combined with a 22 cent interim dividend, the pay out is up 17 per cent year on year.

On January 20 Smurfit Kappa joined other packaging companies in announcing planned price rises of around 10 per cent for the both its main products with recycled containerboard and kraftliner which is made of wood pulp up €60 a tonne.

Gerard Moore of Investec Securities calculates if just half that increase is passed through to higher box prices, it will boost EBITDA by 11 per cent on an annualised basis.

The Dublin-based company which was created by the merger of Jefferson Smurfit and Dutch rival Kappa Industries in 2005, returned to the market in 2007 after a period under private equity ownership.

It is Europe’s largest packaging company, has a big US operation and after purchasing a business in Brazil last year is now the biggest pan-regional producer of corrugated packaging in Latin America.