Shares digital

Smurfit Kappa (SKG) – Finals PTP €170m (€143m) Divi: 16.05c (n/a)

Profits were slightly ahead of expectations, up 19% at €170 million, but the shares fell 3% to €8.9, a sign of investor concern that a major economic slowdown will inevitably affect Smurfit’s earnings.

The good news is that Smurfit has been able to raise prices for its packaging, as raw material and energy costs increased, and expects to maintain margins in 2008. Around half of sales are to fairly recession-proof food and drink sectors, but the other half, including household goods and more discretionary items, could weaken.

Smurfit is on target with its reorganisation and restructuring programme following the merger between Jefferson Smurfitt and Kappa of Holland in 2005. Net debt is sharply lower at €3.4 billion against €4.9 billion, helped by the IPO and refinancing, but is still over three times EBITDA profits.

Shares Says: Lower interest costs will continue to boost boost earnings even if operating profits are flat. On a prospective PE of under six the shares, having halved since May, represent solid value though the dividend yield is only 1.8%.

by: Timon Day