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Smurfit Kappa’s Q2 Profit Tanks On Softer Demand, Higher Input Costs

Smurfit Kappa's Q2 Profit Tanks On Softer Demand, Higher Input Costs

Smurfit Westrock reported a 51% drop in Smurfit Kappa’s quarterly profit, hurt by softer consumer spending on goods crimping demand for packaging products as well as higher input costs.

While packaging companies are starting to see a return in demand after dealing with a year-long slowdown, sales still remain weak as overall consumer spending on goods has dwindled.

In September 2023, packaging groups Smurfit Kappa and WestRock entered into a deal to create Smurfit WestRock, one of the world’s largest paper and packaging producers worth nearly $20 billion.

The deal was completed on 5 July, hence the combined company’s results will be reported from the third quarter of 2024.

Quarterly Profit

Smurfit Kappa‘s second-quarter profit fell to $132 million from $267 million reported a year earlier due to additional expenses of $60 million associated with the deal.

“These results were also achieved against a backdrop of significantly higher recovered fibre costs and lower corrugated box prices. We expect these increased costs will be recovered through increased box pricing with the customary time lag,” said CEO Tony Smurfit.

The Ireland-based company’s revenue fell 3% to $2.97 billion in the quarter ended 30 June.

Adjusted EBITDA for the quarter amounted to $480 million, while adjusted EBITDA margin was 16.2%.

In Europe, adjusted EBITDA decreased by $77 million to $355 million during the quarter due to a $143 million fall in net sales and an increase in labour, distribution and recovered fibre costs.

Adjusted EBITDA for the Americas segment increased by $6 million, or 4%, to $146 million, driven by a $36 million increase in net sales, partially offset by higher raw materials and labour costs.

News by Reuters, additional reporting by ESM.

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