DUBLIN (Reuters) – Smurfit Kappa expects to increase prices further this year to recover high costs after a mix of price hikes and bumper demand delivered record earnings amid “significant and unprecedented cost inflation” in 2021.
Europe’s largest paper packaging producer predicted last July that inflation was here to stay and said on Wednesday that energy and raw materials costs remain at elevated levels, requiring the ongoing price increases that will improve margins.
Exceptional demand for packaging used in e-commerce helped push Smurfit’s core earnings back above pre-pandemic levels to a record 1.7 billion euros ($1.94 billion), up 13% year on year and above the 1.67 billion forecast by 11 analysts polled by Refinitiv.
The Irish group’s EBITDA margin fell to 16.8% from 17.7% a year earlier after the increasing price of recovered fibre – a key raw material in boxes – cost an additional 440 million euros and energy costs rose by 235 million euros.
Smurfit, whose customers include Procter & Gamble, Unilever and Nestle, said current trading and demand for containerboard remain strong and that it expects the market to remain tight in the months ahead.
The packaging producer remains effectively sold out of its product ranges as a result, it added.
($1 = 0.8759 euros)
(Reporting by Padraic Halpin; editing by Jason Neely)