Third Quarter & First Nine Months November 2015

Transcription

1 Third Quarter & First Nine Months November 2015

2 Disclaimer The presentation contains forward-looking statements, including statements about the Company's intentions, beliefs and expectations. These statements are based on the Company's current plans, estimates and projections, as well as the Company's expectations of external conditions and events. Forward-looking statements involve inherent risks and uncertainties and speak only as of the date they are made. The Company undertakes no duty to and will not necessarily update any such statements in light of new information or future events, except to the extent required by any applicable law or regulation. Recipients of this presentation are therefore cautioned that a number of important factors could cause actual results or outcomes to differ materially from those expressed in any forward-looking statements. Please refer to the Principal Risks and Uncertainties contained in the Q2 15 Press Release for details. 2 : SMURFIT KAPPA

3 2015 Third Quarter & First Nine Months Pre-exceptional EPS growth of 20% yoy Higher earnings driving returns cent cent % Q3 EBITDA margin recovery to 15% Reflecting 5% yoy EBITDA growth excluding Venezuela % 14.0% 13.0% Good corrugated volume growth across our reporting segments, up 6% yoy % 11.0% % Strong free cash flow after higher capex and one-off restructuring costs 20 - YTD'10 YTD'11 YTD'12 YTD'13 YTD'14 YTD'15 9.0% 8.0% ROCE at 15%, in line with target 3 : SMURFIT KAPPA Pre-exceptional Basic EPS Source: Smurfit Kappa Return on Capital Employed

4 Financial Highlights Q m Q Q Change Q Change Revenue 2,024 2,027-2,034 - Pre-exceptional EBITDA % 285 7% EBITDA margin 15.0% 14.9% 14.0% Pre-exceptional basic EPS (cent) (4%) % Free cash flow (22%) % Net debt 2,953 2,578 (15%) 3,100 5% Net debt/ebitda 2.6x 2.2x 2.7x 4 : SMURFIT KAPPA

5 Financial Highlights YTD 2015 m YTD 2015 YTD 2014 Change Revenue 6,020 5,975 1% Pre-exceptional EBITDA (1%) EBITDA margin 14.2% 14.5% Pre-exceptional basic EPS (cent) % Free cash flow (31%) Net debt 2,953 2,578 (15%) Net debt/ebitda 2.6x 2.2x 5 : SMURFIT KAPPA

6 Europe YTD 2015 & Medium Term Drivers Strong corrugated demand growth 4% YTD volume growth underpinned by strong box demand Sequential EBITDA margin increase from 14.1% to 15.1% Supportive containerboard fundamentals Strong performance in 2015 despite one-off operational issues Good progress on integration of UK acquisitions and rationalisation programme 6 : SMURFIT KAPPA 2015 containerboard price increases support further corrugated price recovery into 2016

7 Europe YTD 2015 & Medium Term Drivers Portfolio of businesses and countries Focus of the customer on impact at the point of purchase a key opportunity to add value through Shelf Ready and high impact packaging Growth in late stage differentiation and e-commerce Increasing focus on sustainability credentials through the supply chain Baseline demand growth 2% - 3% incremental demand of 400kT 700kT per annum OCC expected to remain at a high level, bolstered by demand Outlook: Medium term containerboard fundamentals remain strong 7 : SMURFIT KAPPA

8 The Americas YTD 2015 & Medium Term Drivers Americas YTD EBITDA growth of 27% yoy excluding Venezuela YTD corrugated volume growth of >18% yoy EBITDA margins recovering to 17.5% in Q3 15 Good progress on implementation of price increases to offset weaker currencies Acquisition of Sound Packaging in October strengthens Southern US footprint 8 : SMURFIT KAPPA

9 The Americas YTD 2015 & Medium Term Drivers Diversification & Growth: Portfolio of Businesses: Venezuela 1% of EBITDA: Higher and more stable contribution to EPS: Stable market exposure: SKTA * provides the Group with diversification of end markets, access to high growth potential as the markets develop SKTA managed as a portfolio of businesses, maximising operational and innovation synergies Recent adoption of alternate exchange rate in Venezuela has reduced Venezuelan exposure to approximately 1% of EBITDA Reduction in finance costs has significantly boosted profits which will be more stable from this higher level going forward Operations in the US, Mexico and Colombia now comprise over 80% of SKTA EBITDA 9 : SMURFIT KAPPA *SKTA = Smurfit Kappa the Americas

10 Medium Term Drivers Growth & Increased Efficiency Business Growth Cost Efficiency Accelerating organic growth 2014 volume growth of +2% 2015 YTD volume growth of +3% Differentiation initiative underpinning value focus with customers Integrated Business Model Cost take-out programme Delivery of 117m in 2014 Committed to target of 75m for 2015 Growth through acquisitions 2014 acquisitions totalling over 160m 2015 acquisitions totalling 210m to date Additional 3% volume improvement yoy through acquisitions Quick Win capital investments Capex of 150m over 3 years Incremental EBITDA of 75m in 2017 onwards 18m expected by year end 2015 Asset Optimisation Programme 10 : SMURFIT KAPPA

11 Capital Allocation 2015 Onwards

12 Proven Track Record of Strong FCF Generation m SKG Free Cash Flow generation ( m) SKG FCF w/o exceptional items ( m) Source: Smurfit Kappa 12 : SMURFIT KAPPA

13 Medium Term Drivers Capital Allocation Optimised capital structure to drive growth and investment opportunities Net debt/ebitda at 2.0x to 3.0x through the cycle Commitment to preserving Ba1 / BB+ credit metrics Debt maturity of 4.9 years and average interest cost of 3.7% De-leveraging has expanded the range of strategic & financial options 13 : SMURFIT KAPPA

14 Capital Allocation Evolution 2007 to Onward Net Debt Reduction Dividend Dividend Capital Expenditure Capital Expenditure M&A M&A Capital Structure 14 : SMURFIT KAPPA

15 Capital Allocation Strategy 2015 Onward Reflects earnings growth Supported by strong FCF Dividend Minimum IRR of 15% Maintain credit rating Of Ba1/BB+ M&A Driving Shareholder Returns Capital Structure Capacity for acq. of > 300m from FCF Net debt To EBITDA range of 2x to 3x Capital Expenditure 15 : SMURFIT KAPPA High return projects Enhanced Operating Efficiency

16 Outlook Driving Earnings Quality & Superior Returns Good medium term fundamentals across most markets Higher earnings quality consistently delivered through: Vertical integration Geographic diversification and Increased customer differentiation Driving the business through organic and acquisition growth Focus on strong free cash generation and exceeding ROCE target of 15% Based on current operating conditions, SKG expects 2015 EBITDA in line with market expectations 16 : SMURFIT KAPPA

17 Appendix Medium Term Business Drivers

18 Smurfit Kappa Group Driving Superior Performance Vertically Integrated & Geographically Diversified Business Model Consistent Financial & Operating Discipline Clear, Value Oriented Capital Allocation Strategy Proven & Experienced Management Team Through Cycle Quality Earnings Profile and Strong Free Cash Flows 18 : SMURFIT KAPPA

19 Medium Term Performance Returns & Cash Flow Focus EBITDA ( m) and EBITDA margin 9.4% CAGR 12.2% % % 13.8% 1,015 1, % 1,107 1, % Return on Capital Employed Upgraded target of 15% through the cycle 6.6% 9.9% 12.5% 12.0% 13.1% 15.0% Cash interest ( m) Forecast of 125m in Free cash flow ( m) Proven record of delivery of strong FCF : SMURFIT KAPPA Note: Comparative figures from 2011 reflect the restatement to employee benefits under the revision of IAS 19. Source: Smurfit Kappa

20 Resilient Business Model Driving Superior Returns 1 Clear market leader in Europe with strong position in the Americas 2 Integrated manufacturer covering the full value chain 3 Resilient business model with a diversified customer base 4 Strength and depth of product portfolio servicing all paper-based packaging needs 5 Customer partnership supported by recently launched differentiation programme 6 Strong, consistent margin and disciplined capital investment 20 : SMURFIT KAPPA

21 1 Clear Leader in Europe; Strong Position in the Americas Europe (FY 2014) The Americas (FY 2014) Total Group 6.1 billion Sales revenue 1.9 billion Sales revenue Over 350 production sites 882 million 305 million 21 countries in Europe EBITDA EBITDA 12 countries in the Americas 14.4% EBITDA Margin 15.7% EBITDA Margin 43,000 employees Group financials (FY 2014) 8.1 billion Sales revenue Europe 76% Revenue The Americas 24% Market position World market for the production of corrugated packaging 1.2 billion EBITDA 14.4% EBITDA Margin Europe 74% EBITDA The Americas 26% Europe in corrugated packaging, containerboard, solidboard, and solidboard packaging 21 : SMURFIT KAPPA

22 2 Integrated Manufacturer Covering the Full Value Chain Raw materials Intermediate products End products Recovered paper Containerboard Testliner and Kraftliner are used to make the inner and outer layers of corrugated cardboard Medium is used to create the rippled or fluted middle layer Corrugated cardboard is then printed and converted according to customer specifications into containers and displays Corrugated containers and displays Virgin wood fibre Represents the scope of an integrated producer 22 : SMURFIT KAPPA

23 3 Resilient Business Model with a Diversified Customer Base Diversified customer base with more than 64,000 customers Top 12 customers account for 10% of Group sales Majority of business in resilient sectors Industrials 35% Others 5% Fast moving consumer goods 60% Majority of customers end markets are in resilient sectors: approximately 60% of revenue from FMCG Source: Smurfit Kappa, FY 2013 Selection of customers Consistent growth in European volumes; Americas business operating well Source: Smurfit Kappa 23 : SMURFIT KAPPA

24 4 Strength and Depth of Product Portfolio First-class packaging through state-of-the-art expertise and capabilities Kraft Paper Effective innovation based on customer and consumer insight Expertise in retail solutions and supply chain optimisation Commitment to highest standards and practices in sustainability Strength and depth of product portfolio servicing all paper-based packaging needs 24 : SMURFIT KAPPA

25 5 Customer Partnership Supported by Differentiation Strategy Application of Collective Intelligence to optimise customer supply chain and support and enhance their brands 25 : SMURFIT KAPPA

26 6 Strong, Consistent Margin and Disciplined Capital Investment EBITDA margin 21% Return on capital employed 17% 19% 15% 15.0% 17% 15% 13% SKG 13% 11% 11.3% 10.3% 9.9% 12.5% 12.0% * 13.1% 11% 9% 9% 7% 7% 6.6% 5% FY'07 FY'08 FY'09 FY'10 FY'11 FY'12 FY'13 FY'14 5% FY'07 FY'08 FY'09 FY'10 FY'11 FY'12 FY'13 FY'14 SKG Company 1 Company 2 Company 3 Source: Smurfit Kappa *Restated for IAS19R 26 : SMURFIT KAPPA

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