Cardboard box-maker Smurfit Kappa launched a €650 million share sale on Thursday evening as it seeks to accelerate investment projects to take advantage of a surge in ecommerce and a shift across the consumer goods industry towards sustainable packaging.
The company hired Credit Suisse, Davy and BNP Paribas to manage the share placing, it said in a stock exchange statement after European markets closed. The amount being raised equates to less than 8 per cent of Smurfit Kappa’s current €8.6 billion market value.
Smurfit Kappa, led by chief executive Tony Smurfit, said it has €1.2 billion to €1.4 billion of investment opportunities. Certain directors and senior managers intend to buy a total of €1.3 million of the new stock.
“Our strong track record of delivery has resulted in the group being very well-positioned to capitalise on structural growth opportunities. From this position of strength we are now focused on investing to strengthen the business and accelerating our vision,” said Mr Smurfit.
“Net proceeds from the placing, together with internally generated cash flows, will enable us to accelerate investment over the next three years, and enable us to deliver for our customers with enhanced financial flexibility.”
While Mr Smurfit said earlier this month, as the company unveiled quarterly earnings, that uncertainty remained over the path and effects of Covid-19 on business in the short term, the group was “increasingly excited by our future prospects and the structural growth drivers of our business, including ecommerce and sustainable packaging”.
Covert from plastic
On a call with analysts at the time, Mr Smurfit said a number of large customers were looking to convert from plastic to paper-based packaging and that the “big trend” of a global shift to sustainable packaging could turn into “very large” financial results for the company in the future.
“We have more opportunities than we know what to do with,” Mr Smurfit said.
Smurfit Kappa unveiled a €193 million surprise payment in July that replaced a final 2019 dividend that was deferred in April at the height of the coronavirus shock. It followed up this month by saying it will pay a second interim dividend of 27.9 cent per share, or €66.5 million in total, in December.
“A key secular trend in the packaging industry is ecommerce and this channel has experienced significant growth as a result of the Covid pandemic and its impact on consumers’ online spending habits,” Smurfit Kappa said in Thursday’s statement.
“Paper-based corrugated packaging facilitates faster packing and an easy returns process while the complexity of supply chains as a result of the development of ecommerce has introduced an increased need for packaging to perform through the supply-chain.”
The group said continues to aim for the lower end of its target leverage range of net debt amounting to between 1.75 and 2.5 times earnings before interest, tax, depreciation and amortisation.