Ireland's Smurfit Kappa sees signs of a return in demand for packaging

·2-min read
Water vapour billows from smokestacks at the Smurfit Kappa Cellulose du Pin plant in Facture

DUBLIN (Reuters) - Packaging giant Smurfit Kappa expects demand to improve as the year progresses following encouraging signs in April and as recent services-focussed consumption habits return to normal, its chief executive said on Friday.

Europe's largest paper packaging producer reported a 13% rise in first quarter core profit to 579 million euros ($636.4 million) on Friday, as higher margins made up for a third successive quarter of lower volumes.

Analysts polled by Refinitiv before the update expected full year profits to fall back by 14% from the record 2.4 billion euros in 2022 at the end of the COVID-19 packaging boom when lockdowns bolstered demand for e-commerce.

CEO Tony Smurfit said that "a wholesale shift" away from consuming at home to a service-led economy had hit the sector harder than expected but that may be at an end.

"Order intakes are improving, that doesn't necessarily mean it's going to translate into shipments improving but in a key market like Germany, for example, order intakes have very much improved in the month of April from the previous three months," he said on an analyst call.

"We would see that the world will become more normal as all the supply chains ease, people get back to stocking again normally and people's consumption habits go back to normal. I hope so."

Smurfit Kappa's London-listed shares were 2.4% higher at 2,914p by 0900 GMT, among the top gainers on the FTSE 100 index.

After hiking the prices customers pay for its boxes by up to 40% over the last two years as costs soared, the Irish group's finance chief Ken Bowles said there was just a small downward move "around the edges" on box prices in the first quarter.

That was primarily due to sharp falls in containerboard prices as ample inventories forced suppliers to take a break from production. Containerboard prices will increase at some point, Smurfit said.

($1 = 0.9098 euros)

(Reporting by Padraic Halpin; Editing by Emelia Sithole-Matarise)