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Packaging group Smurfit Kappa says price rises over for now

Padraic Halpin
·2-min read

By Padraic Halpin

DUBLIN (Reuters) - Packaging giant Smurfit Kappa does not expect to hike prices any further this year and may be able to unwind some of the recent rapid increases it has pushed onto customers, its chief executive said on Wednesday.

The prices Smurfit charges were 35% to 40% higher than they were two years ago at the end of June and Europe's largest paper packaging producer said on Wednesday it had increased them by another 2% to 3% in the third quarter.

However, CEO Tony Smurfit indicated the cycle may be over for now following a recent halving in the cost of waste paper, fall in spot gas prices and an abatement in other input costs such as distribution and logistics.

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"In that environment, it's very difficult to see price increases going forward," Smurfit told an analyst call, adding it was too early to forecast pricing for next year.

"The question is will some of that be given back to market and I think the reality is you would expect some of it is going to be given back to the market."

Smurfit, whose customers include Procter & Gamble, Unilever and Nestle, said in a trading update it expected its core profit this year to increase by 33% to 2.3 billion euros ($2.3 billion).

That's despite a 3% fall in volumes in the third quarter, which Smurfit put down to the impact of high inflation, the war in Ukraine and consumer demand shifting to services from durable goods as the COVID-19 pandemic subsides.

The dip in demand was most evident in "underwhelming" German and British markets, while Spain, France, Italy and much of the Americas were comparatively stronger. Germany should recover pretty quickly when fears around energy costs subside, Smurfit said.

Demand so far in the fourth quarter was at similar levels to the third, with the usual pick up in October ahead of Christmas not evident, he added.

Shares in Smurfit Kappa were 4.4% lower at 32.1 euros by 1010 GMT.

($1 = 1.0118 euros)

(Reporting by Padraic Halpin Editing by Jason Neely and Mark Potter)