In the nine months leading up to September 2019, Smurfit Kappa revenue grew by 3% to €6.8bn, with an 11% rise in EBITDA to €1.2bn
The “expertise” of Smurfit Kappa in the manufacturing of paper-based packaging is a key factor in its revenue growth, according the company’s CEO.
Smurfit Kappa CEO Tony Smurfit’s comments come as the Irish packaging giant unveiled its trading update for the first nine months to September 2019.
During this period, the company’s revenue grew by 3% to €6.8bn ($7.6bn), alongside an 11% growth of its earnings before interest, tax, depreciation and amortisation (EBITDA) to €1.2bn ($1.3bn).
Smurfit said: “While there have been, and continue to be, obvious macro-economic and political challenges, SKG’s very strong performance against this backdrop shows, once again, the quality of our business and the benefits of our geographic diversity.
“Consumers are increasingly demanding sustainable packaging solutions and with our unique applications, knowledge and expertise in paper-based packaging we are ideally positioned to take advantage of this mega trend.”
The company’s corrugated box volume growth was close to 4% year-on-year or approximately 2% on an organic basis, with the pricing for the product being in line with Smurfit Kappa’s expectations.
In the Americas, the company’s organic volume growth was approximately 2%, with a continued EBITDA and EBITDA margin improvement year-on-year.
Growth in demand for corrugated packaging driven by the rise of e-commerce, says industry expert
This increase in revenue reported by Smurfit Kappa follows estimations made by consultancy firm Smithers in 2018, which estimated the global corrugated packaging marketplace would rise to a worth of $300bn by 2023, predicting a 3.7% annual growth.
Market research company NOA, which specialises in the packaging industry, recently conducted a study for trade group the International Corrugated Case Association (ICCA), which found the corrugated marketplace did well across every continent.
Smurfit Kappa was identified as playing a major role in virtually all of those markets and, as such, has benefited from that growth, according to NOA managing director Neil Osment.
He told NS Packaging there has been a perfect storm of demand in corrugated packaging, with the major reason behind this growth being due to rise of the e-commerce market, which is expected to be worth $5.5tr by 2023.
He said: “The overall reason for corrugated packaging doing well is because of e-commerce demand and the drive of Amazon among others.
“Why has it been so good over the last nine months? There is an element of the sustainable, and environmental and an element of switching away from plastic towards paper solutions.
GlobalData consumer analyst Hannah Pervez believes the sustainable packaging “mega-trend” will turn into the norm going forward
She said: “Sustainable packaging is a mega-trend gaining attraction by consumers, manufacturers and governments alike — this trend will to turn into the norm going forward.
“Smurfit Kappa’s 3% revenue growth over the past nine months has shown this, and we can confidently forecast growth in the next few years for the overall cardboard packaging sector, as well as other packing too.
“GlobalData’s 2019 Q3 Global Consumer Survey results show that 43% of consumers worldwide find product packaging made from sustainable materials quite important in their purchasing decision.
“Competitors such as DS Smith already emphasise on prioritising sustainability throughout their supply chain down to their products and have strict targets to meet to achieve this.”