TIDMSKG
31 July 2013: Smurfit Kappa Group plc ('SKG' or 'the Group')
today announced results for the 3 months and 6 months ending 30
June 2013.
2013 Second Quarter & First Half | Key Financial Performance
Measures
EURm H12013 H1(1)2012 change Q22013 Q2(1)2012 change Q12013 change
Revenue EUR3,908 EUR3,680 6% EUR2,019 EUR1,857 9% EUR1,889 7%
EBITDA EUR512 EUR498 3% EUR271 EUR254 7% EUR241 13%
before
Exceptional
Items
and
Share-based
Payment(2)
EBITDA 13.1% 13.5% - 13.4% 13.6% - 12.7% -
Margin
Operating EUR307 EUR303 1% EUR167 EUR155 8% EUR139 20%
Profit
before
Exceptional
Items
Profit EUR127 EUR184 (31%) EUR70 EUR82 (15%) EUR57 21%
before
Income Tax
Basic EPS 32.1 49.4 (35%) 17.7 23.4 (24%) 14.4 23%
(cent)
Pre-exceptional 43.9 37.6 17% 24.1 23.4 3% 19.8 22%
Basic
EPS (cent)
Return on 12.0% 12.1% - 11.7% -
Capital
Employed(3)
Free Cash EUR72 EUR47 55% EUR95 EUR63 52% (EUR23) -
Flow(4)
Net Debt EUR2,817 EUR2,785 1% EUR2,871 (2%)
Net Debt 2.7x 2.8x - 2.8x -
to
EBITDA
(LTM)
(1) Comparative figures reflect the restatement to employee benefits
under the revision of IAS 19, as set out in Note 7.
(2) EBITDA before exceptional items and share-based
payment expense is denoted
by EBITDA throughout the remainder of
the management commentary for ease
of reference. A reconciliation of profit for
the period to EBITDA before exceptional
items and share-based payment expense is set out on page 36.
(3) LTM pre-exceptional operating profit plus share of
associates' profit/average capital employed.
(4) Free cash flow is set out on page 10. The
IFRS cash flow is set out on page 20.
Highlights
-- First half European box volume growth in excess of 2% year-on-year;
Americas growth of 5% excluding SK Orange County ('SKOC')
-- Cost take-out of EUR100 million re-confirmed
-- EBITDA margin progression from 12.7% in quarter one to 13.4% in
quarter two
-- Capital structure successfully repositioned from leveraged to corporate
-- Interim dividend increased by 37% to 10.25 cent
-- Recycled containerboard price increase of EUR50 per tonne effective from
1 August
Performance Review and Outlook
Gary McGann, Smurfit Kappa Group CEO, commented: "Smurfit Kappa
Group is pleased to report first half revenue growth of 6% and
strong EBITDA of EUR512 million. The strong result has been
achieved through improved pricing, continued cost take-out and
enhanced efficiency programmes. In spite of the recessionary
conditions in Europe, the Group delivered like-for-like box volume
growth in Europe of over 2% year-on-year and 5% volume growth in
the Americas, excluding box volumes of SKOC.
SKG's ability to win new business in the current challenging
operating environment is evidence of the Group's strong value
proposition for our customers. With an integrated global network of
packaging designers, trademarked software tools and technical
engineers, SKG is well placed to deliver a superior total offering
together with real cost efficiencies throughout its customers'
supply chains. In July the Group announced the development of a
unique 3D tool entitled 'Virtual Store' to enhance the
understanding of shopper behaviour. This will translate into real
benefits for retail ready packaging design.
With the successful integration and performance of SKOC, the
Group is progressing well with its strategy to expand in the higher
growth markets of the Americas. Packaging volumes in the region
have grown by 5% year to date and EBITDA margins are recovering to
their previous relatively high levels, assisted by the absence of
the significant one-off issues which affected the business in 2012.
The accretive acquisition of SKOC reflects the Group's ability to
identify, acquire, and integrate complementary businesses.
The continued focus on increased geographic diversity, together
with the integrated model, is underpinning the consistency of SKG's
earnings irrespective of economic circumstances.
In July, the Group successfully completed a new EUR1,375 million
refinancing of its Senior Credit Facility on a lower margin
unsecured basis comprising a EUR750 million term loan with a margin
of 2.25% and a EUR625 million revolving credit facility with a
margin of 2.00%. This transaction represents a major milestone in
the evolution of the Group's capital structure and concludes the
successful re-positioning of SKG's debt profile from leveraged to
corporate, whilst reducing interest costs by approximately EUR13
million per annum. In addition SKG has put in place a new trade
receivables securitisation programme of up to EUR175 million which
carries a margin of 1.70%. These transactions provide the Group
with greater financial flexibility, including the potential to
refinance part of its more expensive bond debt at the appropriate
time.
The Group confirms it will pay an interim dividend of 10.25
cent, a year-on-year increase of 37%. This improved dividend
represents the Group's commitment to provide shareholders with
certainty of value and reflects the confidence of the Board in the
Group's performance and prospects.
Rising input costs and improving circumstances in the European
paper industry including, low inventory levels, solid export
markets and relatively high operating rates support higher recycled
containerboard prices. The Group has therefore announced a price
increase of EUR50 per tonne effective from 1 August. With this move
towards more economically sustainable recycled paper pricing, the
Group will recover the increased costs in its corrugated pricing
with the usual three to six month lag. This in turn will support
continued performance and growth into 2014".
About Smurfit Kappa Group
Smurfit Kappa is one of the leading producers of paper-based
packaging in the world, with around 41,000 employees in
approximately 350 production sites across 32 countries and with
revenue of EUR7.3 billion in 2012.
Innovation, service and pro-activity towards customers, using
sustainable resources, is our primary focus. This focus is enhanced
through being an integrated producer, with our packaging plants
sourcing the major part of their raw materials from our own paper
mills. We are the European leader in paper-based packaging,
operating in 21 countries selling products including corrugated,
containerboard, bag-in-box, solidboard and solidboard packaging. We
have a growing base in Eastern Europe in many of these product
areas. We also have a key position in other product/market segments
including graphicboard, MG paper and sack paper. We operate in 11
countries in total in North, Central and South America, and are the
only large scale pan regional player in Latin America.
Forward Looking Statements
Some statements in this announcement are forward-looking. They
represent expectations for the Group's business, and involve risks
and uncertainties. These forward-looking statements are based on
current expectations and projections about future events. The Group
believes that current expectations and assumptions with respect to
these forward-looking statements are reasonable. However, because
they involve known and unknown risks, uncertainties and other
factors, which are in some cases beyond the Group's control, actual
results or performance may differ materially from those expressed
or implied by such forward-looking statements.
Contacts
Seamus Murphy FTI Consulting
Smurfit Kappa Group
Tel: +353 1 202 71 80 Tel: +353 1 663 36 80
E-mail: ir@smurfitkappa.com E-mail: smurfitkappa@fticonsulting.com
2013 Second Quarter & First Half | Performance Overview
European box volumes increased by over 2% for the first half of
2013 adjusting for two less working days year-on-year. Third party
box shipments make up approximately 88% of total corrugated
volumes, and are the most accurate measure of demand for SKG's core
value added products. Total corrugated volumes, which were
negatively affected by declining shipments in the lower margin
sheet business, grew by 1% over the same period. Eastern European
volumes continue to develop well, and have increased in the six
months to June by 9% year-on-year.
In line with the first quarter commentary, European corrugated
pricing has been underpinned by containerboard price increases
implemented in the first four months of the year, and has remained
broadly flat compared to the first quarter of 2013. Recycled
containerboard price increases of EUR50 per tonne effective from 1
August will require further recovery in corrugated pricing into
2014.
Initial market concerns about the negative impact of the Chinese
'Green Fence' initiative have not been realised, and demand for Old
Corrugated Containers ('OCC') in Europe is currently steady. As a
result, pricing of OCC has remained resilient throughout the second
quarter and is at a level that supports increased recycled
containerboard pricing. Industry inventories have decreased
throughout the quarter, reflective of tight market conditions and
solid demand which will further underpin the August pricing
initiative.
SKG's kraftliner operations continue to represent a significant
source of differentiation and profitability for the Group given the
structured market and the stable operating environment. US
kraftliner imports into Europe have decreased by 2% year-on-year to
April 2013, whilst demand remains at a good level for the grade
despite the high spread between recycled and virgin grades. SKG is
net long in kraftliner by approximately 500,000 tonnes.
The performance of the Americas segment has recovered in 2013,
returning to its historic underlying EBITDA margin levels and
achieving corrugated growth in the year to date of 5%, excluding
the SKOC volumes. This improved year-on-year performance reflects
the underlying strength of the business and is assisted by the
absence of the one-off issues that occurred in 2012. SKG regards
the Americas as an important region for future investment given its
growth potential, and the accretive acquisition of SKOC is
indicative of the Group's ability to acquire, integrate and enhance
businesses.
SKG's 250,000 tonne recycled containerboard mill in Townsend
Hook in the UK was temporarily closed at the end of June, and is
scheduled to re-start in the fourth quarter of 2014 with a 250,000
tonne modern lightweight machine, following a total investment of
approximately EUR114 million. This is the largest in a series of
such projects being undertaken by SKG throughout the European paper
system, all of which are delivering increased productivity, lower
costs and ensuring the Group is suitably positioned to respond to
increasing demand for lighter weight containerboard in its end
packaging market.
The Group's net debt decreased by EUR54 million to EUR2,817
million from 31 March to 30 June 2013, resulting in a reduction in
net debt to EBITDA to 2.7 times. This is reflective of management's
continued focus on cash generation and drive to maintain leverage
at a level we consider appropriate for the business.
2013 First Half | Financial Performance
Revenue for the half year grew by 6% from EUR3,680 million in
2012 to EUR3,908 million in 2013, primarily driven by strong growth
in the Americas both as a result of the SKOC acquisition completed
in December 2012 and improved business performance in Venezuela
since the devaluation in the first quarter of 2013.
At EUR512 million, EBITDA for the first half of 2013 was 3%
higher than in the same period in 2012 and reflected higher
earnings in the Americas. This was partly offset by somewhat lower
earnings in Europe, which resulted in a lower year-on-year EBITDA
margin of 13.1%. Group EBITDA margins in the second quarter have
improved to 13.4% from 12.7% in the first quarter.
Operating profit before exceptional items for the half year was
EUR307 million, compared to EUR303 million for the same period in
2012, an increase of 1%.
Exceptional items charged within operating profit in the six
months to June 2013 amounted to EUR32 million. Of this, EUR15
million related to the temporary closure of the Townsend Hook mill
in June. A further EUR15 million related to a currency trading loss
as a result of the devaluation of the Venezuelan Bolivar in
February 2013. This comprised a EUR12 million loss recognised in
the first quarter and an adjustment of EUR3 million in the second
quarter for hyperinflation and re-translation at the quarter end
exchange rate. The remaining EUR2 million was in respect of SKOC
related acquisition costs and the consolidation of the Group's two
plants in Juarez, Mexico into one plant.
Exceptional gains of EUR28 million included within operating
profit in the first half of 2012, comprised EUR10 million from the
sale of land at SKG's former Valladolid mill in Spain and EUR18
million relating to the disposal of a company in Slovakia.
Operating profit after exceptional items for the half year was
EUR275 million, compared to EUR331 million for the same period in
2012, a decrease of 17%.
Net finance costs of EUR149 million were unchanged year-on-year,
with the benefit of reduced cash interest being offset by non-cash
finance costs including the accelerated write-off of deferred debt
issue costs.
Including the Group's share of associates' profit of EUR1
million in 2013, profit before income tax was EUR127 million for
the half year 2013 compared to EUR184 million in 2012.
The income tax expense of EUR50 million for the first half of
2013 represented a EUR21 million decrease on the prior year. The
decrease was mainly due to lower taxable profits, a change in the
geographical mix of profits, lower asset sales in 2013 and a number
of non-recurring items.
Basic earnings per share was 32.1 cent for the half year 2013
(2012: 49.4 cent). Adjusting for exceptional items, pre-exceptional
basic EPS was 43.9 cent (2012: 37.6 cent), an increase of 17%.
2013 Second Quarter & First Half | Free Cash Flow
Free cash flow amounted to EUR95 million in the second quarter
of 2013 compared to EUR63 million in 2012. The increase of EUR32
million was driven mainly by a combination of higher EBITDA, lower
tax payments and other outflows, partly offset by a higher working
capital outflow and higher capital expenditure. At EUR72 million
for the six months to June 2013, the Group's free cash flow was
EUR25 million higher than in 2012 as a result of higher EBITDA,
lower cash interest costs, capital outflows and cash taxes, partly
offset by higher working capital requirements and an exceptional
outflow of EUR17 million.
Following an outflow of EUR98 million in the first quarter,
working capital increased by EUR18 million in the second quarter.
This has resulted in a total outflow in the year to date of EUR116
million (2012: EUR97 million). The outflow arose primarily in
Europe and reflected corrugated volume growth and the impact of the
recycled containerboard price increase in the first quarter.
Working capital amounted to EUR719 million at June 2013,
representing 8.9% of annualised revenue and remains in line with
June 2012 levels. Cash management remains a consistent focus of
management, and working capital levels are determined by the
geographies in which we operate.
Capital expenditure amounted to EUR137 million in the first half
of 2013 and equated to 75% of depreciation, compared to EUR126
million and 74% in the first six months of 2012. For the full year,
SKG's capital expenditure is expected to amount to approximately
100% of depreciation, and incorporates expenditure on customer
oriented and efficiency driven investments.
Cash interest at EUR108 million for the six months to June 2013
was EUR12 million lower than in 2012, reflecting reduced debt
levels and the benefit of significant refinancing activity at
materially reduced interest rates.
At EUR37 million in the first six months of 2013, SKG's tax
payments were EUR10 million lower than in 2012. This reflected the
absence of asset sales in Europe in 2013 and the lower taxable
profits in the Americas segment in 2012 over the prior year.
2013 Second Quarter & First Half | Capital Structure
Successful refinancing of EUR1.375 billion Senior Credit
Facility
In July, the Group successfully completed the refinancing of its
senior secured credit facility with a new unsecured relationship
bank facility. The transaction was initially launched at EUR1,100
million and was upsized to EUR1,375 million following a substantial
oversubscription. It marks the unequivocal completion of the
Group's evolution from a secured leveraged structure post
take-private in 2002 to an unsecured corporate profile, committed
to maintaining leverage below three times through the cycle.
The new EUR1,375 million five-year facility comprises a EUR750
million term loan with a margin of 2.25% and a EUR625 million
revolving credit facility with a margin of 2.00%, reduced from
margins of 3.75% and 3.25% respectively. The Group consequently
expects annual cash interest savings from the refinancing will be
approximately EUR13 million per annum and the transaction will be
immediately earnings accretive.
In addition to the new senior facility, SKG has also put in
place a EUR175 million five-year trade receivables securitisation
programme at a margin of 1.70%, which will complement the existing
EUR250 million programme.
The new facilities will lower SKG's overall cost of capital,
materially reduce debt servicing costs, enhance earnings and
provide greater financial flexibility, including the potential to
refinance part of its more expensive bond debt at an appropriate
time.
Capital structure overview
The Group's net debt has decreased by EUR54 million in the
quarter to EUR2,817 million at June 2013 reflecting positive cash
flows in the period. Net debt to EBITDA has decreased to 2.7 times
in June 2013 from 2.8 times at the end of March 2013, and has
remained broadly flat since June 2012 despite the acquisition of
SKOC for EUR260 million in December 2012. The broad stability in
leverage year-on-year underscores SKG's commitment to maintain
leverage at a level appropriate to the business whilst pursuing
opportunities to grow in targeted markets.
At June 2013 the average maturity profile of the Group's debt
was 5.3 years, in line with June 2012, and when adjusted for the
refinanced Senior Credit Facility the maturity profile increases to
5.6 years. The average interest rate of the Group at 30 June, when
similarly adjusted for the new facility reduces from 6.0% to
approximately 5.6%, a significant decrease from 6.9% at June 2012.
The up-sized refinancing will further increase the liquidity
position of the Group, with a largely undrawn revolving credit
facility of EUR625 million. In addition, the Group held cash of
EUR471 million at 30 June 2013.
The core focus of management remains on cash generation, and
SKG's integrated business model has been proven to provide
resilient positive cash flows at all points in the cycle. The Group
has substantially reduced cash interest costs through a number of
refinancing events since the beginning of 2012 and will continue to
optimise the cost of its debt.
2013 Second Quarter & First Half | Operating Efficiency
Commercial offering, innovation and sustainability
The core strengths of SKG's offering to its customers lie in its
experience in understanding their packaging needs and having the
necessary resources to be able to apply this knowledge to tailor
its service to their exact needs through their supply chains across
Europe and the Americas at an optimised cost. Harnessing a suite of
constantly evolving software tools, the Group is increasingly
capable of applying its global expertise to each of our 60,000
customers across the 32 countries in which we operate.
In July the Group announced the development of its 'Virtual
Store', which will be officially launched in September. The
technology will offer a unique 3D shopping experience on one of the
largest screens in Europe and will be installed in SKG's
Development Centre in the Netherlands. It will be used to allow
customers to experiment with packaging in a realistic retail
environment, and to carry out shopper behaviour research, which
will translate into tangible benefits to retail ready packaging
design.
As part of the constant drive to improve our service and product
offering, the Group introduced two tools which will greatly enhance
our ability to effectively monitor and improve the quality of
packaging provided to our customers. The first tool, 'ZOOM', is an
online system to capture and analyse customer feedback across all
its European packaging operations. Its specific structure enables
the Group to monitor quality performance in unprecedented detail
across its entire European customer base. The second tool, Board
Referee, is an analytical device which will be deployed in all
converting sites to measure the mechanical properties of packaging
materials before they are shipped.
SKG will host its annual Innovations Day in September 2013 to
showcase its best packaging and sustainability ideas to its
customers in a European wide event. It is a unique opportunity for
the Group to impress on its customers the unseen work performed
throughout the business to develop customised, innovative,
sustainable and product enhancing packaging for our customers. In
2012, it was attended by 155 customers.
Consistent investment in modern, market facing equipment
continues to underpin SKG's quality product offering to our
customers. In the second quarter the European packaging division
incurred EUR49 million in capital expenditure across a range of
such projects, examples of which include six and seven colour
rotary die cutting machines in our Twincorr (the Netherlands) and
Gdansk (Poland) plants and an investment in two new converting
machines in our Düsseldorf (Germany) plant to increase its service
capability and production flexibility. In Mexico the Group
installed a seven colour offset printer to service its increasingly
quality driven packaging markets.
The Group has a single minded focus on its end packaging
markets, however the integrated business model remains at the core
of the Group's operating strategy and is the driving force behind
SKG's quality earnings and consistent performance throughout the
cycles.
To this end, the Group has committed to a number of significant
projects in its recycled containerboard system to deliver increased
productivity, reduce costs and provide for additional lightweight
capabilities to match market demand. These projects include the
substantially complete EUR46 million investment in our Hoya mill
(Germany), the current EUR114 million re-build of our Townsend Hook
mill (the UK) and a scheduled EUR39 million upgrade to our Roermond
mill (the Netherlands).
Sustainability
SKG remains fundamentally committed to sustainability and social
responsibility, and regards sustainability as a key business driver
providing a valuable platform for differentiation in the market.
The Group is increasingly aware of a growing demand amongst a broad
range of our stakeholders for sustainable growth models into the
future. We firmly believe we can secure profitable growth while
having a positive impact on our environment.
We will continue to promote our sustainability credentials by
developing innovative packaging solutions for our customers, by
optimising their supply chain, through the use of renewable and
recyclable materials and by contributing to the environment and
communities in which we operate. Measuring the tangible benefits of
our sustainability commitments is essential, and to this end the
Group has established a number of key objectives and specific
targets against which we are audited annually.
The sixth annual Sustainability Report was published in June
2013 and sets out these core commitments and the Group's progress
against them to date.
Cost Take-out Programme
Continued progress in identifying and delivering material cost
savings is essential to underpin the resilience of SKG's EBITDA
margins, given rising input cost pressures and relatively flat
corrugated pricing throughout 2013. The Group has a proven track
record of driving efficiencies and process innovations to reach its
programme goals. Each year the savings target is based on a bottom
up cost rationalisation review which centres on the broad cost
areas of raw materials, wages and salaries, energy, distribution
and other miscellaneous projects.
The Group has reported a further EUR26 million in cost take-out
during the second quarter of 2013, bringing total cost savings for
the year to date to EUR46 million. The EUR100 million objective for
2013 is fully expected to be realised and will bring cumulative
cost savings to EUR600 million since the first such programme was
initiated in 2007.
Capital Market Days | London 11 September & New York 18
September
Smurfit Kappa Group is organising two Capital Market Days for
institutional investors and analysts due to take place in London on
11 September and in New York on 18 September. The event will
provide participants with access to senior management to ensure a
better understanding of SKG's main business units through a series
of small group discussions.
2013 Second Quarter & First Half | Regional Performance
Review
Europe
At EUR1,499 million, European revenue decreased by 1% when
comparing the second quarter of 2013 to the same period in 2012.
European EBITDA at EUR371 million decreased by 11% year-on-year due
to a combination of higher input costs and lower corrugated
pricing, partly offset by volume growth.
Corrugated pricing, which was negatively affected by OCC and
containerboard price volatility in 2012, has remained flat when
comparing the first and second quarters of 2013, underpinned by
positive paper momentum in the first four months of the year. The
recently announced recycled containerboard price increases, when
implemented, will require the Group to recover the increased costs
within the usual three to six month time lag.
On the demand side, SKG's European box volumes increased by over
1% in the first six months of 2013 and by over 2% when restated for
two fewer shipping days in the year to date 2013. Similarly
adjusted total packaging volumes have increased year-on-year by 1%,
reflecting the reduction to the Group's sheet volumes which were
foregone on the basis of unacceptable price levels.
The Group has announced a recycled containerboard price increase
from 1 August as a result of the continuing uneconomic margins in
the grade. The increase is supported by steady demand in both the
European and export markets, low inventory levels, relatively high
operating rates and resilient OCC costs. The European recycled
containerboard industry also currently enjoys a generally
favourable supply outlook which should underscore the pricing
initiative.
In April, the Group's SSK recycled containerboard mill was
forced to temporarily cease production as a result of a fire in its
recovered fibre stock yard. No injuries were sustained during the
incident and due to the speedy deployment of a protective water
curtain, the mill was unaffected restarting operations within 42
hours of the shut. Approximately 9,000 tonnes of recovered paper
was destroyed and total costs associated with the incident are
expected to be EUR3 million.
In kraftliner, SKG has benefited from reasonable price levels
since April 2012. The capacity outlook for the market remains
relatively stable and imports of kraftliner from the US have
decreased by 2% year-on-year to April.
Energy costs have increased by 6% year-on-year for the six
months to June 2013 as a result of price increases in most
countries throughout Europe. The Group operates an active energy
hedging programme and at the half year 77% of energy volumes had
been fixed for the year.
The Americas
The Americas, inclusive of SKOC, reported revenue of EUR952
million and EBITDA of EUR161 million in the first half of 2013,
representing 24% and 32% respectively of the Group. Excluding SKOC,
EBITDA for the period was 37% higher than in 2012, reflecting the
benefit of a 5% increase in corrugated demand, the absence of
material one-off issues which negatively affected the segment in
2012 and improved business performance in Venezuela since the
devaluation in the first quarter of 2013.
The integration of SKOC into the Group has progressed well and
the business continues to deliver a strong performance. Positive
pricing momentum in the US has been maintained through the industry
wide implementation of a second price increase of US$50 per ton in
April, and this is flowing through to box prices in the second half
of 2013. Volumes in the recycled containerboard mill have also been
increased by over 4% year-on-year to approximately 305,000 tons as
a result of cooperation with SKG's paper technology specialists and
targeted capital investment. Synergies of US$32 million are now
expected to be delivered with US$13 million deliverable in
2013.
In Colombia, packaging demand has started to normalise following
some weakness in the first quarter, and volumes have increased by
3% year-on-year for the first six months of the year. At the end of
March the start-up of a new US$14 million lime kiln was
successfully carried out in the Group's Cali mill. The investment
has a payback period of less than two and a half years and is
improving fuel efficiency as well as reducing the overall cost of
third party lime purchases. Currency pressures reduced during the
second quarter following a 5% depreciation in the Colombian Peso
against the US dollar.
The Group's Mexican operations continue to perform well,
supported by a steady economic backdrop. Packaging volumes
increased by 3% year-on-year in the first half, and pricing was
increased to recover the higher recycled paper prices in the box
prices. A constant focus on cost take-out also continues to benefit
EBITDA margins. Mill volumes were up year-on-year, despite the loss
of 2.5 days production in the Cerro Gordo mill due to a fire. This
reflects the current solid demand environment for
containerboard.
When adjusting for the impact of a prolonged strike in one of
the corrugated plants in 2012, SKG's underlying corrugated volumes
in Argentina were 3% lower in the first half of 2013, reflecting
the continuing economic and political pressure in the country. As a
result there has been a strong focus on pricing with increases
implemented in the six months to June 2013.
The political situation in Venezuela is calm but challenging.
The economy continues to experience significant inflationary
pressures and demand for scarce goods. As a result of the response
to the shortages and the absence of one-off issues, the Group's
converting operations are experiencing good demand growth across
all product lines with 9% year-on-year packaging volume growth in
the first half of 2013.
The Americas continue to provide important geographic diversity
to SKG's operations and deliver access to higher growth markets
with fundamentally superior margins than those of the mature
European region. With the successful and immediately EPS accretive
addition of SKOC in 2012 at an increasingly attractive EV/EBITDA
multiple, the Group remains firmly committed to future growth in
this region.
Summary Cash Flow
Summary cash flows1 for the second quarter and six months are
set out in the following table.
Restated Restated
3 months to 3 months to 6 months to 6 months to
30-Jun-13 30-Jun-12 30-Jun-13 30-Jun-12
EURm EURm EURm EURm
Pre-exceptional 271 254 512 498
EBITDA
Exceptional (4) - (17) -
items
Cash interest (54) (59) (108) (120)
expense
Working (18) (9) (116) (97)
capital
change
Current (2) (1) (5) (5)
provisions
Capital (68) (63) (137) (126)
expenditure
Change in (4) (2) 3 (29)
capital
creditors
Tax paid (21) (33) (37) (47)
Sale of fixed 1 3 1 11
assets
Other (6) (27) (24) (38)
Free cash flow 95 63 72 47
Share issues 1 1 4 5
Purchase of - - (15) (13)
own shares
Sale - - - 1
of businesses
and
investments
Purchase (2) (1) (5) (7)
of investments
Dividends (50) (36) (50) (37)
Derivative - (2) - (1)
termination
payments
Net 44 25 6 (5)
cash
inflow/(outflow)
Net - - (1) -
debt/cash
acquired/disposed
Deferred debt (3) (6) (12) (10)
issue
costs
amortised
Currency 13 (29) (18) (18)
translation
adjustments
Decrease/(increase) 54 (10) (25) (33)
in net debt
1 The summary cash flow is prepared on a different basis to the
Consolidated Statement of Cash Flows under IFRS. The principal
difference is that the summary cash flow details movements
in net debt while the IFRS cash flow details movements in
cash and cash equivalents. In addition, the IFRS cash flow has
different sub-headings to those used in the summary cash
flow. A reconciliation of the free cash flow to cash generated
from operations in the IFRS cash flow is set out below.
6 months to 6 months to
30-Jun-13 30-Jun-12
EURm EURm
Free cash 72 47
flow
Add Cash interest 108 120
back:
Capital expenditure (net of change in capital creditors) 134 155
Tax payments 37 47
Financing activities 3 -
Less: Sale of fixed assets (1) (11)
Profit on sale of assets and businesses - non exceptional (3) (3)
Receipt of capital grants (1) -
Dividends received from associates (1) (1)
Non-cash financing activities (1) (7)
Cash generated from 347 347
operations
Capital Resources
The Group's primary sources of liquidity are cash flow from
operations and borrowings under the revolving credit facility. The
Group's primary uses of cash are for debt service and capital
expenditure.
At 30 June 2013 Smurfit Kappa Treasury Funding Limited had
outstanding US$292.3 million 7.50% senior debentures due 2025 and
the Group had outstanding EUR203 million variable funding notes
issued under the EUR250 million accounts receivable securitisation
programme maturing in November 2015.
At 30 June 2013, Smurfit Kappa Acquisitions had outstanding
EUR200 million 5.125% senior secured notes due 2018, US$300 million
4.875% senior secured notes due 2018, EUR400 million 4.125% senior
secured notes due 2020 and EUR250 million senior secured floating
rate notes due 2020. In addition, Smurfit Kappa Acquisitions had
outstanding EUR500 million 7.25% senior secured notes due 2017 and
EUR500 million 7.75% senior secured notes due 2019. At 30 June
2013, the Group's senior credit facility comprised a EUR360 million
Tranche B maturing in 2016 and a EUR362 million Tranche C maturing
in 2017. In addition, as at 30 June 2013, the facility included a
EUR525 million revolving credit facility which was substantially
undrawn apart from EUR22.3 million drawn under various ancillary
facilities and letters of credit.
The following table provides the range of interest rates as at
30 June 2013 for each of the drawings under the various senior
credit facility term loans.
BORROWING ARRANGEMENT CURRENCY INTEREST RATE
Term Loan B EUR 3.738% - 3.847%
USD 3.905%
Term Loan C EUR 3.988% - 4.097%
USD 4.155%
Borrowings under the revolving credit facility are available to
fund the Group's working capital requirements, capital expenditures
and other general corporate purposes.
On 24 July, the Group successfully completed a new five-year
unsecured EUR1,375 million refinancing of its senior credit
facility comprising a EUR750 million term loan with a margin of
2.25% and a EUR625 million revolving credit facility with a margin
of 2.00%. The term loan is repayable EUR125 million on 24 July
2016, EUR125 million 24 July 2017 with the balance of EUR500
million repayable on the maturity date. In connection with the
refinancing, the collateral securing the obligations under the
Group's various outstanding senior notes and debentures have also
been released and the senior notes and debentures are therefore now
unsecured. The new unsecured senior credit facility is supported by
substantially the same guarantee arrangements as the old senior
credit facility. The existing senior notes and debentures likewise
continue to have substantially similar guarantee arrangements as
supported those instruments prior to the refinancing.
In addition, on 3 July the Group put in place a new five-year
trade receivables securitisation programme of up to EUR175 million
utilising the Group's receivables in Austria, Belgium, Italy and
the Netherlands. The programme, which has been arranged by Rabobank
and carries a margin of 1.70%, will complement the Group's existing
EUR250 million securitisation programme.
Market Risk and Risk Management Policies
The Group is exposed to the impact of interest rate changes and
foreign currency fluctuations due to its investing and funding
activities and its operations in different foreign currencies.
Interest rate risk exposure is managed by achieving an appropriate
balance of fixed and variable rate funding. The Group had fixed an
average of 81% of its interest cost on borrowings over the
following twelve months.
Our fixed rate debt comprised mainly EUR500 million 7.25% senior
secured notes due 2017, EUR500 million 7.75% senior secured notes
due 2019, EUR200 million 5.125% senior secured notes due 2018,
US$300 million 4.875% senior secured notes due 2018 (US$50 million
swapped to floating), EUR400 million 4.125% senior secured notes
due 2020 and US$292.3 million 7.50% senior debentures due 2025. In
addition, the Group also has EUR610 million in interest rate swaps
with maturity dates ranging from January 2014 to July 2014.
Market Risk and Risk Management Policies (continued)
Our earnings are affected by changes in short-term interest
rates as a result of our floating rate borrowings. If LIBOR
interest rates for these borrowings increase by one percent, our
interest expense would increase, and income before taxes would
decrease, by approximately EUR8 million over the following twelve
months. Interest income on our cash balances would increase by
approximately EUR5 million assuming a one percent increase in
interest rates earned on such balances over the following twelve
months.
The Group uses foreign currency borrowings, currency swaps,
options and forward contracts in the management of its foreign
currency exposures.
Principal Risks and Uncertainties
Risk assessment and evaluation is an integral part of the
management process throughout the Group. Risks are identified,
evaluated and appropriate risk management strategies are
implemented at each level.
The key business risks are identified by the senior management
team. The Board in conjunction with senior management identifies
major business risks faced by the Group and determines the
appropriate course of action to manage these risks.
The principal risks and uncertainties faced by the Group were
outlined in our 2012 annual report on pages 45-46. The annual
report is available on our website www.smurfitkappa.com.
The principal risks and uncertainties remain substantially the
same for the remaining six months of the financial year and are
summarised below:
-- If the current economic climate were to deteriorate and result in an
increased economic slowdown which was sustained over any
significant
length of time, or the sovereign debt crisis (including its
impact on
the euro) were to intensify, it could adversely affect the
Group's
financial position and results of operations
-- The cyclical nature of the packaging industry could result in
overcapacity and consequently threaten the Group's pricing
structure
-- If operations at any of the Group's facilities (in particular its key
mills) were interrupted for any significant length of time it
could
adversely affect the Group's financial position and results
of
operations
-- Price fluctuations in raw materials and energy costs could adversely
affect the Group's manufacturing costs
-- The Group is exposed to currency exchange rate fluctuations and in
addition, to currency exchange controls in Venezuela and
Argentina
-- The Group may not be able to attract and retain suitably qualified
employees as required for its business
-- The Group is subject to a growing number of environmental laws and
regulations, and the cost of compliance or the failure to comply
with
current and future laws and regulations may negatively affect
the
Group's business
-- The Group is exposed to potential risks in relation to its Venezuelan
operations
-- The Group is subject to anti-trust and similar legislation in the
jurisdictions in which it operates.
The Board regularly monitors all of the above risks and
appropriate actions are taken to mitigate those risks or address
their potential adverse consequences.
Consolidated Income Statement - Six Months
Restated
6 months to 30-Jun-13 6 months to 30-Jun-12
Unaudited Unaudited
Pre-exceptional2013 Exceptional2013 Total2013 Pre-exceptional2012 Exceptional2012 Total2012
EURm EURm EURm EURm EURm EURm
Revenue 3,908 - 3,908 3,680 - 3,680
Cost of sales (2,786) (9) (2,795) (2,624) - (2,624)
Gross profit 1,122 (9) 1,113 1,056 - 1,056
Distribution costs (311) - (311) (290) - (290)
Administrative (505) - (505) (464) - (464)
expenses
Other operating 1 - 1 1 28 29
income
Other operating - (23) (23) - - -
expenses
Operating profit 307 (32) 275 303 28 331
Finance costs (158) (6) (164) (169) - (169)
Finance income 9 6 15 20 - 20
Share 1 - 1 2 - 2
of associates'
profit (after tax)
Profit before 159 (32) 127 156 28 184
income tax
Income tax expense (50) (71)
Profit for the 77 113
financial
period
Attributable to:
Owners of the 73 110
parent
Non-controlling 4 3
interests
Profit for the 77 113
financial
period
Earnings per share
Basic earnings per 32.1 49.4
share - cent
Diluted earnings 31.8 48.5
per share - cent
The notes to the condensed Group interim financial statements
form an integral part of this report.
Consolidated Income Statement - Second Quarter
Restated
3 months to 30-Jun-13 3 months to 30-Jun-12
Unaudited Unaudited
Pre-exceptional2013 Exceptional2013 Total2013 Pre-exceptional2012 Exceptional2012 Total2012
EURm EURm EURm EURm EURm EURm
Revenue 2,019 - 2,019 1,857 - 1,857
Cost of sales (1,423) (9) (1,432) (1,327) - (1,327)
Gross profit 596 (9) 587 530 - 530
Distribution costs (159) - (159) (147) - (147)
Administrative (270) - (270) (229) - (229)
expenses
Other operating - - - 1 - 1
income
Other operating - (10) (10) - - -
expenses
Operating profit 167 (19) 148 155 - 155
Finance costs (88) - (88) (80) - (80)
Finance income 8 1 9 5 - 5
Share 1 - 1 2 - 2
of associates'
profit (after tax)
Profit before 88 (18) 70 82 - 82
income tax
Income tax expense (26) (30)
Profit for the 44 52
financial
period
Attributable to:
Owners of the 41 52
parent
Non-controlling 3 -
interests
Profit for the 44 52
financial
period
Earnings per share
Basic earnings per 17.7 23.4
share - cent
Diluted earnings 17.5 23.0
per share - cent
Consolidated Statement of Comprehensive Income - Six Months
Restated
6 months to 6 months to
30-Jun-13 30-Jun-12
Unaudited Unaudited
EURm EURm
Profit for the financial period 77 113
Other comprehensive income:
Items that may subsequently be
reclassified to profit or loss
Foreign currency translation
adjustments:
- Arising in the period (212) 87
- Recycled to Consolidated - (17)
Income Statement
on disposal of subsidiary
Effective portion of changes in fair
value of cash flow hedges:
- Movement out of reserve 14 12
- New fair value adjustments (4) (5)
into reserve
- Movement in deferred tax (1) (1)
(203) 76
Items which will not be subsequently
reclassified to profit or loss
Defined benefit pension plans:
- Actuarial loss (8) (68)
- Movement in deferred tax 2 9
(6) (59)
Total other comprehensive (209) 17
(expense)/income
Total comprehensive (expense)/income (132) 130
for the financial period
Attributable to:
Owners of the parent (109) 110
Non-controlling interests (23) 20
Total comprehensive (expense)/income (132) 130
for the financial period
The notes to the condensed Group interim financial statements
form an integral part of this report.
Consolidated Statement of Comprehensive Income - Second
Quarter
Restated
3 months to 3 months to
30-Jun-13 30-Jun-12
Unaudited Unaudited
EURm EURm
Profit for the financial period 44 52
Other comprehensive income:
Items that may subsequently be
reclassified to profit or loss
Foreign currency translation
adjustments:
- Arising in the period (98) 52
Effective portion of changes in fair
value of cash flow hedges:
- Movement out of reserve 9 6
- New fair value adjustments (12) (1)
into reserve
- Movement in deferred tax - (1)
(101) 56
Items which will not be subsequently
reclassified to profit or loss
Defined benefit pension plans:
- Actuarial loss (50) (40)
- Movement in deferred tax 11 7
(39) (33)
Total other comprehensive (140) 23
(expense)/income
Total comprehensive (expense)/income (96) 75
for the financial period
Attributable to:
Owners of the parent (89) 63
Non-controlling interests (7) 12
Total comprehensive (expense)/income (96) 75
for the financial period
Consolidated Balance Sheet
Restated Restated
30-Jun-13 30-Jun-12 31-Dec-12
Unaudited Unaudited Unaudited
EURm EURm EURm
ASSETS
Non-current assets
Property, plant 2,946 2,984 3,076
and equipment
Goodwill and 2,302 2,249 2,336
intangible
assets
Available-for-sale 33 32 33
financial assets
Investment in 16 16 16
associates
Biological assets 111 127 127
Trade and other 5 4 4
receivables
Derivative financial - 12 1
instruments
Deferred income 199 162 191
tax assets
5,612 5,586 5,784
Current assets
Inventories 744 708 745
Biological assets 10 11 6
Trade and other 1,548 1,480 1,422
receivables
Derivative financial 7 8 10
instruments
Restricted cash 9 11 15
Cash and cash 462 502 447
equivalents
2,780 2,720 2,645
Total assets 8,392 8,306 8,429
EQUITY
Capital and reserves
attributable
to the owners of
the parent
Equity share capital - - -
Share premium 1,976 1,950 1,972
Other reserves 265 451 444
Retained earnings (56) (294) (159)
Total equity 2,185 2,107 2,257
attributable
to
the owners of
the parent
Non-controlling 196 211 212
interests
Total equity 2,381 2,318 2,469
LIABILITIES
Non-current
liabilities
Borrowings 3,211 3,228 3,188
Employee benefits 724 712 738
Derivative financial 54 44 65
instruments
Deferred income tax 217 211 211
liabilities
Non-current income 14 12 15
tax liabilities
Provisions for 44 56 57
liabilities
and charges
Capital grants 12 12 12
Other payables 7 8 9
4,283 4,283 4,295
Current liabilities
Borrowings 77 70 66
Trade and other 1,578 1,531 1,534
payables
Current income tax 14 40 4
liabilities
Derivative financial 39 49 43
instruments
Provisions for 20 15 18
liabilities
and charges
1,728 1,705 1,665
Total liabilities 6,011 5,988 5,960
Total equity and 8,392 8,306 8,429
liabilities
The notes to the condensed Group interim financial statements
form an integral part of this report.
Consolidated Statement of Changes in Equity
Restated
Attributable to the owners of the parent Non-controllinginterests Totalequity
Equitysharecapital Sharepremium Otherreserves Retainedearnings Total
EURm EURm EURm EURm EURm EURm EURm
Unaudited
At 1 January 2013 - 1,972 444 (159) 2,257 212 2,469
Profit for the - - - 73 73 4 77
financial
period
Other comprehensive
income
Foreign currency - - (185) - (185) (27) (212)
translation
adjustments
Defined benefit - - - (6) (6) - (6)
pension plans
Effective portion - - 9 - 9 - 9
of changes in
fair value of cash
flow hedges
Total comprehensive - - (176) 67 (109) (23) (132)
(expense)/income
for the financial
period
Shares issued - 4 - - 4 - 4
Hyperinflation - - - 83 83 10 93
adjustment
Dividends paid - - - (47) (47) (3) (50)
Share-based payment - - 12 - 12 - 12
Shares acquired by - - (15) - (15) - (15)
SKG Employee Trust
At 30 June 2013 - 1,976 265 (56) 2,185 196 2,381
At 1 January 2012 - 1,945 391 (340) 1,996 191 2,187
Profit for the - - - 110 110 3 113
financial
period
Other comprehensive
income
Foreign currency - - 53 - 53 17 70
translation
adjustments
Defined benefit - - - (59) (59) - (59)
pension plans
Effective portion - - 6 - 6 - 6
of changes in
fair value of cash
flow hedges
Total comprehensive - - 59 51 110 20 130
income
for the financial
period
Shares issued - 5 - - 5 - 5
Hyperinflation - - - 28 28 4 32
adjustment
Dividends paid - - - (33) (33) (4) (37)
Share-based payment - - 14 - 14 - 14
Shares acquired by - - (13) - (13) - (13)
SKG Employee Trust
At 30 June 2012 - 1,950 451 (294) 2,107 211 2,318
An analysis of the movements in Other Reserves is provided in
Note 15.
The notes to the condensed Group interim financial statements
form an integral part of this report.
Consolidated Statement of Cash Flows
Restated
6 months to 6 months to
30-Jun-13 30-Jun-12
Unaudited Unaudited
EURm EURm
Cash flows from operating
activities
Profit before income tax 127 184
Net finance costs 149 149
Depreciation charge 170 163
Impairment of assets 9 -
Amortisation of intangible assets 12 10
Amortisation of capital grants (1) (1)
Share-based payment expense 12 14
Profit on purchase/sale of (3) (29)
assets and businesses
Share of associates' (1) (2)
profit (after tax)
Net movement in working capital (114) (104)
Change in biological assets 11 8
Change in employee benefits (28) (48)
and other provisions
Other 4 3
Cash generated from operations 347 347
Interest paid (105) (125)
Income taxes paid:
Overseas corporation tax (net (37) (47)
of tax refunds) paid
Net cash inflow from 205 175
operating activities
Cash flows from investing
activities
Interest received 2 4
Additions to property, plant and (131) (151)
equipment and biological assets
Additions to intangible assets (3) (3)
Receipt of capital grants 1 -
Decrease in restricted cash 5 1
Disposal of property, 4 14
plant and equipment
Dividends received 1 1
from associates
Purchase of subsidiaries and (3) (5)
non-controlling interests
Deferred consideration paid (3) (1)
Net cash outflow from (127) (140)
investing activities
Cash flows from financing
activities
Proceeds from issue of 4 5
new ordinary shares
Proceeds from bond issuance 400 -
Purchase of own shares (15) (13)
Increase in interest-bearing 28 7
borrowings
Payment of finance leases (3) (4)
Repayment of borrowings (391) (330)
Derivative termination payments - (1)
Deferred debt issue costs (9) (12)
Dividends paid to shareholders (47) (33)
Dividends paid to non-controlling (3) (4)
interests
Net cash outflow from (36) (385)
financing activities
Increase/(decrease) in cash 42 (350)
and cash equivalents
Reconciliation of opening
to closing
cash and cash equivalents
Cash and cash equivalents 423 825
at 1 January
Currency translation adjustment (22) 8
Increase/(decrease) in cash 42 (350)
and cash equivalents
Cash and cash equivalents 443 483
at 30 June
An analysis of the Net Movement in Working Capital is provided
in Note 11.
The notes to the condensed Group interim financial statements
form an integral part of this report.
Notes to the condensed Group interim financial statements
1.General Information
Smurfit Kappa Group plc ('SKG plc' or 'the Company') and its
subsidiaries (together 'SKG' or 'the Group') manufacture,
distribute and sell containerboard, corrugated containers and other
paper-based packaging products such as solidboard and graphicboard.
The Company is a public limited company whose shares are publicly
traded. It is incorporated and tax resident in Ireland. The address
of its registered office is Beech Hill, Clonskeagh, Dublin 4,
Ireland.
2.Basis of Preparation
The condensed Group interim financial statements included in
this report have been prepared in accordance with the Transparency
(Directive 2004/109/EC) Regulations 2007, the related Transparency
Rules of the Irish Financial Services Regulatory Authority and with
International Accounting Standard 34, Interim Financial Reporting
('IAS 34') as adopted by the European Union. Certain quarterly
information and the balance sheet as at 30 June 2012 have been
included in this report; this information is supplementary and not
required by IAS 34. This report should be read in conjunction with
the consolidated financial statements for the year ended 31
December 2012 included in the Group's 2012 annual report which is
available on the Group website www.smurfitkappa.com. The accounting
policies and methods of computation and presentation adopted in the
preparation of the condensed Group interim financial statements are
consistent with those described and applied in the annual report
for the financial year ended 31 December 2012 with the exception of
the standards described below.
IAS 19 Revised
The IASB has issued a number of amendments to IAS 19, Employee
Benefits, which became effective for the Group from 1 January 2013.
The main effect on the Group financial statements stems from the
removal of the concept of expected return on plan assets. As a
result the expected return on plan assets is now calculated using
the same discount rate as that used to determine the present value
of plan liabilities. The difference between the implied return and
the actual return on assets is recognised in other comprehensive
income. The amendments have been applied retrospectively in
accordance with the transitional provisions of the standard,
resulting in the adjustment of prior year financial information.
The effect of these adjustments is shown in Note 7.
Amendments to IAS 1
The amended IAS 1, Presentation of Financial Statements,
requires the grouping of items of other comprehensive income that
may be reclassified to profit or loss at a future point in time
separately from those items which will never be reclassified. The
revised standard, which has been adopted by the Group with effect
from 1 January 2013, affects presentation only and does not impact
the Group's financial position or performance.
There are a number of other changes to IFRS issued and effective
from 1 January 2013 which include IFRS 10, Consolidated Financial
Statements, IFRS 11, Joint Arrangements, IFRS 12, Disclosure of
Interests in Other Entities, IFRS 13, Fair Value Measurement, IAS
27, Separate Financial Statements, and IAS 28, Investments in
Associates and Joint Ventures. They either do not have an effect on
the consolidated financial statements or they are not currently
relevant for the Group.
The Group is a highly integrated paper and paperboard
manufacturer with leading market positions, quality assets and
broad geographic reach. The financial position of the Group, its
cash generation, capital resources and liquidity continue to
provide a stable financing platform. Having made enquiries, the
Directors have a reasonable expectation that the Company, and the
Group as a whole, have adequate resources to continue in
operational existence for the foreseeable future. For this reason,
they continue to adopt the going concern basis in preparing the
half year financial statements.
The condensed Group interim financial statements include all
adjustments that management considers necessary for a fair
presentation of such financial information. All such adjustments
are of a normal recurring nature. Certain tables in this interim
statement may not add precisely due to rounding.
The Group's auditors have not audited or reviewed the condensed
Group interim financial statements contained in this report.
2.Basis of Preparation (continued)
The condensed Group interim financial statements presented do
not constitute full group accounts within the meaning of Regulation
40(1) of the European Communities (Companies: Group Accounts)
Regulations, 1992 of Ireland insofar as such group accounts would
have to comply with all of the disclosure and other requirements of
those Regulations. Full Group accounts for the year ended 31
December 2012 will be filed with the Irish Registrar of Companies
in due course. The audit report on those Group accounts was
unqualified.
3.Segmental Analyses
The Group has determined reportable operating segments based on
the manner in which reports are reviewed by the chief operating
decision maker ('CODM'). The CODM is determined to be the executive
management team in assessing performance, allocating resources and
making strategic decisions. Prior to the acquisition of Orange
County Container Group ('OCCG'), the two business segments
identified were Europe and Latin America. Because of the high level
of integration between OCCG and our existing operations in Mexico,
OCCG was included with our existing Latin American operations which
were renamed as the Americas. OCCG has been renamed as Smurfit
Kappa Orange County ('SKOC').
The Europe segment is highly integrated. It includes a system of
mills and plants that primarily produces a full line of
containerboard that is converted into corrugated containers. The
Americas segment comprises all forestry, paper, corrugated and
folding carton activities in a number of Latin American countries
and the operations of SKOC. Inter-segment revenue is not material.
No operating segments have been aggregated for disclosure
purposes.
Segment disclosures are based on operating segments identified
under IFRS 8. Segment profit is measured based on earnings before
interest, tax, depreciation, amortisation, exceptional items and
share-based payment expense ('EBITDA before exceptional items').
Segment assets consist primarily of property, plant and equipment,
biological assets, goodwill and intangible assets, inventories,
trade and other receivables, deferred income tax assets and cash
and cash equivalents. Group centre assets are comprised primarily
of available-for-sale financial assets, derivative financial
assets, deferred income tax assets, cash and cash equivalents and
restricted cash.
Restated
6 months to 30-Jun-13 6 months to 30-Jun-12
Europe TheAmericas Total Europe TheAmericas Total
EURm EURm EURm EURm EURm EURm
Revenue
and
Results
Revenue 2,956 952 3,908 3,005 675 3,680
EBITDA 371 161 532 416 97 513
before
exceptional
items
Segment (6) (17) (23) 28 - 28
exceptional
items
EBITDA 365 144 509 444 97 541
after
exceptional
items
Unallocated (20) (15)
centre
costs
Share-based (12) (14)
payment
expense
Depreciation (181) (171)
and
depletion
(net)
Amortisation (12) (10)
Impairment (9) -
of
assets
Finance (164) (169)
costs
Finance 15 20
income
Share 1 2
of
associates'
profit
(after
tax)
Profit 127 184
before
income
tax
Income (50) (71)
tax
expense
Profit 77 113
for
the
financial
period
Assets
Segment 6,183 1,860 8,043 6,249 1,625 7,874
assets
Investment 2 14 16 2 14 16
in
associates
Group 333 416
centre
assets
Total 8,392 8,306
assets
3.Segmental Analyses (continued)
Restated
3 months to 30-Jun-13 3 months to 30-Jun-12
Europe TheAmericas Total Europe TheAmericas Total
EURm EURm EURm EURm EURm EURm
Revenue
and
Results
Revenue 1,499 520 2,019 1,515 342 1,857
EBITDA 193 96 289 217 42 259
before
exceptional
items
Segment (6) (4) (10) - - -
exceptional
items
EBITDA 187 92 279 217 42 259
after
exceptional
items
Unallocated (18) (5)
centre
costs
Share-based (7) (6)
payment
expense
Depreciation (91) (87)
and
depletion
(net)
Amortisation (6) (6)
Impairment (9) -
of
assets
Finance (88) (80)
costs
Finance 9 5
income
Share 1 2
of
associates'
profit
(after
tax)
Profit 70 82
before
income
tax
Income (26) (30)
tax
expense
Profit 44 52
for
the
financial
period
4.Exceptional Items
6 months to 6 months to
The following items are regarded 30-Jun-13 30-Jun-12
as exceptional in nature:
EURm EURm
Gain on disposal of assets - 28
and operations
Currency trading loss on Venezuelan (15) -
Bolivar devaluation
Impairment loss on property, (9) -
plant and equipment
Reorganisation and restructuring (7) -
costs
Business acquisition costs (1) -
Exceptional items included (32) 28
in operating profit
Exceptional finance cost (6) -
Exceptional finance income 6 -
Exceptional items included - -
in net finance costs
Exceptional items charged within operating profit in the six
months to June 2013 amounted to EUR32 million, EUR15 million of
which related to the temporary closure of the Townsend Hook mill in
the UK (comprising an impairment charge of EUR9 million and
reorganisation and restructuring costs of EUR6 million). A further
EUR1 million of reorganisation costs related to the consolidation
of the Group's two plants in Juarez, Mexico, into one plant. A
currency trading loss of EUR15 million was recorded as a result of
the devaluation of the Venezuelan Bolivar in February 2013,
comprising EUR12 million booked in the first quarter and an
adjustment of EUR3 million in the second quarter for hyperinflation
and re-translation. The original loss reflected the higher cost to
the Venezuelan operations of discharging its non-Bolivar
denominated net payables following the devaluation. Business
acquisition costs of EUR1 million related to the acquisition of
SKOC.
4.Exceptional Items (continued)
Exceptional finance costs in the six months to June 2013
comprised an offsetting charge of EUR6 million in respect of the
accelerated amortisation of debt issue costs and a gain of EUR6
million in Venezuela on the value of US dollar denominated
intra-group loans, following the devaluation of the Bolivar. The
accelerated amortisation of debt issue costs arose from the
repayment of part of the senior credit facility from the proceeds
of January's EUR400 million bond issue.
In 2012, we reported an exceptional gain of EUR28 million in
relation to the disposal of assets and operations. This comprised
EUR10 million in respect of the sale of land at SKG's former
Valladolid mill in Spain (operation closed in 2008), together with
EUR18 million relating to the disposal of a company in Slovakia.
This gain primarily related to the reclassification (under IFRS) of
the cumulative translation differences from the Consolidated
Statement of Comprehensive Income to the Consolidated Income
Statement.
5.Finance Cost and Income
Restated
6 months to 6 months to
30-Jun-13 30-Jun-12
EURm EURm
Finance cost:
Interest payable on bank 41 68
loans and overdrafts
Interest payable on other borrowings 76 68
Exceptional finance costs associated 6 -
with debt restructuring
Foreign currency translation 4 11
loss on debt
Fair value loss on derivatives 1 1
not designated as hedges
Net interest cost on net 13 15
pension liability
Net monetary loss - hyperinflation 23 6
Total finance cost 164 169
Finance income:
Other interest receivable (2) (4)
Foreign currency translation (3) (3)
gain on debt
Exceptional foreign currency (6) -
translation gain
Fair value gain on derivatives (4) (13)
not designated as hedges
Total finance income (15) (20)
Net finance cost 149 149
6.Income Tax Expense
Income tax expense recognised in the Consolidated Income
Statement
Restated
6 months to 6 months to
30-Jun-13 30-Jun-12
EURm EURm
Current tax:
Europe 15 28
The Americas 28 24
43 52
Deferred tax 7 19
Income tax expense 50 71
Current tax is analysed as follows:
Ireland 1 2
Foreign 42 50
43 52
Income tax recognised
in the Consolidated
Statement of Comprehensive Income
Restated
6 months to 6 months to
30-Jun-13 30-Jun-12
EURm EURm
Arising on actuarial loss (2) (9)
on defined benefit plans
Arising on qualifying derivative 1 1
cash flow hedges
(1) (8)
The reduction in income tax expense compared to 2012 is largely
explained by lower taxable profits, a change in the geographical
mix of profits, lower asset sales in 2013 and a number of
non-recurring items including a deferred tax credit for accumulated
tax losses. The income tax expense also includes the effects in
2013 of the acquisition of SKOC in the US which was completed in
the fourth quarter of 2012. The tax expense is recognised based on
an estimate of the weighted average annual tax rate expected for
the full financial year.
There is a tax credit associated with exceptional items in 2013
of EUR5 million compared to a EUR2 million tax expense in 2012.
7.Employee Benefits - Defined Benefit Plans
The table below sets out the components of the defined benefit
cost for the period:
Restated
6 months to 6 months to
30-Jun-13 30-Jun-12
EURm EURm
Current service cost 26 16
Recognition of net loss - 1
Gain on curtailment - (12)
Net interest cost on net 13 15
pension liability
Defined benefit cost 39 20
Included in cost of sales, distribution costs and administrative
expenses is a defined benefit cost of EUR26 million (2012: EUR5
million). Net interest cost on net pension liability of EUR13
million (2012: EUR15 million) is included in finance costs in the
Consolidated Income Statement
The amounts recognised in the Consolidated Balance Sheet were as
follows:
Restated
30-Jun-13 31-Dec-12
EURm EURm
Present value of funded or partially (1,807) (1,832)
funded obligations
Fair value of plan assets 1,579 1,598
Deficit in funded or partially (228) (234)
funded plans
Present value of wholly (496) (504)
unfunded obligations
Net pension liability (724) (738)
The employee benefits provision has decreased from EUR738
million at 31 December 2012 to EUR724 million at 30 June 2013. The
main reason for this is favourable exchange rate movements over the
period.
Restatement of prior periods in accordance with IAS 19
The Group adopted IAS 19 (as revised) from 1 January 2013. In
accordance with the previous version of IAS 19, the Consolidated
Income Statement included an interest cost based on present value
calculations of projected pension payments and finance income based
on the expected rates of income generated by plan assets. Generally
the rate of expected income on plan assets exceeded the discount
rate used in calculating the interest cost. Under the revised
standard the interest cost and expected return on plan assets have
been replaced with a net interest amount and the rate of return on
plan assets is calculated using the same discount rate as that used
to determine the present value of plan liabilities. The difference
between the lower rate of return on plan assets and the actual
return on assets is recognised in other comprehensive income,
largely offsetting the higher net interest cost in the income
statement. There are other minor changes which we have allowed for
but they do not have a material effect on the financial
statements.
The revised standard has been applied retrospectively in
accordance with the transitional provisions of the standard,
resulting in the adjustment of prior year financial information.
The effects of adoption on previously reported financial
information are shown in the following table.
7.Employee Benefits - Defined Benefit Plans (continued)
Previouslyreported Adjustments Restated
EURm EURm EURm
As
at 1 January
2012
Employee 655 1 656
benefits
- non-current
liabilities
Provisions 55 (2) 53
for
liabilities
and charges
- non-current
liabilities
Deferred 177 - 177
income
tax assets
Retained (341) 1 (340)
earnings
As at and for
the year
ended 31
December
2012
Employee 737 1 738
benefits
- non-current
liabilities
Provisions 59 (2) 57
for
liabilities
and charges
- non-current
liabilities
Deferred 191 - 191
income
tax assets
Retained (160) 1 (159)
earnings
Cost of sales (5,238) (2) (5,240)
Administrative (938) (2) (940)
expenses
Finance costs (399) 71 (328)
Finance 93 (79) 14
income
Profit before 331 (12) 319
income tax
Income tax (71) 3 (68)
expense
Profit for 260 (9) 251
the
financial
year
Attributable 249 (9) 240
to owners
of the parent
Basic earnings 111.2 (4.3) 106.9
per
share - cent
Diluted 108.3 (4.1) 104.2
earnings
per share
- cent
Other
comprehensive
income
Defined
benefit
pension
plans:
- Actuarial (108) 12 (96)
loss
- Movement in 19 (3) 16
deferred tax
As at and
for the
six months
ended 30 June
2012
Employee 711 1 712
benefits
- non-current
liabilities
Provisions 58 (2) 56
for
liabilities
and charges
- non-current
liabilities
Deferred 162 - 162
income
tax assets
Retained (295) 1 (294)
earnings
Cost of sales (2,623) (1) (2,624)
Administrative (463) (1) (464)
expenses
Finance costs (204) 35 (169)
Finance 59 (39) 20
income
Profit before 190 (6) 184
income tax
Income tax (72) 1 (71)
expense
Profit for 118 (5) 113
the
financial
period
Attributable 115 (5) 110
to owners
of the parent
Basic earnings 51.6 (2.2) 49.4
per
share - cent
Diluted 50.6 (2.1) 48.5
earnings
per share
- cent
Other
comprehensive
income
Defined
benefit
pension
plans:
- Actuarial (74) 6 (68)
loss
- Movement in 10 (1) 9
deferred tax
8.Earnings Per Share
Basic
Basic earnings per share is calculated by dividing the profit
attributable to the owners of the parent by the weighted average
number of ordinary shares in issue during the period.
Restated
6 months to 6 months to
30-Jun-13 30-Jun-12
Profit attributable to the owners 73 110
of the parent (EUR million)
Weighted average number of ordinary 228 223
shares in issue (million)
Basic earnings per share (cent) 32.1 49.4
Diluted
Diluted earnings per share is calculated by adjusting the
weighted average number of ordinary shares outstanding to assume
conversion of all dilutive potential ordinary shares which comprise
convertible shares issued under the management equity plans.
Restated
6 months to 6 months to
30-Jun-13 30-Jun-12
Profit attributable to the owners 73 110
of the parent (EUR million)
Weighted average number of ordinary 228 223
shares in issue (million)
Potential dilutive ordinary 2 4
shares assumed (million)
Diluted weighted average ordinary 230 227
shares (million)
Diluted earnings per share (cent) 31.8 48.5
Pre-exceptional
Restated
6 months to 6 months to
30-Jun-13 30-Jun-12
Profit attributable to the owners 73 110
of the parent (EUR million)
Exceptional items included 32 (28)
in profit before
income tax (Note 4) (EUR million)
Income tax on exceptional (5) 2
items (EUR million)
Pre-exceptional profit 100 84
attributable to
the owners of the parent
(EUR million)
Weighted average number 228 223
of ordinary
shares in issue (million)
Pre-exceptional basic earnings 43.9 37.6
per share (cent)
Diluted weighted average ordinary 230 227
shares (million)
Pre-exceptional diluted earnings 43.5 36.9
per share (cent)
9.Dividends
During the period, the final dividend for 2012 of 20.5 cent per
share was paid to the holders of ordinary shares.
10.Property, Plant and Equipment
Land andbuildings Plant Total
andequipment
EURm EURm EURm
Six months
ended
30 June 2013
Opening net 1,119 1,957 3,076
book
amount
Reclassifications 26 (34) (8)
Additions 1 122 123
Acquisitions - 1 1
Depreciation (25) (145) (170)
charge
for the
period
Impairments - (9) (9)
Retirements (1) - (1)
and
disposals
Hyperinflation 21 21 42
adjustment
Foreign (48) (60) (108)
currency
translation
adjustment
At 30 June 1,093 1,853 2,946
2013
Year ended
31
December
2012
Opening net 1,115 1,858 2,973
book
amount
Reclassifications 10 (15) (5)
Additions 13 247 260
Acquisitions 1 118 119
Depreciation (44) (288) (332)
charge
for the year
Retirements (5) (2) (7)
and
disposals
Hyperinflation 17 19 36
adjustment
Foreign 12 20 32
currency
translation
adjustment
At 1,119 1,957 3,076
31 December
2012
11.Net Movement in Working Capital
6 months to 6 months to
30-Jun-13 30-Jun-12
EURm EURm
Change in inventories (28) (5)
Change in trade and (178) (132)
other receivables
Change in trade and 92 33
other payables
Net movement in working capital (114) (104)
12.Analysis of Net Debt
30-Jun-13 31-Dec-12
EURm EURm
Senior credit facility:
Revolving credit facility(1)- (6) (7)
interest at relevant
interbank rate +3.25% on RCF(10)
Tranche B term loan(2a)- 360 550
interest at relevant
interbank rate + 3.625%(10)
Tranche C term loan(2b)- 362 556
interest at relevant
interbank rate + 3.875%(10)
US Yankee bonds (including 224 222
accrued interest)(3)
Bank loans and overdrafts 76 65
Cash (471) (462)
2015 receivables securitisation 201 197
variable funding notes(4)
2017 senior secured notes (including 494 492
accrued interest)(5)
2018 senior secured notes (including 425 423
accrued interest)(6)
2019 senior secured notes (including 494 494
accrued interest)(7)
2020 senior secured notes (including 400 -
accrued interest)(8)
2020 senior secured floating rate notes 247 247
(including accrued interest)(9)
Net debt before finance leases 2,806 2,777
Finance leases 5 8
Net debt including leases 2,811 2,785
Balance of revolving credit facility 6 7
reclassified to debtors
Net debt after reclassification 2,817 2,792
(1) Revolving credit facility ('RCF') of EUR525
million (available under the senior
credit facility) to be repaid in full
in 2016. (a) Revolver loans - nil,
(b) drawn under ancillary facilities and
facilities supported by letters of
credit - nil and (c) other operational
letters of credit EUR22.3 million.
(2a) Tranche B term loan due to be repaid
in 2016. EUR168.4 million prepaid
January - March 2013, EUR25.5 million prepaid April 2013.
(2b) Tranche C term loan due to be repaid
in 2017. EUR149.2 million prepaid
January - March 2013, EUR47.9 million prepaid April 2013.
(3) US$292.3 million 7.50% senior debentures due 2025.
(4) Receivables securitisation variable funding notes due 2015.
(5) EUR500 million 7.25% senior secured notes due 2017.
(6) EUR200 million 5.125% senior secured notes due 2018 and US$300
million 4.875% senior secured notes due 2018.
(7) EUR500 million 7.75% senior secured notes due 2019.
(8) EUR400 million 4.125% senior secured notes
due 2020, issued in January 2013.
(9) EUR250 million senior secured floating rate notes
due 2020. Interest at EURIBOR +3.5%.
(10) The margins applicable to the senior credit
facility are determined as follows:
Net debt/EBITDA ratio RCF Tranche B Tranche C
Greater than 4.0 : 1 4.000% 3.875% 4.125%
4.0 : 1 or less but 3.750% 3.625% 3.875%
more than 3.5 : 1
3.5 : 1 or less but 3.500% 3.625% 3.875%
more than 3.0 : 1
3.0 : 1 or less but 3.250% 3.625% 3.875%
more than 2.5 : 1
2.5 : 1 or less 3.125% 3.500% 3.750%
13.Fair Value Hierarchy
Fair Level 1 Level 2 Level 3 Total
value
measurement
at 30 June
2013
EURm EURm EURm EURm
Available-for-sale
financial
assets:
Listed 1 - - 1
Unlisted - 7 25 32
Derivative
financial
instruments:
Assets at - 5 - 5
fair
value through
Consolidated
Income
Statement
Derivatives - 2 - 2
used
for hedging
Derivative
financial
instruments:
Liabilities - (59) - (59)
at fair
value through
Consolidated
Income
Statement
Derivatives - (34) - (34)
used
for hedging
1 (79) 25 (53)
The fair value of the derivative financial instruments set out
above has been measured using observable market inputs as defined
under IFRS 13, Fair Value Measurement. All are plain derivative
instruments, valued with reference to observable foreign exchange
rates, interest rates or broker prices. The Group uses discounted
cash flow analysis for various available-for-sale financial assets
that are not traded in active markets. There has been no movement
to the level 3 financial instruments from 31 December 2012 to 30
June 2013.
14.Fair Value
The following table sets out the fair value of the Group's
principal financial assets and liabilities. The determination of
these fair values is based on the descriptions set out within Note
2 to the consolidated financial statements of the Group's 2012
annual report.
June 2013
Carrying value Fair value
EURm EURm
Trade and other receivables(1) 1,420 1,420
Available-for-sale financial 33 33
assets(2)
Cash and cash equivalents(3) 462 462
Derivative assets(4) 7 7
Restricted cash 9 9
1,931 1,931
Trade and other payables(1) 1,273 1,273
Senior credit facility(5) 716 720
Receivables securitisation(3) 201 201
Bank overdrafts(3) 76 76
US Yankee bonds(5) 224 249
2017 secured fixed rate notes(5) 494 519
2018 secured fixed rate notes(5) 425 430
2019 secured fixed rate notes(5) 494 535
2020 secured floating 247 250
rate notes(5)
2020 secured fixed rate notes(5) 400 385
4,550 4,638
Finance leases 5 5
4,555 4,643
Derivative liabilities(4) 93 93
4,648 4,736
Total net position (2,717) (2,805)
(1) The fair value of trade and other receivables and
payables is estimated as the present value
of future cash flows, discounted at the market
rate of interest at the reporting date.
(2) The fair value of listed available-for-sale financial
assets is determined by reference
to their bid price at the reporting date.
Unlisted available-for-sale financial
assets are valued using recognised valuation
techniques for the underlying security
including discounted cash flows and similar
unlisted equity valuation models.
(3) The carrying amount reported in the Consolidated
Balance Sheet is estimated
to approximate to fair value because of the short-term maturity
of these instruments and, in the case
of the receivables securitisation,
the variable nature of the facility and re-pricing dates.
(4) The fair value of forward foreign currency
and energy contracts is based on their
listed market price if available. If a
listed market price is not available,
then fair value is estimated by discounting
the difference between the contractual
forward price and the current forward
price for the residual maturity
of the contract using a risk-free interest
rate (based on government bonds). The
fair value of interest rate swaps is based
on discounting estimated future
cash flows based on the terms and maturity
of each contract and using market
interest rates for a similar instrument at the measurement date.
(5) Fair value is based on broker prices at the balance sheet date.
15.Other Reserves
Other reserves included in the Consolidated Statement of Changes
in Equity are comprised of the following:
Reverseacquisitionreserve Cashflow Foreigncurrencytranslationreserve Share-basedpaymentreserve Ownshares Available-for-salereserve
hedgingreserve Total
EURm EURm EURm EURm EURm EURm EURm
At 1 January 2013 575 (26) (198) 105 (13) 1 444
Other comprehensive income
Foreign currency translation - - (185) - - - (185)
adjustments
Effective portion of changes in - 9 - - - - 9
fair value of cash flow hedges
Total other comprehensive - 9 (185) - - - (176)
income/(expense)
Share-based payment - - - 12 - - 12
Shares acquired by - - - - (15) - (15)
SKG Employee Trust
At 30 June 2013 575 (17) (383) 117 (28) 1 265
At 1 January 2012 575 (35) (228) 79 - - 391
Other comprehensive income
Foreign currency translation - - 53 - - - 53
adjustments
Effective portion of changes in - 6 - - - - 6
fair value of cash flow hedges
Total other comprehensive income - 6 53 - - - 59
Share-based payment - - - 14 - - 14
Shares acquired by - - - - (13) - (13)
SKG Employee Trust
At 30 June 2012 575 (29) (175) 93 (13) - 451
16.Venezuela
Hyperinflation
As discussed more fully in the Group's 2012 annual report,
Venezuela became hyperinflationary during 2009 when its cumulative
inflation rate for the past three years exceeded 100%. As a result,
the Group applied the hyperinflationary accounting requirements of
IAS 29 - Financial Reporting in Hyperinflationary Economies to its
Venezuelan operations at 31 December 2009 and for all subsequent
accounting periods.
The index used to reflect current values is derived from a
combination of Banco Central de Venezuela's National Consumer Price
Index from its initial publication in December 2007 and the
Consumer Price Index for the metropolitan area of Caracas for
earlier periods. The level of and movement in the price index at
June 2013 and 2012 are as follows:
30-Jun-13 30-Jun-12
Index at period end 398.6 285.5
Movement in period 25.0% 7.5%
16.Venezuela (continued)
As a result of the entries recorded in respect of
hyperinflationary accounting under IFRS, the Consolidated Income
Statement is impacted as follows: Revenue EUR14 million increase
(2012: EUR12 million increase), pre-exceptional EBITDA EUR2 million
decrease (2012: EUR2 million decrease) and profit after taxation
EUR44 million decrease (2012: EUR20 million decrease). In 2013, a
net monetary loss of EUR23 million (2012: EUR6 million loss) was
recorded in the Consolidated Income Statement. The impact on our
net assets and our total equity is an increase of EUR52 million
(2012: EUR12 million increase).
Devaluation
On 8 February 2013, the Venezuelan government announced the
devaluation of its currency, the Bolivar Fuerte and the termination
of the SITME transaction system. The official exchange rate was
changed from VEF 4.3 per US dollar to VEF 6.3 per US dollar. As a
result of the devaluation the Group recorded a reduction in net
assets of approximately EUR142 million in relation to these
operations and a reduction in the euro value of the Group's cash
balances of EUR28 million.
17.Related Party Transactions
Details of related party transactions in respect of the year
ended 31 December 2012 are contained in Note 30 to the consolidated
financial statements of the Group's 2012 annual report. The Group
continued to enter into transactions in the normal course of
business with its associates and other related parties during the
period. There were no transactions with related parties in the
first half of 2013 or changes to transactions with related parties
disclosed in the 2012 consolidated financial statements that had a
material effect on the financial position or the performance of the
Group.
18.Post Balance Sheet Events
On 24 July 2013, the Group successfully completed the
refinancing of its existing senior secured credit facility with a
new five-year unsecured relationship bank facility. In connection
with the refinancing, the collateral securing the obligations under
the Group's various outstanding senior notes and debentures was
also released and the senior notes and debentures are therefore now
unsecured.
The new EUR1,375 million five-year facility comprises a EUR750
million term loan with a margin of 2.25% and a EUR625 million
revolving credit facility with a margin of 2.00%, reduced from
margins of 3.75% and 3.25% respectively. The Group consequently
expects annual cash interest savings from the refinancing will be
approximately EUR13 million per annum and the transaction will be
immediately earnings accretive. There will be a one-off exceptional
cost of approximately EUR16 million arising from the accelerated
amortisation of unamortised deferred debt issue costs related to
the existing facility.
In addition to the new senior facility, on 3 July 2013 SKG put
in place a new five-year trade receivables securitisation programme
of up to EUR175 million utilising the Group's receivables in
Austria, Belgium, Italy and the Netherlands. The programme carries
a margin of 1.70% and will complement the Group's existing EUR250
million securitisation programme.
19.Board Approval
The interim report was approved by the Board of Directors on 30
July 2013.
20.Distribution of the Interim Report
The 2013 interim report is available on the Group's website
(www.smurfitkappa.com). A printed copy will be posted to
shareholders and will also be available to the public at the
Company's registered office.
Responsibility Statement in Respect of the Six Months Ended 30
June 2013
The Directors, whose names and functions are listed on pages 34
and 35 in the Group's 2012 annual report, are responsible for
preparing this interim management report and the condensed Group
interim financial statements in accordance with the Transparency
(Directive 2004/109/EC) Regulations 2007, the related Transparency
Rules of the Central Bank of Ireland and with IAS 34, Interim
Financial Reporting as adopted by the European Union.
The Directors confirm that, to the best of their knowledge:
-- The condensed Group interim financial statements for the half year
ended 30 June 2013 have been prepared in accordance with the
international accounting standard applicable to interim
financial
reporting, IAS 34, adopted pursuant to the procedure provided
for
under Article 6 of the Regulation (EC) No. 1606/2002 of the
European
Parliament and of the Council of 19 July 2002;
-- the interim management report includes a fair review of the important
events that have occurred during the first six months of the
financial
year, and their impact on the condensed Group interim
financial
statements for the half year ended 30 June 2013, and a
description of
the principal risks and uncertainties for the remaining six
months;
-- the interim management report includes a fair review of related party
transactions that have occurred during the first six months of
the
current financial year and that have materially affected the
financial
position or the performance of the Group during that period, and
any
changes in the related party transactions described in the last
annual
report that could have a material effect on the financial
position or
performance of the Group in the first six months of the
current
financial year.
Signed on behalf of the BoardG.W. McGann, Director and Chief
Executive OfficerI.J. Curley, Director and Chief Financial
Officer30 July 2013
Supplementary Financial Information
EBITDA before exceptional items and share-based payment expense
is denoted by EBITDA in the following schedules for ease of
reference.
Reconciliation of Profit to EBITDA
Restated Restated
3 months to 3 months to 6 months to 6 months to
30-Jun-13 30-Jun-12 30-Jun-13 30-Jun-12
EURm EURm EURm EURm
Profit 44 52 77 113
for
the
financial
period
Income 26 30 50 71
tax
expense
Gain - - - (28)
on
disposal
of assets
and
operations
Currency 3 - 15 -
trading
loss
on
Venezuelan
Bolivar
devaluation
Impairment 9 - 9 -
loss
on
property,
plant
and
equipment
Reorganisation 7 - 7 -
and
restructuring
costs
Business - - 1 -
acquisition
costs
Share (1) (2) (1) (2)
of
associates'
profit
(after
tax)
Net 79 75 149 149
finance
costs
Share-based 7 6 12 14
payment
expense
Depreciation, 97 93 193 181
depletion
(net)
and
amortisation
EBITDA 271 254 512 498
Supplementary Historical Financial Information
Restated
EURm Q2, 2012 Q3, 2012 Q4, 2012 FY, 2012 Q1, 2013 Q2, 2013
Group 3,050 2,944 2,951 11,896 3,080 3,285
and
third
party
revenue
Third 1,857 1,830 1,824 7,335 1,889 2,019
party
revenue
EBITDA 254 279 239 1,016 241 271
EBITDA 13.6% 15.2% 13.1% 13.8% 12.7% 13.4%
margin
Operating 155 180 119 630 126 148
profit
Profit 82 102 33 319 57 70
before
income
tax
Free 63 118 118 282 (23) 95
cash
flow
Basic 23.4 32.3 25.2 106.9 14.4 17.7
earnings
per
share
-
cent
Weighted 223 223 226 224 228 229
average
number
of
shares
used
in
EPS
calculation
(million)
Net 2,785 2,640 2,792 2,792 2,871 2,817
debt
Net 2.78 2.59 2.75 2.75 2.84 2.74
debt
to
EBITDA
(LTM)
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