The proposed combination of Smurfit Kappa and WestRock will create a global leader in sustainable packaging. Smurfit Kappa delivered another excellent outcome in 2023.

The proposed combination of Smurfit Kappa and WestRock will create a global leader in sustainable packaging. Smurfit Kappa delivered another excellent outcome in 2023

Highlights for the Year | Annual Progress Report of Smurfit Kappa for FY 23
-Delivered an excellent outcome for the Group, the second best in our 90 year history
-Delivered on our progressive dividend policy
-Announced our early adoption of the Task Force on Nature-related Financial Disclosures (‘TNFD’)
-Announced a proposed combination with WestRock to create a global leader in sustainable packaging, Smurfit WestRock

2023 Performance
The demand environment for the industry in 2023 was difficult primarily due to destocking and a lack of economic activity in certain sectors, particularly durable goods. However, we have seen strong acceleration in demand for sustainable packaging solutions. While full year volumes for the Group were down 3.5%, we saw a progressive improvement in demand during the year with a return to growth in the fourth quarter.

During 2023, we invested over €1 billion in our business, which together with prior years’ spend, sets a strong platform for future growth and delivery. Additionally, with the wide geographic and product diversity that exists within SKG, we continue to see opportunities for growth and expansion. Some examples of this include the development of our Bag-in-Box business across multiple geographic regions and our expansion into Morocco with a new state-of-the-art corrugated facility.

Smurfit Kappa delivered another excellent outcome for the Group in 2023 with Revenue of €11.3 billion, EBITDA of €2,080 million, and an EBITDA margin of 18.5%. In what has been a challenging year, this result reflects the effectiveness of our capital allocation programme, the security of SKG’s integrated operating model and the commitment and dedication of our people in providing our customers with industry-leading, innovative and sustainable packaging solutions. On behalf of the Board and management team, I would like to record our sincere appreciation to each and every one of our employees.

Proposed Combination with WestRock

On 12 September 2023, we were pleased to announce the proposed combination of Smurfit Kappa and WestRock to create Smurfit WestRock, a global leader in sustainable packaging. The Board sees compelling strategic, commercial and financial rationale for combining Smurfit Kappa and WestRock’s highly complementary paper-based packaging companies to create a global leader in sustainable packaging. The proposed combination will enhance Smurfit Kappa and WestRock’s existing offerings by creating the global ‘Go-To’ packaging partner of choice. The proposed combination is expected to close early July 2024, (subject to shareholder approval and other closing conditions of the Smurfit WestRock transaction).

The Europe 
The Europe segment is the larger of the Group’s two segments, accounting for 75% of its revenue and 77% of its EBITDA in 2023. Our Europe segment is highly integrated. It includes a system of mills and plants that primarily produce a full line of containerboard that is converted into corrugated containers. In addition, the Europe segment also produces other types of paper, such as solid board, sack kraft paper, machine glazed (‘MG’) and graphic paper; and other paper-based packaging, such as honeycomb, solid-board packaging and folding cartons; and Bag-in-Box packaging.

The Americas
Our Americas segment is also highly integrated. Like our Europe segment, it includes a system of mills and plants that primarily produce a full line of containerboard that is converted into corrugated containers. The Americas segment, which includes a number of Latin American countries and the United States, also comprises forestry; other types of paper, such as boxboard and sack paper; and paper-based packaging, such as folding cartons, honeycomb and paper sacks.

The Group continued to invest in its Americas business in 2023 with growth and sustainability related investments across our forestry, paper and packaging businesses in Brazil, Colombia, Mexico and the US. We approved investments in our paper division to upgrade machines and increase production efficiencies, investing in automation in our forestry division to take out costs, while investing in state-of-the-art converting equipment in our corrugated division.

Sustainability
Sustainability is a key part of SKG’s strategy. As a responsible company, operating globally, Smurfit Kappa has a product that is naturally sustainable and a circular process that is increasingly sustainable. Our performance-led culture continues to drive our industry-leading performance, with our people living our values of Loyalty, Integrity, Respect and Safety at work and our purpose to create, protect and care. SKG understands the challenges facing both our business and the planet and is committed to doing its part in resolving these critical issues.

The Group continued to be recognised in 2023 for its leading sustainability credentials. Having been recognised in 2023 as both a Regional Top Rated and Industry Top Rated company by Morningstar Sustainalytics, SKG has retained both honours in 2024 for its strong ESG credentials and continuous improvement. SKG is now ranked first in Paper Packaging for 2024, up from second in 2023 and fourth in 2022.

The Group has always been at the forefront of ensuring we provide the most innovative and sustainable packaging for our customers as well as setting ambitious sustainability targets for ourselves. We continued to make significant progress towards achieving our sustainability goals and delivered many sustainability achievements during 2023. We were also pleased to announce our early adoption of the Taskforce on Nature-related Financial Disclosures in January 2024. This announcement builds on our existing nature-related reporting and targets which are included in senior management incentives and our cost of funding.

Commercial Offering and Innovation 
SKG’s leadership in innovation and unrivalled market offering is a defining characteristic of our business. With over 1,000 designers across the Group, supported by a network of laboratories, design facilities and unique applications, we continued to deliver the most innovative and sustainable packaging solutions for our customers in 2023. The Group continues to invest in research and development to push the boundaries of paper-based packaging and our design teams work closely with our customers to develop bespoke solutions which optimise functionality, cost-effectiveness and consumer appeal.

In 2023, the Group announced the expansion of its Design2Market Factory a er a successful first year in operation in the Netherlands. This unique facility, which provides customers with tangible packaging prototypes that can be tested in the market in just two weeks before moving into large-scale production, will be replicated across Germany, Italy, Poland and the UK.

The above review by Tony Smurfit Group, Chief Executive Officer has been extracted from Smurfit Kappa’s Annual Report for 2023
 

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