Pulp Paper & Logistics


INDUSTRY NEWS 5


Smurfit Kappa pulls out of Venezuela after ‘interference’


S


murfit Kappa is pulling out of its carton business in Venezuela following what it


describes as the “continuing actions and interference” of the government. The Ireland-based global paper


maker says its wholly-owned subsidiary Smurfit Holdings BV is no longer able to maintain control of the business of Smurfit Kappa Carton de Venezuela (SKCV). The Government of Venezuela


took control of SKCV’s Valencia mill at the end of August with an occupation order, following which Smurfit Holdings confirmed that it was “impossible to manage its affairs in a way that complies with its normal business standards”. In a statement, Smurfit Kappa, which operates in 35 countries in the Americas and Europe, said that since the notification of the occupation order, it has been subject to government interference. This included “the arbitrary


Packaging M&A remains buoyant after record year


There were continued high levels of mergers and acquisitions in the packaging industry, with the top three cartonboard manufacturers reinforcing their leading positions, according to data published by Alantra, the global investment banking and asset management firm.


Some 183 transactions were


completed in the first half of 2018, following a record year for deals in 2017.


Global growth provided the


backdrop, says Alantra, while macro trends including the rise of on-the- go food packaging, sustainable packaging and online retail have offered businesses expansion and new market opportunities. Mark Wilson, a partner in the UK advisory business of Alantra and a leading adviser to the packaging sector, said: “The high valuations paid by strategic buyers for market- leading assets will not abate any time soon. Vendors will, however, need to consider very carefully how they can maximise value from a sale process,


especially when their business spans diverse products, geographies and end markets. We are seeing an increasing trend whereby standalone divisions in multi-site groups are sold to completely different acquirers.” Commenting on the cartonboard business, Wilson said: “There has been substantial consolidation in the paper and board market in H1 2018, with the largest three players in Europe all reinforcing their market- leading positions. “DS Smith acquired Europac in Spain for €1.7bn at a 10x EBITDA multiple, Smurfit Kappa acquired Reparenco in the Netherlands for €460m, and Saica acquired Emin Leydier in France. “While European companies have


historically struggled to win auction processes in the US, DS Smith successfully acquired Corrugated Container Corporation, a US recycled paper packaging manufacturer. US players are looking to Europe for expansion, with International Paper making an ultimately unsuccessful €8.6bn bid for Smurfit Kappa.”


harassment of its employees by the Directorate General of Military Counterintelligence through unauthorised visits which have the effect of intimidating its workforce, resulting in increasing absenteeism”. Furthermore, the government arbitrarily arrested two SKCV employees on charges of price speculation, boycotting, destabilising the economy and smuggling. As a consequence of the loss of control over SKCV, Smurfit Kappa


said it would deconsolidate its Venezuelan operations during the third quarter of 2018. Smurfit Kappa added that it would be writing down assets worth approximately €60 million. SKCV represented less than 1 per cent of Smurfit’s EBITDA in the first six months of 2018. Smurfit Kappa operates three


paper mills in Venezuela, at Caracas, San Felipe and Valencia. Caracas and San Felipe also produce boxboard packaging, as does a site at Maracay.


Sales up at Sappi but profits slip


Despite an increase in sales at South Africa’s leading paper maker Sappi for the nine months ended in June of 9.9 per cent to US$4.27 billion, compared with the same period a year earlier, net profit slipped from $236m to $216m. For the quarter, sales were $1.45bn, up by 14.6 per cent, with net profit also slightly down, from $58m to $51m. Sappi has been increasing


moving away from the production of printing and writing papers, towards pulp, and packaging papers.


Commenting on the results Sappi’s chief executive Steve Binnie said: “Our third quarter operating performance was in line with previous guidance with earnings (EBITDA ex special items) flat at US$155 million compared to a year ago. “The third quarter is seasonally and historically our weakest quarter due to the slow-down in business activity during the Northern Hemisphere summer


holiday period and Sappi’s choice to use this quarter to undertake major annual maintenance shuts. A strong performance by our European operations was offset by a number of one-off operational and production issues in our South African and North American businesses. “Capital expenditure increased


due to the now completed paper machine conversion at Somerset Mill and the debottlenecking of dissolving wood pulp production at our Ngodwana and Saiccor mills. I am pleased that we have completed the conversion projects at Somerset and Maastricht mills and that we can look forward to significantly improved packaging sales volumes in the coming financial year.” At the Ngodwana mill, which


suffered from a late start up the focus is on an evaporator upgrade to reach the planned capacity of 250,000 tons per year. At Saiccor, the mill is operating at its full capacity of 780,000 tons per year.


September/October 2018


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