Smurfit Kappa Group EBITDA surged on 21.8% and Revenue increased on 4.5%
13 Feb 2019 • About Smurfit Kappa Group (
$SKG) • By InTwits
Smurfit Kappa Group reported 2018 financial results today. Here are the key drivers of the company's long term financial model:
- Smurfit Kappa Group has medium CAPEX intensity: 5 year average CAPEX/Revenue was 5.4%. At the same time it's a lot of higher than industry average of 4.1%.
- CAPEX is quite volatile: 226 TRYm in 2018, 164 TRYm in 2017, 180 TRYm in 2016, 240 TRYm in 2015, 717 TRYm in 2014
- The company has highly profitable business model: ROIC is 16.3%
- It operates with high leverage: Net Debt/EBITDA is 2.1x while industry average is 1.6x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
The company's Revenue increased on 4.5%. Revenue growth happened at the same time with EBITDA margin expansion. EBITDA Margin increased on 2.3 pp from 14.0% to 16.3% in 2018.
Gross Margin increased on 3.2 pp from 29.8% to 33.1% in 2018. SG&A as a % of Revenue showed almost no change in 2018. During the last 5 years SG&A as a % of Revenue bottomed in 2016 at 20.1% and was growing since that time.
Net Income margin dropped on 12.1 pp from 4.9% to -7.2% in 2018. During 2014-2018 Net Income margin topped in 2016 at 5.4% and was declining since that time.
Investments (CAPEX, working capital and M&A)
Smurfit Kappa Group's CAPEX/Revenue was 5.9% in 2018. The company showed small growth in CAPEX/Revenue of 0.62 pp from 5.3% in 2015 to 5.9% in 2018. It's average level of CAPEX/Revenue for the last three years was 5.4%. During 2014-2018 CAPEX as a % of Revenue bottomed in 2017 at 5.2%.
Smurfit Kappa Group has spent €482m on M&A in 2018 which accounts for 5.4% of revenue.
Return on investment
The company operates at low but positive ROIC (16.3%) and negative ROE (-24.5%). ROIC increased on 2.9 pp from 13.4% to 16.3% in 2018. ROE dropped on 41.8 pp from 17.2% to -24.5% in 2018. During the last 5 years ROE topped in 2016 at 19.7% and was declining since that time.
Leverage (Debt)
Company's Net Debt / EBITDA is 2.1x and Debt / EBITDA is 2.4x. Net Debt / EBITDA dropped on 0.2x from 2.4x to 2.1x in 2018. Debt increased on 5.8% while cash dropped on 23.2%. Net Debt/EBITDA declined at -0.1x per annum in the last 5 years.
Smurfit Kappa Group has good short term financial stability: Interest coverage ratio (ICR) is 6.4x. Smurfit Kappa Group has no short term refinancing risk: cash is higher than short term debt (243.7%).
Average interest expence charged on company's debt was 4.6% in 2018.
The company paid €213 despite negative Net Income of €-646 in 2018.
Management team
The company's CEO is Anthony P J Smurfit "Tony". Anthony P J Smurfit "Tony" has 4 years tenure with the company. CEO total compensation was €2,167,000 in 2018 which included €1,106,000 salary and €807,000 annual bonus. Smurfit Kappa Group's CFO Kenneth Bowles "Ken" has spent 3 years with the company.
Insider ownership is 0.82%.
The company has 46,025 employees. Average revenue per employee in 2018 was €194,373.
Financial and operational results
FY ended 31 Dec 2018
Smurfit Kappa Group ($SKG) key annual financial indicators| mln. € | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 8,083 | 8,109 | 8,159 | 8,562 | 8,946 | 4.5% |
| Gross Profit | 2,383 | 2,429 | 2,469 | 2,554 | 2,957 | 15.8% |
| SG&A | 1,672 | 1,659 | 1,639 | 1,745 | 1,852 | 6.1% |
| EBITDA | 1,027 | 1,157 | 1,212 | 1,197 | 1,458 | 21.8% |
| EBIT | | | | | 1,039 | |
| Interest expence | | | | | 163 | |
| Tax | | | | | 235 | |
| Net Income | 241 | 400 | 444 | 417 | -646 | -254.9% |
| Stock Based Compensation | | | | | 22 | |
Balance Sheet
|
|---|
| Cash | 387 | 270 | 436 | 530 | 407 | -23.2% |
| Inventory | | | | | 858 | |
| Short Term Debt | 65 | 85 | 137 | 673 | 167 | -75.2% |
| Long Term Debt | 3,093 | 3,238 | 3,247 | 2,671 | 3,372 | 26.2% |
Cash flow
|
|---|
| Capex | 430 | 428 | 427 | 442 | 528 | 19.5% |
| Dividends | | | | | 213 | |
| Acquisitions | | | | | 482 | |
Ratios
|
|---|
| Revenue growth | 1.6% | 0.3% | 0.6% | 4.9% | 4.5% | |
| EBITDA growth | 1.2% | 12.7% | 4.8% | -1.2% | 21.8% | |
|
|---|
| Gross Margin | 29.5% | 30.0% | 30.3% | 29.8% | 33.1% | 3.2% |
| EBITDA Margin | 12.7% | 14.3% | 14.9% | 14.0% | 16.3% | 2.3% |
| EBIT Margin | | | | | 11.6% |
| SG&A, % of revenue | 20.7% | 20.5% | 20.1% | 20.4% | 20.7% | 0.3% |
| SBC, % of revenue | | | | | 0.2% |
| Net Income Margin | 3.0% | 4.9% | 5.4% | 4.9% | -7.2% | -12.1% |
| CAPEX, % of revenue | 5.3% | 5.3% | 5.2% | 5.2% | 5.9% | 0.7% |
|
|---|
| ROIC | 11.8% | 13.9% | 14.1% | 13.4% | 16.3% | 2.9% |
| ROE | 10.6% | 18.2% | 19.7% | 17.2% | -24.5% | -41.8% |
| Net Debt/EBITDA | 2.7x | 2.6x | 2.4x | 2.4x | 2.1x | -0.2x |
| Interest coverage ratio (ICR) | | | | | 6.4x |
| Interest expence / Average debt | | | | | 4.6% | |
People
|
|---|
| Insider ownership | | | | | 0.8% | |
| Employees | | | | | 46,025 | |
| Revenue/Employee, th. € | | | | | 194 | |
Peers in General Industrials
Below you can find Smurfit Kappa Group benchmarking vs. other companies in General Industrials industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Coral Products ($CRU) | | 1.2% | 7.4% | 14.5% | 9.2% |
| Macfarlane Group ($MACF) | 6.9% | 10.0% | 6.3% | 9.0% | |
| Robinson ($RBN) | | 3.8% | -5.8% | 8.6% | |
| Jardine Strategic Hldgs ($88EI) | -1.3% | -8.8% | 0.5% | 6.8% | |
| Press Corp ($PESD) | 20.3% | 17.8% | 17.2% | 6.2% | |
| |
|---|
| Median (9 companies) | 6.9% | 1.2% | 1.9% | 6.2% | 2.4% |
|---|
| Smurfit Kappa Group ($SKG) | | 0.3% | 0.6% | 4.9% | 4.5% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Press Corp ($PESD) | 56.0% | 54.5% | 59.6% | 59.1% | |
| Coral Products ($CRU) | 23.7% | 29.6% | 33.1% | 34.1% | 34.6% |
| Honeywell International Inc ($HON) | 28.2% | 30.7% | 30.9% | 32.0% | 30.5% |
| Macfarlane Group ($MACF) | 30.9% | 31.5% | 31.0% | 30.8% | |
| Jardine Strategic Hldgs ($88EI) | 25.4% | 25.5% | 25.8% | 25.7% | |
| |
|---|
| Median (9 companies) | 24.5% | 25.5% | 25.8% | 25.7% | 24.8% |
|---|
| Smurfit Kappa Group ($SKG) | 29.5% | 30.0% | 30.3% | 29.8% | 33.1% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Press Corp ($PESD) | 29.2% | 25.3% | 27.7% | 35.2% | |
| Jardine Strategic Hldgs ($88EI) | 13.5% | 15.1% | 21.4% | 27.4% | |
| Honeywell International Inc ($HON) | 16.8% | 20.0% | 19.6% | 20.4% | 18.7% |
| Barloworld ($BWO) | 10.0% | 10.3% | 10.7% | 11.0% | 14.6% |
| Robinson ($RBN) | 15.1% | 4.1% | 14.3% | 9.9% | |
| |
|---|
| Median (9 companies) | 13.3% | 10.3% | 12.7% | 9.9% | 5.9% |
|---|
| Smurfit Kappa Group ($SKG) | 12.7% | 14.3% | 14.9% | 14.0% | 16.3% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Press Corp ($PESD) | 12.1% | 9.0% | 8.8% | 11.3% | |
| Robinson ($RBN) | 3.5% | 3.7% | 6.5% | 8.8% | |
| General Electric Co. ($GEC) | 6.1% | 6.3% | 6.0% | 6.1% | 6.3% |
| Coral Products ($CRU) | 2.2% | 2.5% | 8.9% | 4.3% | 3.9% |
| Jardine Strategic Hldgs ($88EI) | 4.1% | 2.9% | 3.1% | 3.3% | |
| |
|---|
| Median (9 companies) | 2.9% | 2.8% | 3.1% | 3.3% | 2.3% |
|---|
| Smurfit Kappa Group ($SKG) | 5.3% | 5.3% | 5.2% | 5.2% | 5.9% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Honeywell International Inc ($HON) | 21.3% | 23.2% | 19.6% | 19.0% | 18.1% |
| Macfarlane Group ($MACF) | 19.0% | 17.8% | 16.9% | 15.4% | |
| Barloworld ($BWO) | 14.1% | 12.9% | 12.7% | 13.2% | 13.2% |
| Thyssenkrupp Ag ($0O1C) | 10.8% | 9.5% | 12.7% | 12.2% | 5.2% |
| Jardine Strategic Hldgs ($88EI) | 6.2% | 6.3% | 9.2% | 11.7% | |
| |
|---|
| Median (9 companies) | 10.8% | 9.5% | 12.7% | 11.9% | 5.2% |
|---|
| Smurfit Kappa Group ($SKG) | 11.8% | 13.9% | 14.1% | 13.4% | 16.3% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Coral Products ($CRU) | 3.4x | 2.7x | 2.5x | 3.0x | 5.3x |
| Robinson ($RBN) | 1.0x | 0.9x | 1.2x | 2.2x | |
| Honeywell International Inc ($HON) | 0.3x | 0.9x | 1.0x | 1.3x | 0.9x |
| Thyssenkrupp Ag ($0O1C) | 2.0x | 1.8x | 1.8x | 1.3x | 2.5x |
| Macfarlane Group ($MACF) | 1.3x | 1.3x | 1.4x | 1.1x | |
| |
|---|
| Median (8 companies) | 1.3x | 1.3x | 1.2x | 1.2x | 1.7x |
|---|
| Smurfit Kappa Group ($SKG) | 2.7x | 2.6x | 2.4x | 2.4x | 2.1x |
