Smurfit Kappa Group reports 174% Net Income growth in 2019 and 0.55 pp EBITDA Margin decline from 16.3% to 15.7%
05 Feb 2020 • About Smurfit Kappa Group (
$SKG) • By InTwits
Smurfit Kappa Group reported FY2019 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 5.7%. At the same time it's a lot of higher than industry average of 4.0%.
- CAPEX is quite volatile: 280 TRYm in 2019, 101 TRYm in 2018, 116 TRYm in 2017, 56 TRYm in 2016, 63 TRYm in 2015
- The company has highly profitable business model: ROIC is 13.3%
- It operates with high leverage: Net Debt/EBITDA is 2.5x 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 slightly on 1.1%. During FY2015-FY2019 Revenue growth topped in FY2017 at 4.9% and was decelerating since that time. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased on 3.0 pp from 36.9% to 40.0% in 2019.
Gross Margin showed almost no change in FY2019. SG&A as a % of Revenue increased slightly on 0.77 pp from 20.7% to 21.5% in FY2019. During FY2015-FY2019 SG&A as a % of Revenue bottomed in FY2016 at 20.1% and was growing since that time.
Net Income margin surged on 12.5 pp from -7.2% to 5.3% in FY2019.
Investments (CAPEX, working capital and M&A)
In FY2019 the company had CAPEX/Revenue of 6.8%. CAPEX/Revenue increased slightly on 1.5 pp from 5.2% in FY2016 to 6.8% in FY2019. For the last three years the average CAPEX/Revenue was 5.9%. During FY2015-FY2019 CAPEX as a % of Revenue bottomed in FY2017 at 5.2% and was growing since that time.
Return on investment
The company operates at good ROIC (13.3%) and ROE (16.7%). ROIC decreased on 3.0 pp from 16.3% to 13.3% in FY2019. ROE surged on 41.2 pp from -24.5% to 16.7% in FY2019.
Leverage (Debt)
Debt level is 2.5x Net Debt / EBITDA and 2.6x Debt / EBITDA. Net Debt / EBITDA surged on 0.3x from 2.1x to 2.5x in FY2019. Debt increased on 4.2% while cash dropped on 53.6%. During the last 5 years Net Debt/EBITDA bottomed in FY2018 at 2.1x.
Smurfit Kappa Group has no short term refinancing risk: cash is higher than short term debt (102.2%).
Valuation and dividends
The company's trades at EV/EBITDA 7.5x and P/E 15.0x.
Management team
Smurfit Kappa Group's CEO Anthony P J Smurfit "Tony" is a founder and has spent 4 years with the company. Smurfit Kappa Group's CFO is Kenneth Bowles "Ken". Kenneth Bowles "Ken" has 3 years tenure at the company.
Financial and operational results
FY ended 30 Nov -0001
Smurfit Kappa Group ($SKG) key annual financial indicators| mln. € | 2015 | 2016 | 2017 | 2018 | 2019 | 2019/2018 |
|---|
P&L
|
|---|
| Revenue | 8,109 | 8,159 | 8,562 | 8,946 | 9,048 | 1.1% |
| Gross Profit | 2,429 | 2,469 | 2,554 | 2,957 | 2,997 | 1.4% |
| SG&A | 1,659 | 1,639 | 1,745 | 1,852 | 1,943 | 4.9% |
| EBITDA | 1,157 | 1,212 | 1,197 | 1,458 | 1,425 | -2.3% |
| EBIT | | | | 1,039 | | |
| Interest expence | | | | 163 | | |
| Tax | | | | 235 | | |
| Net Income | 400 | 444 | 417 | -646 | 476 | |
| Stock Based Compensation | | | | 22 | | |
Balance Sheet
|
|---|
| Cash | 270 | 436 | 530 | 407 | 189 | -53.6% |
| Inventory | | | | 858 | | |
| Short Term Debt | 85 | 137 | 673 | 167 | 185 | 10.8% |
| Long Term Debt | 3,238 | 3,247 | 2,671 | 3,372 | 3,501 | 3.8% |
Cash flow
|
|---|
| Capex | 428 | 427 | 442 | 528 | 612 | 15.9% |
| Dividends | | | | 213 | | |
| Acquisitions | | | | 482 | | |
Ratios
|
|---|
| Revenue growth | 0.3% | 0.6% | 4.9% | 4.5% | 1.1% | |
| EBITDA growth | 12.7% | 4.8% | -1.2% | 21.8% | -2.3% | |
|
|---|
| Gross Margin | 30.0% | 30.3% | 29.8% | 33.1% | 33.1% | 0.1% |
| EBITDA Margin | 14.3% | 14.9% | 14.0% | 16.3% | 15.7% | -0.5% |
| EBIT Margin | | | | 11.6% | |
| SG&A, % of revenue | 20.5% | 20.1% | 20.4% | 20.7% | 21.5% | 0.8% |
| SBC, % of revenue | | | | 0.2% | |
| Net Income Margin | 4.9% | 5.4% | 4.9% | -7.2% | 5.3% | 12.5% |
| CAPEX, % of revenue | 5.3% | 5.2% | 5.2% | 5.9% | 6.8% | 0.9% |
|
|---|
| ROIC | 13.9% | 14.1% | 13.4% | 16.3% | 13.3% | -3.0% |
| ROE | 18.2% | 19.7% | 17.2% | -24.5% | 16.7% | 41.2% |
| Net Debt/EBITDA | 2.6x | 2.4x | 2.4x | 2.1x | 2.5x | 0.3x |
| Interest coverage ratio (ICR) | | | | 6.4x | |
| Interest expence / Average debt | | | | 4.7% | | |
People
|
|---|
| Insider ownership | | | | 0.8% | | |
| Employees | | | | 46,025 | | |
| Revenue/Employee, th. € | | | | 194 | | |
Peers in General Industrials
Below we provide Smurfit Kappa Group benchmarking against other companies in General Industrials industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2015 | FY2016 | FY2017 | FY2018 | FY2019 |
|---|
| Coral Products ($CRU) | 1.2% | 7.4% | 14.5% | 9.2% | |
| Honeywell International Inc ($HON) | | 1.9% | 3.1% | 3.1% | -12.2% |
| Barloworld ($BWO) | 1.0% | -1.0% | -0.2% | 2.4% | |
| General Electric Co. ($GEC) | | 3.9% | 0.7% | 1.0% | -21.7% |
| Thyssenkrupp Ag ($0O1C) | 3.8% | -8.2% | 5.6% | -16.1% | |
| |
|---|
| Median (5 companies) | 3.8% | 1.9% | 6.2% | 2.4% | -16.9% |
|---|
| Smurfit Kappa Group ($SKG) | | 0.6% | 4.9% | 4.5% | 1.1% |
Top companies by Gross margin, %
| Top | FY2015 | FY2016 | FY2017 | FY2018 | FY2019 |
|---|
| Coral Products ($CRU) | 29.6% | 33.1% | 34.1% | 34.6% | |
| Honeywell International Inc ($HON) | 30.7% | 30.9% | 32.0% | 30.5% | 33.7% |
| General Electric Co. ($GEC) | 23.9% | 21.4% | 9.5% | 19.1% | 20.3% |
| Thyssenkrupp Ag ($0O1C) | 16.1% | 16.9% | 16.8% | 14.2% | |
| |
|---|
| Median (4 companies) | 25.5% | 25.8% | 25.7% | 24.8% | 27.0% |
|---|
| Smurfit Kappa Group ($SKG) | 30.0% | 30.3% | 29.8% | 33.1% | 33.1% |
Top companies by EBITDA margin, %
| Top 5 | FY2015 | FY2016 | FY2017 | FY2018 | FY2019 |
|---|
| Honeywell International Inc ($HON) | 20.0% | 19.6% | 20.4% | 18.7% | 22.2% |
| Barloworld ($BWO) | 10.3% | 10.7% | 11.0% | 14.6% | |
| Coral Products ($CRU) | 8.5% | 7.1% | 8.7% | 5.9% | |
| Thyssenkrupp Ag ($0O1C) | 5.5% | 6.3% | 5.5% | 3.3% | |
| General Electric Co. ($GEC) | 10.4% | 12.7% | -3.0% | -9.9% | |
| |
|---|
| Median (5 companies) | 10.3% | 12.7% | 9.9% | 5.9% | 22.2% |
|---|
| Smurfit Kappa Group ($SKG) | 14.3% | 14.9% | 14.0% | 16.3% | 15.7% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2015 | FY2016 | FY2017 | FY2018 | FY2019 |
|---|
| General Electric Co. ($GEC) | 6.3% | 6.0% | 6.1% | 6.3% | |
| Coral Products ($CRU) | 2.5% | 8.9% | 4.3% | 3.9% | |
| Thyssenkrupp Ag ($0O1C) | 2.7% | 3.1% | 3.3% | 2.3% | |
| Honeywell International Inc ($HON) | 2.8% | 2.8% | 2.5% | 2.0% | 2.3% |
| Barloworld ($BWO) | 2.2% | 1.6% | 1.2% | 1.0% | |
| |
|---|
| Median (5 companies) | 2.8% | 3.1% | 3.3% | 2.3% | 2.3% |
|---|
| Smurfit Kappa Group ($SKG) | 5.3% | 5.2% | 5.2% | 5.9% | 6.8% |
Top companies by ROIC, %
| Top 5 | FY2015 | FY2016 | FY2017 | FY2018 | FY2019 |
|---|
| Honeywell International Inc ($HON) | 23.2% | 19.6% | 19.0% | 18.1% | 18.5% |
| Barloworld ($BWO) | 12.9% | 12.7% | 13.2% | 13.2% | |
| Thyssenkrupp Ag ($0O1C) | 9.5% | 12.7% | 12.2% | 5.2% | |
| Coral Products ($CRU) | 6.7% | 3.2% | 3.6% | -0.9% | |
| General Electric Co. ($GEC) | 2.0% | 4.0% | -4.1% | -11.5% | 0.5% |
| |
|---|
| Median (6 companies) | 9.5% | 12.7% | 11.9% | 5.2% | 9.5% |
|---|
| Smurfit Kappa Group ($SKG) | 13.9% | 14.1% | 13.4% | 16.3% | 13.3% |
Top companies by Net Debt / EBITDA
| Top | FY2015 | FY2016 | FY2017 | FY2018 | FY2019 |
|---|
| Coral Products ($CRU) | 2.7x | 2.5x | 3.0x | 5.3x | |
| Thyssenkrupp Ag ($0O1C) | 1.8x | 1.8x | 1.3x | 2.5x | |
| Honeywell International Inc ($HON) | 0.9x | 1.0x | 1.3x | 0.9x | 0.9x |
| Barloworld ($BWO) | 1.7x | 1.2x | 0.8x | 0.4x | |
| |
|---|
| Median (4 companies) | 1.3x | 1.2x | 1.2x | 1.7x | 0.9x |
|---|
| Smurfit Kappa Group ($SKG) | 2.6x | 2.4x | 2.4x | 2.1x | 2.5x |
