Fourth Quarter & Full Year February 2016

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Elaine Wilkinson
7 years ago
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1 Fourth Quarter & Full Year February 2016

2 Disclaimer The presentation contains forward-looking statements, including statements about the Company's intentions, beliefs and expectations. These statements are based on the Company's current plans, estimates and projections, as well as the Company's expectations of external conditions and events. Forward-looking statements involve inherent risks and uncertainties and speak only as of the date they are made. The Company undertakes no duty to and will not necessarily update any such statements in light of new information or future events, except to the extent required by any applicable law or regulation. Recipients of this presentation are therefore cautioned that a number of important factors could cause actual results or outcomes to differ materially from those expressed in any forward-looking statements. Please refer to the Principal Risks and Uncertainties contained in the FY 15 Press Release for details. 2 : SMURFIT KAPPA

3 Smurfit Kappa At A Glance Europe 2015 EBITDA of 901m with 28,000 employees No. 1 in Corrugated No. 1 in Recycled Containerboard No. 1 in Kraftliner No. 1 in Bag-in-box The Americas 2015 EBITDA of 306m with 17,000 employees Only significant pan-regional supplier No.1 in Colombia No.3 in Mexico Growing presence in the US New platform in Brazil from December 2015 EBITDA of c 1.2 billion across 370 facilities in 34 countries with 45,000 employees 3 : SMURFIT KAPPA

4 2015 Fourth Quarter & Full Year Pre-exceptional EPS growth of 21% yoy Higher earnings driving returns cent cent % ROCE of 15.1% and Net Debt / EBITDA of 2.4x adjusting for Dec 15 acquisitions Strong free cash flow after higher capex and one-off restructuring costs Good corrugated volume growth and positive corrugated pricing dynamics % 14.0% 13.0% 12.0% 11.0% 10.0% 9.0% Over 380m on acquisitions in 2015 and 450m on internal investment projects 4 : SMURFIT KAPPA % * Pre-exceptional Basic EPS Return on Capital Employed Source: Smurfit Kappa

5 Financial Highlights Ian Curley, Group CFO

6 Financial Highlights Q m Q Q Change Q Change Revenue 2,089 2,108 (1%) 2,024 3% Pre-exceptional EBITDA % 305 7% EBITDA margin 15.6% 14.0% 15.0% Pre-exceptional basic EPS (cent) % % Free cash flow % 162 (6%) Net Debt 3,048 2,759 11% 2,953 3% Net Debt/EBITDA* 2.4x 2.4x 2.6x 6 : SMURFIT KAPPA *Reported net debt / EBITDA of 2.6x decreases to 2.4x after adjusting for Brazilian acquisitions in December

7 Financial Highlights Full Year 2015 m FY 2015 FY 2014 Change Revenue 8,109 8,083 - Pre-exceptional EBITDA 1,182 1,161 2% EBITDA margin 14.6% 14.4% Pre-exceptional basic EPS (cent) % Free cash flow % Net Debt 3,048 2,759 11% Net Debt/EBITDA 2.4x * 2.4x 7 : SMURFIT KAPPA *Reported net debt / EBITDA of 2.6x decreases to 2.4x after adjusting for Brazilian acquisitions in December

8 2015 Free Cash Flow Bridge to EBITDA ,182 (69) (123) 1050 (24) (28) (451) (131) 33 (1) EBITDA Exceptional items Cash interest Working capital Current provisions Capex Cash tax Sale of Fixed Assets Others* 2015 Free cash flow Conversion of 33% of EBITDA to free cash flow High quality EBITDA, lower cash interest costs and solid working capital management Exceptional costs and restructuring provisions partly offset by sale proceeds Enhanced capital investment programme and somewhat higher cash taxes due to higher profitability 8 : SMURFIT KAPPA *Others primarily include pension benefit costs and capital creditors

9 European Review Roberto Villaquiran, CEO Europe

10 Europe Full Year 2015 Performance Highlights Strong corrugated performance 3% underlying volume growth in % box price increase in Q4 15 Strengthening long-term margins EBITDA margins Solid recycled containerboard fundamentals 17.0% 16.0% 15.0% - Absolute margins trending higher - Troughs at higher levels 2016 external kraftliner sales volumes secured Pressure on price in Q1 16 not expected to have material impact on boxes Good progress on integration of UK acquisitions and rationalisations 14.0% 13.0% 12.0% 11.0% 10.0% Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q Source: Smurfit Kappa 10 : SMURFIT KAPPA

11 Europe Investment & Differentiation Driving Growth Balanced Investment Appraisal Differentiation & Quality Major Investments Paper 2015 Townsend Hook re-build at 114m 2016 Roermond PM1 upgrade at 40m 2016 Sanguesa conversion at 27m Major Investments Corrugated new conversion machines at 85m 2014 New bag-in-box plant in Spain at 28m Acquisitions 2013 Acquisition of CRP 2015 Acquisitions of Inspirepac and Beacon Broadest geographic diversity Robust insights into most markets Benefitting from knowledge transfers Unrivalled breadth and depth to our offering Shelf Viewer 41,155 images Innobook 6,477 concept designs Pack Expert 41,812 supply chain cases Paper to Box 22 flute types ShelfSmart 12,000 Shopper results ShelfSmart Approach Quality Management & Operational Efficiencies Lowest defect rate in the industry Benchmarking and operational excellence 11 : SMURFIT KAPPA

12 Europe Trading Outlook & Key Business Drivers Structural improvements and major capex projects will boost 2016 performance Positive corrugated dynamics sustaining into 2016 Virgin containerboard market under pressure but SKG s position in kraftliner remains an important competitive advantage OCC prices expected to remain at high level due to demand and tight supply Recycled market in robust condition through the medium term supported by demand Good trading outlook with quality earnings through integration 12 : SMURFIT KAPPA

13 The Americas Review Juan Guillermo Castaneda, CEO The Americas

14 The Americas Full Year 2015 Performance Highlights Solid Americas EBITDA result despite impact from Venezuelan rate change YTD volume growth of 18% yoy Underlying increase of 3% ex Venezuela msm 2,000 1,800 1,600 CAGR of +18% since EBITDA margins recovering to a well supported 16.4% Continued focus on price increases, cost take-out and acquisition integration 1,400 1,200 Encouraging traction of new PAS business with multinational customers This offering has been significantly strengthened by the Brazilian acquisitions 1, Legacy business Acquisitions 14 : SMURFIT KAPPA Source: Smurfit Kappa

15 The Americas Geographic Diversity & Acquisitive Growth Diversification of end markets reduces risk for the overall Group Knowledge and asset transfers strengthens the Group s overall service offering and ensures maximal asset efficiencies Differentiate in the region through: The scale of our operations and comprehensive service offerings across the region Ability to harness the full Group s collective intelligence and creativity Experience and commitment to Sustainability and CSR Continued delivery against stated M&A goals delivering material accretive growth M&A priorities outlined in Snapshot Expand in the US Acquisition of Bates, Brian Thomas and Sound Enter Central America Acquisition of Rierba in 2014 & CYBSA in 2015 Consolidate our position in Colombia Acquisition of Corrumed in 2014 Enter the Brazilian packaging market Acquisition of Inpa and Paema in : SMURFIT KAPPA

16 The Americas Trading Outlook & Key Business Drivers Good corrugated volume growth sustaining into 2016 Continued focus on offsetting FX headwinds through pricing initiatives and cost take-out Repositioned market exposure with over 80% of EBITDA from US, Mexico and Colombian market in 2015 Priority to ensure successful integration of acquisitions through 2016 EBITDA margins well supported at 16.4% with upside as integration and pricing initiatives are implemented 16 : SMURFIT KAPPA

17 Objectives & Outlook

18 Proven Track Record of Strong FCF Generation Free cash flow of over 2 billion since 2009 m Strong & Sustainable Free Cash Flows % % % Average free cash flow of almost 300m per annum % 25% 20% % % 50 5% Solid and steadily improving FCF conversion to 33% FCF FCF % of EBITDA 0% Source: Smurfit Kappa 18 : SMURFIT KAPPA

Capital Allocation Strategy 2016 Onward Reflects earnings growth Supported by strong FCF Dividend Minimum IRR of 15% Maintain credit rating Of Ba1/BB+ M&A Driving Shareholder

19 Capital Allocation Strategy 2016 Onward Reflects earnings growth Supported by strong FCF Dividend Minimum IRR of 15% Maintain credit rating Of Ba1/BB+ M&A Driving Shareholder Returns Capital Structure Capacity for acq. of > 300m from FCF Net Debt To EBITDA range of 2x to 3x Capital Expenditure 19 : SMURFIT KAPPA High return projects Enhanced Operating Efficiency

20 Capital Allocation Progressive Dividend Progressive dividend to reflect earnings growth Sustained delivery of improved returns Provides certainty of value cent to 2015 CAGR of 34% Payments totalling 141m in 2015 supported by strong free cash flows Increase of 2015 dividend by 23% with final dividend payment of 48 cent payable 13 May Interim Final Source: Smurfit Kappa 20 : SMURFIT KAPPA

21 Outlook Good fundamentals across most markets Improving earnings delivered through: Vertical integration Geographic diversification Asset Quality Increased customer differentiation Upgrading to Premium London Listing subject to regulatory approvals Proven track record of strong free cash flow generation to continue to support delivery on strategic objectives Balanced investments and good earnings growth in 2016 to sustainably support our ROCE target of 15% 21 : SMURFIT KAPPA

22 Our new investor app is now accessible from our website below or by clicking HERE Follow us on twitter smurfitkappa.com openthefuture.info

The Americas Investing in Growth. Ian Curley, Group CFO Juan Guillermo Castaneda, CFO the Americas

The Americas Investing in Growth Ian Curley, Group CFO Juan Guillermo Castaneda, CFO the Americas The Americas and M&A Key Takeaways Pan-regional footprint Increasing exposure to higher growth markets