Higher raw material costs and FX headwinds took a chunk out of Smurfit Kappa Group PLC’s (LON:SKG) profits last year.
The Irish packaging maker grew revenues by 5% to €8.56bn in the 12 months ended December 31 (2016: €8.16bn) as more and more customers opt for Smurfit’s more sustainable, paper-based products.
READ: Smurfit Kappa reports third quarter profit drop but full year to meet market forecasts
But costs over the year jumped by more than €120mln, and while some of these were offset through price increases, pre-tax profits fell 12% to €576mln (2016: €654mln).
The Americas was a particularly poor performer, with the hurricanes and tropical storms seen at the end of the year impacting underlying profits and margins.
Mixed results
Worryingly, Smurfit said several countries in that region had experienced an unexpected slowdown in the year and are showing no signs of recovering.
The performance in Europe was more encouraging, with strong demand helping to boost margins towards the end of the year.
Smurfit lifted its final dividend by 12% to €0.645 per share.
“As we start 2018, the benefits of paper-based packaging are being increasingly recognised as the most sustainable, biodegradable solution for both our customers and their end customers,” said chief executive Tony Smurfit.
“While we continue to experience currency volatility, wage inflation as well as higher energy and other input costs, 2018 has seen the continuation of good demand in Europe, further input cost recovery and signs of improvement in our Americas business.”
Smurfit shares rose 2.5% to £25.12 early on Wednesday, although shares had headed lower in the days running up to the results.