TIDMSKG
1 November: Smurfit Kappa Group plc ('SKG' or 'the Group') today
announced results for the 3 months and 9 months ending 30 September
2017.
2017 Third Quarter & First Nine Months | Key Financial
Performance Measures
EURm YTD2017 YTD2016 Change Q32017 Q32016 Change Q22017 Change
Revenue EUR6,354 EUR6,099 4% EUR2,121 EUR2,050 4% EUR2,104 1%
EBITDA(1) EUR889 EUR916 (3%) EUR320 EUR323 (1%) EUR292 10%
EBITDA 14.0% 15.0% 15.1% 15.7% 13.9%
Margin(1)
Operating EUR574 EUR609 (6%) EUR216 EUR219 (2%) EUR190 13%
Profit
before
Exceptional
Items
Profit EUR415 EUR499 (17%) EUR170 EUR187 (9%) EUR136 25%
before
Income Tax
Basic EPS 127.0 147.1 (14%) 52.7 56.4 (7%) 42.8 23%
(cent)
Pre-exceptional 127.7 142.0 (10%) 52.7 56.4 (7%) 42.8 23%
Basic
EPS
(cent)(1)
Return on 14.8% 16.1% 14.7%
Capital
Employed(1)
Free Cash EUR198 EUR199 - EUR152 EUR164 (7%) EUR30 408%
Flow(1)
Net EUR2,839 EUR2,953 (4%) EUR2,985 (5%)
Debt(1)
Net Debt 2.3x 2.4x 2.5x
to
EBITDA
(LTM)(1)
(1) Additional information in relation to these Alternative
Performance Measures ('APMs') is set out in Supplementary Financial
Information on page 28.
Third Quarter and First Nine Months Key Points
-- Group revenue growth of 4% for the third quarter and year-to-date
-- Continued box price progression in the third quarter
-- Increased sequential EBITDA margin of 15.1%
-- Solid free cash flow delivery of EUR152 million for the quarter
-- Acquisitions in Russia and Greece, expanding the Group's packaging
footprint
Performance Review and Outlook
Tony Smurfit, Group CEO, commented:
"SKG continues to deliver, showing strong sequential progress
with Group EBITDA margin at 15.1% for the quarter.
"Total Group corrugated volumes grew 3% for the quarter.
Corrugated volumes in Europe improved by 4% on a days-adjusted
basis with strong demand in most areas of activity. In the Americas
demand growth was 3% with growth in most markets.
"In the third quarter, recovered fibre cost pressures remained,
resulting in a headwind of almost EUR40 million for the quarter and
EUR111 million for the year-to-date compared to 2016. SKG will
continue to offset these cost pressures through further corrugated
price recovery and ongoing efficiency improvements as we progress
towards the year-end and into 2018.
"Reported third quarter EBITDA in Europe was up 3% year-on-year
against a backdrop of increased recovered fibre costs of EUR26
million, with sequential margins expanding to 15.3% reflecting
ongoing corrugated price recovery, strong demand in most markets,
the continuation of our capital programmes and the strength of our
integrated model.
"In the Americas, EBITDA decreased 8% year-on-year primarily as
a result of increased input costs and currency headwinds. The
region is strongly pursuing input cost recovery, which has
contributed to improved sequential EBITDA margins at 15.4%. Recent
investments in our mill system provide an improved operating
platform for 2018 and beyond.
"We continue to expand our geographic reach through the
acquisition of a corrugated plant in central Moscow. This
acquisition establishes SKG as the largest international corrugated
packaging producer in Russia. In October, we agreed to purchase a
high-end display and corrugated business in Greece, which provides
us with a platform for future expansion in the region. SKG remains
a disciplined acquirer and is committed to growth through
acquisition where it creates long-term value for our shareholders
and enhances the overall quality of our business.
"The Group's net debt to EBITDA ratio continues to improve and
now stands at 2.3x.
"The demand backdrop remains strong and in these increasingly
tight markets, the Group continues to invest in our asset base to
support our customers through security of supply.
"The exceptional volatility in global recovered fibre trade
flows continues to present some short-term uncertainty. The Group
has shown sequential progress within that context, and remains on
track to continue corrugated price recovery. We expect to deliver a
full year EBITDA in line with current market expectations and will
enter 2018 with optimism and good momentum."
About Smurfit Kappa
Smurfit Kappa, a FTSE 100 company, is one of the leading
providers of paper-based packaging solutions in the world, with
around 45,000 employees in approximately 370 production sites
across 34 countries and with revenue of EUR8.2 billion in 2016. We
are located in 21 countries in Europe, and 13 in the Americas. We
are the only large-scale pan-regional player in Latin America.
With our pro-active team, we relentlessly use our extensive
experience and expertise, supported by our scale, to open up
opportunities for our customers. We collaborate with forward
thinking customers by sharing superior product knowledge, market
understanding and insights in packaging trends to ensure business
success in their markets. We have an unrivalled portfolio of
paper-packaging solutions, which is constantly updated with our
market-leading innovations. This is enhanced through the benefits
of our integration, with optimal paper design, logistics,
timeliness of service, and our packaging plants sourcing most of
their raw materials from our own paper mills.
smurfitkappa.com
Check out our microsite: openthefuture.info
Follow us on Twitter at @smurfitkappa and on LinkedIn at
'Smurfit Kappa'.
Forward Looking Statements
Some statements in this announcement are forward-looking. They
represent expectations for the Group's business, and involve risks
and uncertainties. These forward-looking statements are based on
current expectations and projections about future events. The Group
believes that current expectations and assumptions with respect to
these forward-looking statements are reasonable. However, because
they involve known and unknown risks, uncertainties and other
factors, which are in some cases beyond the Group's control, actual
results or performance may differ materially from those expressed
or implied by such forward-looking statements.
Contacts
Garrett Quinn Melanie Farrell or Mark Kenny
Smurfit Kappa FTI Consulting
T: +353 1 202 71 80 T: +353 1 663 36 80
E: ir@smurfitkappa.com E: smurfitkappa@fticonsulting.com
2017 Third Quarter & First Nine Months | Performance
Overview
The Group reported EBITDA for the quarter of EUR320 million,
EUR3 million down on the same period last year. EBITDA in Europe
was EUR7 million higher, offset by a shortfall of EUR7 million in
the Americas and higher Group Centre costs. The underlying1 move in
EBITDA was an increase of 4% reflecting higher earnings in both
regions.
EBITDA margin of 15.1% for the third quarter has improved from
13.9% in the second quarter and 13.0% in the first quarter, driven
by better margins in both Europe and the Americas. This margin
progression is as a result of the recovery of raw material cost
pressures through box price recovery and a continuous focus on cost
take-out. The improved result was delivered in an environment of
continued high recovered fibre costs and adverse currency impacts,
underscoring the Group's ability to deliver, through the strength
of our integrated model and geographically diverse portfolio of
businesses.
In Europe, total reported corrugated box volumes for the third
quarter were up 3%. On a days-adjusted basis, net of acquisitions,
volumes increased by 4%.
In Europe, the Group's recovered fibre costs for the third
quarter increased by 16% year-on-year. For the first nine months,
recovered fibre costs were 18% higher than the same period in 2016.
In the Americas, recovered fibre costs were also higher
year-on-year, 26% higher in the third quarter and 23% higher for
the first nine months.
The main European markets for recycled containerboard increased
again in August bringing the cumulative increase from January 2017
to an average of EUR105 per tonne. Continued demand strength for
recycled containerboard has resulted in inventory levels being
significantly below industry norms.
Global demand for kraftliner is very strong and supply remains
extremely tight. SKG implemented a further price increase of EUR50
per tonne in August bringing the cumulative increase from January
2017 to EUR150 per tonne in North Western Europe and an additional
EUR20 to EUR30 per tonne of increases in Southern European
markets.
In the Americas, total corrugated volumes increased 3% for the
third quarter with good demand in most markets. The region reported
EBITDA margin improvement from 14.2% in the second quarter to 15.4%
in the third quarter. On an underlying basis, the EBITDA result was
10% higher year-on-year. The region's result was impacted by higher
recovered fibre costs and its short position in kraftliner of
approximately 300,000 tonnes per annum. Export prices for
kraftliner from the US are over 30% higher year-on-year. These
input cost pressures were offset in part by corrugated price
recovery which will continue through the remainder of the year and
into 2018.
The Group reported a free cash flow in the third quarter of
EUR152 million compared to EUR164 million in the same period of
2016 and an improved net debt to EBITDA ratio, both sequentially
and year-on-year, of 2.3x.
2017 Third Quarter & First Nine Months | Financial
Performance
Revenue for the first nine months of 2017 was EUR6,354 million,
EUR255 million or 4% higher than last year, with Europe higher by
EUR135 million and the Americas higher by EUR120 million. On an
underlying basis, Europe increased by EUR162 million year-on-year
while the Americas increased by EUR163 million. For the quarter,
revenue was EUR2,121 million, up 4% on the same period last year,
or 7% on an underlying basis.
EBITDA for the first nine months of 2017 was EUR889 million,
EUR27 million down on the same period in 2016, with lower earnings
in both Europe and the Americas partly offset by marginally lower
Group centre costs.
There were no exceptional items charged within operating profit
in the first nine months of either 2017 or 2016.
1 Underlying in relation to financial measures throughout this
report excludes acquisitions, disposals, currency and
hyperinflation movements where applicable.
Net pre-exceptional finance costs for the first nine months of
2017 of EUR157 million were EUR34 million higher than in 2016,
primarily as the result of an increase in cash interest and a net
monetary loss of EUR12 million relating to hyperinflation in 2017
compared to a net monetary gain of EUR12 million in 2016.
Cash interest was EUR9 million higher year-on-year.
Approximately, EUR6 million of this increase relates to additional
interest following our EUR500 million 2.375% bond issue in January
2017. This funding has created additional Group liquidity which
will allow for the refinancing of higher cost debt maturing in 2018
and will generate interest savings from mid-2018 onwards. The
balance of EUR3 million is driven primarily by higher interest
costs in the Americas and our capital programmes in the region.
The exceptional finance cost of EUR2 million in the first nine
months of 2017 represented the accelerated amortisation of the
issue costs relating to the debt within our senior credit facility
which was paid down with the proceeds of the EUR500 million bond
issue in January. In the first nine months of 2016, the Group
reported exceptional finance income of EUR12 million in relation to
the profit on the sale of our shareholding in the Swedish company
IL Recycling.
Basic EPS for the first nine months of 2017 was 127.0 cent, 14%
lower than the 147.1 cent earned in the same period of 2016. The
third quarter basic EPS was 52.7 cent against 56.4 cent in the
third quarter of 2016, a reduction of 7%. On a pre-exceptional
basis, EPS was 127.7 cent for the first nine months, 10% lower than
the 142.0 cent in 2016. On a pre-exceptional basis, EPS for the
third quarter was 7% lower year-on-year at 52.7 cent compared to
56.4 cent in 2016.
2017 Third Quarter and First Nine Months | Free Cash Flow
Free cash flow for the third quarter of 2017 was EUR152 million
compared to EUR164 million in 2016, a decrease of EUR12 million.
With EBITDA EUR3 million lower, the year-on-year decrease was
mainly driven by a lower working capital inflow partly offset by
lower capital outflows, tax payments and 'other' outflows.
Free cash flow for the nine months to September 2017 was EUR198
million compared to EUR199 million in 2016.
Capital expenditure amounted to EUR260 million in the nine
months to September 2017 and equated to 86% of depreciation
compared to 110% in 2016.
The working capital movement in the nine months to September
2017 was an outflow of EUR120 million compared to an outflow of
EUR109 million in 2016. The outflow in 2017 was the combination of
an increase in debtors and stocks partly offset by an increase in
creditors. These increases reflect the combination of higher
corrugated prices, volume growth, strengthening European
containerboard pricing and higher OCC costs. Working capital
amounted to EUR686 million at September 2017, representing 8.1% of
annualised revenue compared to 7.7% at September 2016.
Cash interest of EUR119 million in the nine months to September
was EUR9 million higher year-on-year.
Tax payments of EUR107 million were EUR10 million lower than in
2016, primarily due to the timing of payments.
2017 Third Quarter and First Nine Months | Capital Structure
Net debt was EUR2,839 million at the end of September resulting
in a net debt to EBITDA ratio of 2.3x compared to 2.5x at the end
of June 2017 and 2.4x at the end of the third quarter of 2016. The
Group's balance sheet continues to provide considerable financial
strategic flexibility, subject to the stated leverage range of 2.0x
to 3.0x through the cycle and SKG's Ba1/BB+/BB+ credit rating.
At 30 September 2017 the Group's average interest rate was 4.1%
compared to 4.2% at 30 September 2016. The Group's diversified
funding base and long dated maturity profile of 3.6 years provide a
stable funding outlook. In terms of liquidity, the Group held cash
balances of EUR597 million at the end of the quarter, which was
further supplemented by available commitments under its revolving
credit facility of approximately EUR834 million.
2017 Third Quarter and First Nine Months | Commercial Offering
and Innovation
In September, the Group held its first Innovation Event in the
Americas, 'Packaging in a Digital World', in its new Experience
Centre in Dallas. Customers from across the 13 countries where the
Group operates in the region, together with members of the SKG
team, came together to discuss the challenges and more importantly
the opportunities for corrugated packaging to make a difference in
their world.
These events, along with our expanding network of Experience
Centres, continue to help our customers succeed in their
marketplace using our Smart portfolio of business applications,
Shelfsmart and Supplysmart. During the third quarter, the Group
strengthened its customer offering by adding eSmart to our Smart
portfolio of business applications. Our enhanced Smart portfolio
enables our customers to benefit from a range of unique solutions,
from supply chain optimisation to e-commerce growth opportunities
and finally supporting brand visibility and ultimately sales growth
at the point of purchase.
The Group was awarded seven regional awards in the quarter for
design in displays and packaging across Russia, the Netherlands and
Germany. The Group's most recent success was four Popai awards for
the UK and Ireland in October.
2017 Third Quarter and First Nine Months | Regional Performance
Review
Europe
The EBITDA margin of the European business continued to improve
in the third quarter to 15.3% from 14.2% in the second quarter and
13.6% in the first quarter. Reported EBITDA of EUR247 million for
the quarter was EUR7 million higher year-on-year. For the first
nine months of 2017, Europe reported EBITDA of EUR686 million, down
EUR14 million or 2% year-on-year. The year-to-date result, on an
underlying basis, was 1% lower compared to the same period last
year, mainly reflecting the impact of higher input costs and the
customary lag in recovering increased containerboard costs in
corrugated prices.
The Group continues to recover input cost pressure through
corrugated price recovery and expects further progression through
the fourth quarter of 2017 and into 2018.
On a days adjusted basis, net of acquisitions, corrugated box
volumes for the quarter increased by 4% year-on-year. Total
reported corrugated box volumes for the first nine months were up
close to 3%.
During the third quarter, the Group expanded its operational
footprint in Russia through the acquisition of Soyuz, a corrugated
plant in the greater Moscow area. This addition establishes SKG as
the largest international corrugated packaging producer in Russia
and the Soyuz site provides an opportunity for further organic
expansion.
In October, the Group agreed to acquire a high-end display and
box business in Greece, which upon completion will extend the
Group's access to the South Eastern European market by combining
SKG's expertise and scale with their product offering and
geographic positioning.
In Europe, the Group's recovered fibre costs for the first nine
months were up 18% on the same period in 2016. In the third
quarter, the year-on-year increase was 16% or an impact of EUR26
million.
The Americas
In the Americas, the Group reported an increase in the
sequential EBITDA margin from 14.2% to 15.4% in the third quarter.
The underlying EBITDA result was 10% higher year-on-year. The
currency impact was offset in part by the positive contribution
from our pricing initiatives in the region.
In the Americas, total corrugated volumes increased 3% for the
third quarter with strong demand in most markets.
In Colombia, the Group's operations have continued to perform
well with corrugated volumes up 5% in the first nine months of the
year over the same period in 2016.
In Mexico, corrugated volumes were up 4% year-on-year for the
first nine months, maintaining the strong growth seen in the
country in 2016 and 2015.
In the US, margins were impacted by a 49% increase in recovered
fibre costs in the third quarter. Corrugated volumes were lower
primarily as a result of natural events and rationalisation
activities.
In Brazil, SKG's year-on-year corrugated volumes were up 11% for
the first nine months, continuing a strong recovery. The Group also
saw some signs of recovery in Argentina with corrugated volumes up
6% in the quarter year-on-year. In Chile, corrugated volumes were
up 5% in the quarter year-on-year.
In Venezuela, the Group's corrugated shipments were down 43% in
the nine months to September 2017 compared to the same period in
2016. However, the Group's operations continue to perform in
extremely difficult circumstances. The macro situation remains
uncertain and we continue to monitor events as they unfold. The
business represented 2% of Group EBITDA in the first nine months.
Net assets in Venezuela decreased to EUR83 million as at 30
September 2017 (31 December 2016: EUR91 million).
In recent months we have invested close to $100 million in two
paper mill projects in Colombia and Mexico which combined will
provide an additional 140,000 tonnes of recycled containerboard
benefiting the region in 2018 and beyond.
Summary Cash Flow
Summary cash flows(1) for the third quarter and nine months are
set out in the following table.
3 months to 3 months to 9 months to 9 months to
30-Sep-17 30-Sep-16 30-Sep-17 30-Sep-16
EURm EURm EURm EURm
EBITDA 320 323 889 916
Cash interest expense (38) (38) (119) (110)
Working capital change 5 51 (120) (109)
Current provisions (3) - (5) (7)
Capital expenditure (83) (110) (260) (321)
Change in capital (8) 9 (58) 1
creditors
Tax paid (31) (47) (107) (117)
Sale of fixed assets 2 1 5 2
Other (12) (25) (27) (56)
Free cash flow 152 164 198 199
Share issues - - 1 -
Purchase of own shares - - (11) (10)
Sale of businesses - - 5 13
and investments
Purchase of businesses (36) - (46) (40)
and investments
Dividends (1) (1) (139) (116)
Derivative termination - - (1) -
payments
Net cash inflow 115 163 7 46
Net cash acquired 3 - 3 -
Deferred debt issue (3) (2) (9) (8)
costs amortised
Currency translation 31 7 101 57
adjustment
Decrease in net debt 146 168 102 95
(1) The summary cash flow is prepared on a different basis to
the Condensed Consolidated Statement of Cash Flows under IFRS
('IFRS cash flow') and as such the reconciling items between EBITDA
and decrease/(increase) in net debt may differ to amounts presented
in the IFRS cash flow. The principal differences are as
follows:
(a) The summary cash flow details movements in net debt. The
IFRS cash flow details movements in cash and cash equivalents.
(b) Free cash flow reconciles to cash generated from operations
in the IFRS cash flow as shown in the table on the next page. The
main adjustments are in respect of cash interest, capital
expenditure, tax payments and the sale of fixed assets and
businesses.
(c) The IFRS cash flow has different sub-headings to those used
in the summary cash flow.
-- Current provisions in the summary cash flow are included within change
in employee benefits and other provisions in the IFRS cash
flow.
-- The total of capital expenditure and change in capital creditors in
the summary cash flow includes additions to intangible assets
which is
shown separately in the IFRS cash flow. It also includes
capitalised
leased assets which are excluded from additions to property,
plant and
equipment and biological assets in the IFRS cash flow.
-- Other in the summary cash flow includes changes in employee benefits
and other provisions (excluding current provisions),
amortisation of
capital grants, receipt of capital grants and dividends received
from
associates which are shown separately in the IFRS cash flow.
Reconciliation of Free Cash Flow to Cash Generated from
Operations
9 months to 9 months to
30-Sep-17 30-Sep-16
EURm EURm
Free cash 198 199
flow
Add Cash interest 119 110
back:
Capital expenditure (net of change in capital creditors) 318 320
Tax payments 107 117
Less: Sale of fixed assets (5) (2)
Profit on sale of assets and businesses - non-exceptional (7) (6)
Receipt of capital grants (in 'Other' in summary cash flow) (4) (2)
Dividends received from associates (1) (1)
Cash generated from 725 735
operations
Capital Resources
The Group's primary sources of liquidity are cash flow from
operations and borrowings under the revolving credit facility. The
Group's primary uses of cash are for funding day to day operations,
capital expenditure, debt service, dividends and other investment
activity including acquisitions.
At 30 September 2017, Smurfit Kappa Treasury Funding Limited had
outstanding US$292.3 million 7.50% senior debentures due 2025. The
Group had outstanding EUR109 million and STGGBP66.7 million
variable funding notes issued under the EUR240 million accounts
receivable securitisation programme maturing in June 2019, together
with EUR5 million variable funding notes issued under the EUR175
million accounts receivable securitisation programme maturing in
February 2022.
Smurfit Kappa Acquisitions had outstanding EUR200 million 5.125%
senior notes due 2018, US$300 million 4.875% senior notes due 2018,
EUR400 million 4.125% senior notes due 2020, EUR250 million senior
floating rate notes due 2020, EUR500 million 3.25% senior notes due
2021, EUR500 million 2.375% senior notes due 2024 and EUR250
million 2.75% senior notes due 2025. Smurfit Kappa Acquisitions and
certain subsidiaries are also party to a senior credit facility. At
30 September 2017, the Group's senior credit facility comprised
term drawings of EUR312.6 million, US$55.8 million and STGGBP113.5
million under the amortising Term A facility maturing in 2020. In
addition, as at 30 September 2017, the facility included an EUR845
million revolving credit facility of which EUR6 million was drawn
in revolver loans, with a further EUR5 million in operational
facilities including letters of credit drawn under various
ancillary facilities.
The following table provides the range of interest rates at 30
September 2017 for each of the drawings under the various senior
credit facility loans.
Borrowing arrangement Currency Interest Rate
Term A Facility EUR 1.227% - 1.271% USD 2.835%
GBP 1.855%
Revolving Credit Facility EUR 0.977%
Borrowings under the revolving credit facility are available to
fund the Group's working capital requirements, capital expenditures
and other general corporate purposes.
In January 2017 the Group issued EUR500 million of seven-year
euro denominated senior notes at a coupon of 2.375%, the proceeds
of which were used to prepay term debt under the senior credit
facility, reduce indebtedness under existing securitisation
facilities and for general corporate purposes. In February 2017 the
Group increased the revolving credit facility under the senior
credit facility by EUR220 million thereby further enhancing
liquidity.
In May 2017 the Group amended, restated and extended its EUR175
million 2018 receivables securitisation programme, which utilises
the Group's receivables in Austria, Belgium, Italy and the
Netherlands, extending the maturity to 2022 and reducing the margin
on the variable funding notes from 1.70% to 1.375%.
Market Risk and Risk Management Policies
The Group is exposed to the impact of interest rate changes and
foreign currency fluctuations due to its investing and funding
activities and its operations in different foreign currencies.
Interest rate risk exposure is managed by achieving an appropriate
balance of fixed and variable rate funding. As at 30 September
2017, the Group had fixed an average of 81% of its interest cost on
borrowings over the following twelve months.
The Group's fixed rate debt comprised EUR200 million 5.125%
senior notes due 2018, US$300 million 4.875% senior notes due 2018
(US$50 million swapped to floating), EUR400 million 4.125% senior
notes due 2020, EUR500 million 3.25% senior notes due 2021, EUR500
million 2.375% senior notes due 2024, EUR250 million 2.75% senior
notes due 2025 and US$292.3 million 7.50% senior debentures due
2025. In addition the Group had EUR349 million in interest rate
swaps with maturity dates ranging from October 2018 to January
2021.
The Group's earnings are affected by changes in short-term
interest rates as a result of its floating rate borrowings. If
LIBOR/EURIBOR interest rates for these borrowings increase by one
percent, the Group's interest expense would increase, and income
before taxes would decrease, by approximately EUR8 million over the
following twelve months. Interest income on the Group's cash
balances would increase by approximately EUR6 million assuming a
one percent increase in interest rates earned on such balances over
the following twelve months.
The Group uses foreign currency borrowings, currency swaps,
options and forward contracts in the management of its foreign
currency exposures.
Condensed Consolidated Income Statement - Nine Months
9 months to 30-Sep-17 9 months to 30-Sep-16
Unaudited Unaudited
Pre-exceptional 2017 Exceptional 2017 Total 2017 Pre-exceptional 2016 Exceptional 2016 Total 2016
EURm EURm EURm EURm EURm EURm
Revenue 6,354 - 6,354 6,099 - 6,099
Cost of sales (4,482) - (4,482) (4,257) - (4,257)
Gross profit 1,872 - 1,872 1,842 - 1,842
Distribution (497) - (497) (476) - (476)
costs
Administrative (801) - (801) (757) - (757)
expenses
Operating 574 - 574 609 - 609
profit
Finance costs (178) (2) (180) (160) - (160)
Finance income 21 - 21 37 12 49
Share - - - 1 - 1
of associates'
profit (after
tax)
Profit before 417 (2) 415 487 12 499
income tax
Income tax (112) (147)
expense
Profit for the 303 352
financial
period
Attributable
to:
Owners of the 299 345
parent
Non-controlling 4 7
interests
Profit for the 303 352
financial
period
Attributable
to:
Owners of the 299 345
parent
Non-controlling 4 7
interests
Profit for the 303 352
financial
period
Earnings per
share
Basic earnings 127.0 147.1
per
share - cent
Diluted 126.2 145.9
earnings
per share
- cent
Condensed Consolidated Income Statement - Third Quarter
3 months to 30-Sep-17 3 months to 30-Sep-16
Unaudited Unaudited
Pre-exceptional 2017 Exceptional 2017 Total 2017 Pre-exceptional 2016 Exceptional 2016 Total 2016
EURm EURm EURm EURm EURm EURm
Revenue 2,121 - 2,121 2,050 - 2,050
Cost of sales (1,471) - (1,471) (1,428) - (1,428)
Gross profit 650 - 650 622 - 622
Distribution (165) - (165) (162) - (162)
costs
Administrative (269) - (269) (241) - (241)
expenses
Operating 216 - 216 219 - 219
profit
Finance costs (48) - (48) (43) - (43)
Finance income 2 - 2 11 - 11
Profit before 170 - 170 187 - 187
income tax
Income tax (42) (50)
expense
Profit for the 128 137
financial
period
Attributable
to:
Owners of the 124 132
parent
Non-controlling 4 5
interests
Profit for the 128 137
financial
period
Attributable
to:
Owners of the 124 132
parent
Non-controlling 4 5
interests
Profit for the 128 137
financial
period
Earnings per
share
Basic earnings 52.7 56.4
per
share - cent
Diluted 52.4 55.9
earnings
per share
- cent
Condensed Consolidated Statement of Comprehensive Income - Nine
Months
9 months to 9 months to
30-Sep-17 30-Sep-16
Unaudited Unaudited
EURm EURm
Profit for the financial period 303 352
Other comprehensive income:
Items that may be subsequently
reclassified to profit or loss
Foreign currency translation adjustments:
- Arising in the period (158) (123)
Effective portion of changes in fair
value of cash flow hedges:
- Movement out of reserve 6 5
- New fair value adjustments into reserve (3) (7)
(155) (125)
Items which will not be subsequently
reclassified to profit or loss
Defined benefit pension plans:
- Actuarial loss (7) (191)
- Movement in deferred tax 1 28
(6) (163)
Total other comprehensive expense (161) (288)
Total comprehensive income 142 64
for the financial period
Attributable to:
Owners of the parent 160 56
Non-controlling interests (18) 8
Total comprehensive income 142 64
for the financial period
Condensed Consolidated Statement of Comprehensive Income - Third
Quarter
3 months to 3 months to
30-Sep-17 30-Sep-16
Unaudited Unaudited
EURm EURm
Profit for the financial period 128 137
Other comprehensive income:
Items that may be subsequently
reclassified to profit or loss
Foreign currency translation adjustments:
- Arising in the period (29) (25)
Effective portion of changes in fair
value of cash flow hedges:
- Movement out of reserve 3 2
- New fair value adjustments into reserve (3) (3)
(29) (26)
Items which will not be subsequently
reclassified to profit or loss
Defined benefit pension plans:
- Actuarial loss (23) (62)
- Movement in deferred tax 4 7
(19) (55)
Total other comprehensive expense (48) (81)
Total comprehensive income 80 56
for the financial period
Attributable to:
Owners of the parent 77 51
Non-controlling interests 3 5
Total comprehensive income 80 56
for the financial period
Condensed Consolidated Balance Sheet
30-Sep-17 30-Sep-16 31-Dec-16
Unaudited Unaudited Audited
EURm EURm EURm
ASSETS
Non-current assets
Property, plant and equipment 3,194 3,129 3,261
Goodwill and intangible assets 2,414 2,468 2,478
Available-for-sale financial assets 21 21 21
Investment in associates 15 17 17
Biological assets 96 95 114
Trade and other receivables 26 34 29
Derivative financial instruments - 28 42
Deferred income tax assets 191 200 190
5,957 5,992 6,152
Current assets
Inventories 791 755 779
Biological assets 12 10 10
Trade and other receivables 1,628 1,518 1,470
Derivative financial instruments 18 11 10
Restricted cash 8 8 7
Cash and cash equivalents 589 479 436
3,046 2,781 2,712
Total assets 9,003 8,773 8,864
EQUITY
Capital and reserves attributable
to owners of the parent
Equity share capital - - -
Share premium 1,984 1,983 1,983
Other reserves (639) (547) (507)
Retained earnings 1,083 756 853
Total equity attributable 2,428 2,192 2,329
to owners of the parent
Non-controlling interests 147 164 174
Total equity 2,575 2,356 2,503
LIABILITIES
Non-current liabilities
Borrowings 2,765 3,295 3,247
Employee benefits 858 941 884
Derivative financial instruments 24 27 12
Deferred income tax liabilities 144 167 183
Non-current income tax liabilities 31 32 30
Provisions for liabilities and charges 58 49 69
Capital grants 17 14 14
Other payables 13 13 13
3,910 4,538 4,452
Current liabilities
Borrowings 671 145 137
Trade and other payables 1,759 1,673 1,705
Current income tax liabilities 45 29 21
Derivative financial instruments 20 12 27
Provisions for liabilities and charges 23 20 19
2,518 1,879 1,909
Total liabilities 6,428 6,417 6,361
Total equity and liabilities 9,003 8,773 8,864
Condensed Consolidated Statement of Changes in Equity
Attributable to owners
of the parent
Equity share Share premium Other reserves Retained earnings Total Non-controlling Total equity
capital interests
EURm EURm EURm EURm EURm EURm EURm
Unaudited
At 1 January - 1,983 (507) 853 2,329 174 2,503
2017
Profit for the - - - 299 299 4 303
financial
period
Other
comprehensive
income
Foreign - - (136) - (136) (22) (158)
currency
translation
adjustments
Defined benefit - - - (6) (6) - (6)
pension plans
Effective - - 3 - 3 - 3
portion
of changes in
fair value
of cash
flow hedges
Total - - (133) 293 160 (18) 142
comprehensive
(expense)/income
for
the financial
period
Shares issued - 1 - - 1 - 1
Purchase - - - - - (15) (15)
of
non-controlling
interests
Hyperinflation - - - 73 73 9 82
adjustment
Dividends paid - - - (136) (136) (3) (139)
Share-based - - 12 - 12 - 12
payment
Shares acquired - - (11) - (11) - (11)
by
SKG Employee
Trust
At 30 September - 1,984 (639) 1,083 2,428 147 2,575
2017
Unaudited
At 1 January - 1,983 (425) 619 2,177 151 2,328
2016
Profit for the - - - 345 345 7 352
financial
period
Other
comprehensive
income
Foreign - - (124) - (124) 1 (123)
currency
translation
adjustments
Defined benefit - - - (163) (163) - (163)
pension plans
Effective - - (2) - (2) - (2)
portion
of changes in
fair value
of cash
flow hedges
Total - - (126) 182 56 8 64
comprehensive
(expense)/income
for
the financial
period
Hyperinflation - - - 68 68 8 76
adjustment
Dividends paid - - - (113) (113) (3) (116)
Share-based - - 14 - 14 - 14
payment
Shares acquired - - (10) - (10) - (10)
by
SKG Employee
Trust
At 30 September - 1,983 (547) 756 2,192 164 2,356
2016
An analysis of the movements in Other reserves is provided in
Note 13.
Condensed Consolidated Statement of Cash Flows
9 months to 9 months to
30-Sep-17 30-Sep-16
Unaudited Unaudited
EURm EURm
Cash flows from operating activities
Profit before income tax 415 499
Net finance costs 159 111
Depreciation charge 265 259
Amortisation of intangible assets 30 25
Amortisation of capital grants (1) (1)
Equity settled share-based payment expense 12 14
Profit on sale/purchase of assets and businesses (7) (11)
Share of associates' profit (after tax) - (1)
Net movement in working capital (119) (109)
Change in biological assets 7 9
Change in employee benefits and other provisions (47) (72)
Other (primarily hyperinflation adjustments) 11 12
Cash generated from operations 725 735
Interest paid (122) (113)
Income taxes paid:
Irish corporation tax paid (6) (22)
Overseas corporation tax (net (101) (95)
of tax refunds) paid
Net cash inflow from operating activities 496 505
Cash flows from investing activities
Interest received 2 3
Business disposals 4 -
Additions to property, plant and (311) (311)
equipment and biological assets
Additions to intangible assets (7) (9)
Receipt of capital grants 4 2
Disposal of available-for-sale financial assets 1 13
Increase in restricted cash (1) (4)
Disposal of property, plant and equipment 12 8
Dividends received from associates 1 1
Purchase of subsidiaries and (40) (32)
non-controlling interests
Deferred consideration paid (3) (8)
Net cash outflow from investing activities (338) (337)
Cash flows from financing activities
Proceeds from issue of new ordinary shares 1 -
Proceeds from bond issue 500 -
Proceeds from other debt issues - 250
Purchase of own shares (11) (10)
Increase in other interest-bearing borrowings 12 33
Repayment of finance leases (2) (3)
Repayment of borrowings (366) (169)
Derivative termination payments (1) -
Deferred debt issue costs paid (10) (2)
Dividends paid to shareholders (136) (113)
Dividends paid to non-controlling interests (3) (3)
Net cash outflow from financing activities (16) (17)
Increase in cash and cash equivalents 142 151
Reconciliation of opening to closing
cash and cash equivalents
Cash and cash equivalents at 1 January 402 263
Currency translation adjustment 19 22
Increase in cash and cash equivalents 142 151
Cash and cash equivalents at 30 September 563 436
An analysis of the Net movement in working capital is provided
in Note 11.
Notes to the Condensed Consolidated Interim Financial
Statements
1.General Information
Smurfit Kappa Group plc ('SKG plc' or 'the Company') and its
subsidiaries (together 'SKG' or 'the Group') manufacture,
distribute and sell containerboard, corrugated containers and other
paper-based packaging products such as solidboard, graphicboard and
bag-in-box. The Company is a public limited company whose shares
are publicly traded. It is incorporated and domiciled in Ireland.
The address of its registered office is Beech Hill, Clonskeagh,
Dublin 4, D04 N2R2, Ireland.
2.Basis of Preparation and Accounting Policies
The consolidated financial statements of the Group are prepared
in accordance with International Financial Reporting Standards
('IFRS') issued by the International Accounting Standards Board
('IASB') as adopted by the European Union ('EU'); and those parts
of the Companies Act 2014 applicable to companies reporting under
IFRS. The financial information presented in this report has not
been prepared in accordance with International Accounting Standard
34 - 'Interim Financial Reporting' ('IAS 34').
The financial information presented in this report has been
prepared in accordance with the Group's accounting policies. Full
details of the accounting policies adopted by the Group are
contained in the financial statements included in the Group's
annual report for the year ended 31 December 2016 which is
available on the Group's website; smurfitkappa.com. The accounting
policies and methods of computation and presentation adopted in the
preparation of the condensed consolidated interim financial
statements are consistent with those described and applied in the
annual report for the financial year ended 31 December 2016. There
are no new IFRS effective from 1 January 2017 which have a material
effect on the condensed consolidated interim financial information
included in this report.
The condensed consolidated interim financial statements include
all adjustments that management considers necessary for a fair
presentation of such financial information. All such adjustments
are of a normal recurring nature. Certain tables in this interim
statement may not add precisely due to rounding.
The condensed consolidated interim financial statements
presented do not constitute full statutory accounts. Full statutory
accounts for the year ended 31 December 2016 have been filed with
the Irish Registrar of Companies. The audit report on those
statutory accounts was unqualified.
3.Segmental Analyses
The Group has determined operating segments based on the manner
in which reports are reviewed by the chief operating decision maker
('CODM'). The CODM is determined to be the executive management
team responsible for assessing performance, allocating resources
and making strategic decisions. The Group has identified two
operating segments: 1) Europe and 2) The Americas.
The Europe segment is highly integrated. It includes a system of
mills and plants that primarily produces a full line of
containerboard that is converted into corrugated containers. The
Americas segment comprises all forestry, paper, corrugated and
folding carton activities in a number of Latin American countries
and the United States. Inter-segment revenue is not material. No
operating segments have been aggregated for disclosure
purposes.
Segment profit is measured based on EBITDA(1)
9 months to 30-Sep-17 9 months to 30-Sep-16
Europe The Americas Total Europe The Americas Total
EURm EURm EURm EURm EURm EURm
Revenue and
results
Revenue 4,774 1,580 6,354 4,639 1,460 6,099
EBITDA 686 225 911 700 241 941
Unallocated (22) (25)
centre
costs
Share-based (13) (14)
payment
expense
Depreciation (272) (268)
and
depletion (net)
Amortisation (30) (25)
Finance costs (180) (160)
Finance income 21 49
Share - 1
of associates'
profit (after
tax)
Profit before 415 499
income tax
Income tax (112) (147)
expense
Profit for the 303 352
financial
period
3 months to 30-Sep-17 3 months to 30-Sep-16
Europe The Americas Total Europe The Americas Total
EURm EURm EURm EURm EURm EURm
Revenue and
results
Revenue 1,610 511 2,121 1,537 513 2,050
EBITDA 247 79 326 240 86 326
Unallocated (6) (3)
centre
costs
Share-based (4) (4)
payment
expense
Depreciation (90) (91)
and
depletion
(net)
Amortisation (10) (9)
Finance costs (48) (43)
Finance income 2 11
Profit before 170 187
income tax
Income tax (42) (50)
expense
Profit for the 128 137
financial
period
(1) EBITDA is defined within Alternative Performance Measures
set out in Supplementary Financial Information.
4.Exceptional Items
9 months to 9 months to
The following items are regarded 30-Sep-17 30-Sep-16
as exceptional in nature:
EURm EURm
Exceptional finance costs 2 -
Exceptional finance income - (12)
Exceptional items included in net finance costs 2 (12)
Exceptional finance costs of EUR2 million arose in the first
quarter of 2017 and represented the accelerated amortisation of the
issue costs relating to the debt within our senior credit facility
which was paid down with the proceeds of January's EUR500 million
bond issue.
The exceptional finance income in 2016 related to the gain of
EUR12 million on the sale of our shareholding in the Swedish
company, IL Recycling, in the second quarter.
5.Finance Costs and Income
9 months to 9 months to
30-Sep-17 30-Sep-16
EURm EURm
Finance costs:
Interest payable on bank loans and overdrafts 40 41
Interest payable on other borrowings 88 79
Exceptional finance costs associated 2 -
with debt restructuring
Unwinding discount element of provision 1 1
Foreign currency translation loss on debt 21 9
Fair value loss on derivatives - 13
not designated as hedges
Net interest cost on net pension liability 16 17
Net monetary loss - hyperinflation 12 -
Total finance costs 180 160
Finance income:
Other interest receivable (2) (3)
Foreign currency translation gain on debt (10) (20)
Exceptional gain on sale of investment - (12)
Fair value gain on derivatives (9) (2)
not designated as hedges
Net monetary gain - hyperinflation - (12)
Total finance income (21) (49)
Net finance costs 159 111
6.Income Tax Expense
Income tax expense recognised in the Condensed Consolidated
Income Statement
9 months to 9 months to
30-Sep-17 30-Sep-16
EURm EURm
Current tax:
Europe 101 80
The Americas 40 51
141 131
Deferred tax (29) 16
Income tax expense 112 147
Current tax is analysed as follows:
Ireland 12 12
Foreign 129 119
141 131
Income tax recognised in the Condensed Consolidated Statement of
Comprehensive Income
9 months to 9 months to
30-Sep-17 30-Sep-16
EURm EURm
Arising on defined benefit plans (1) (28)
The income tax expense in 2017 is EUR35 million lower than in
the comparable period in 2016, primarily due to the tax effects of
lower earnings and a deferred tax credit of EUR29 million in 2017
compared to a deferred tax charge of EUR16 million in 2016.
The current tax expense has increased by EUR10 million compared
to the prior period. The Group's historic tax losses have now been
fully utilised in a number countries and the impact of this,
together with other timing items, is included in the increased
current tax expense in 2017.
7.Employee Benefits - Defined Benefit Plans
The table below sets out the components of the defined benefit
cost for the period:
9 months to 9 months to
30-Sep-17 30-Sep-16
EURm EURm
Current service cost 20 23
Past service cost - (21)
Gain on settlement - (5)
Actuarial loss arising on other - 1
long-term employee benefits
Net interest cost on net pension liability 14 16
Defined benefit cost 34 14
Included in cost of sales, distribution costs and administrative
expenses is a defined benefit cost of EUR20 million (2016: EUR2
million gain). Net interest cost on net pension liability of EUR14
million (2016: EUR16 million) is included in finance costs in the
Condensed Consolidated Income Statement.
The amounts recognised in the Condensed Consolidated Balance
Sheet were as follows:
30-Sep-17 31-Dec-16
EURm EURm
Present value of funded or partially (2,240) (2,320)
funded obligations
Fair value of plan assets 1,888 1,953
Deficit in funded or partially funded plans (352) (367)
Present value of wholly unfunded obligations (506) (517)
Net pension liability (858) (884)
8.Earnings per Share
Basic
Basic earnings per share is calculated by dividing the profit
attributable to owners of the parent by the weighted average number
of ordinary shares in issue during the period less own shares.
9 months to 9 months to
30-Sep-17 30-Sep-16
Profit attributable to owners 299 345
of the parent (EUR million)
Weighted average number of ordinary 235 234
shares in issue (million)
Basic earnings per share (cent) 127.0 147.1
Diluted
Diluted earnings per share is calculated by adjusting the
weighted average number of ordinary shares outstanding to assume
conversion of all dilutive potential ordinary shares. These
comprise convertible shares issued under the Share Incentive Plan,
which were based on performance and the passage of time, and
deferred shares held in trust issued under the Deferred Annual
Bonus Plan, which are based on the passage of time.
9 months to 9 months to
30-Sep-17 30-Sep-16
Profit attributable to owners 299 345
of the parent (EUR million)
Weighted average number of ordinary 235 234
shares in issue (million)
Potential dilutive ordinary 2 2
shares assumed (million)
Diluted weighted average ordinary 237 236
shares (million)
Diluted earnings per share (cent) 126.2 145.9
Pre-exceptional
9 months to 9 months to
30-Sep-17 30-Sep-16
Profit attributable to owners 299 345
of the parent (EUR million)
Exceptional items included in profit before 2 (12)
income tax (Note 4) (EUR million)
Pre-exceptional profit attributable to 301 333
owners of the parent (EUR million)
Weighted average number of ordinary 235 234
shares in issue (million)
Pre-exceptional basic earnings 127.7 142.0
per share (cent)
Diluted weighted average ordinary 237 236
shares (million)
Pre-exceptional diluted earnings 126.9 140.8
per share (cent)
9.Dividends
During the year, the final dividend for 2016 of 57.6 cent per
share was paid to the holders of ordinary shares. In October, an
interim dividend for 2017 of 23.1 cent per share was paid to the
holders of ordinary shares.
10.Property, Plant and Equipment
Land and buildings Plant and equipment Total
EURm EURm EURm
Nine months ended 30
September 2017
Opening net book amount 1,004 2,257 3,261
Reclassifications 36 (37) (1)
Additions 1 245 246
Acquisitions 28 6 34
Depreciation charge (36) (229) (265)
Retirements and (3) (1) (4)
disposals
Hyperinflation 24 19 43
adjustment
Foreign currency (42) (78) (120)
translation
adjustment
At 30 September 2017 1,012 2,182 3,194
Year ended 31 December
2016
Opening net book amount 988 2,115 3,103
Reclassifications 42 (43) (1)
Additions 11 465 476
Acquisitions 10 56 66
Depreciation charge (48) (309) (357)
Retirements and (1) (11) (12)
disposals
Hyperinflation 25 21 46
adjustment
Foreign currency (23) (37) (60)
translation
adjustment
At 31 December 2016 1,004 2,257 3,261
11.Net Movement in Working Capital
9 months to 9 months to
30-Sep-17 30-Sep-16
EURm EURm
Change in inventories (58) (42)
Change in trade and other receivables (194) (103)
Change in trade and other payables 133 36
Net movement in working capital (119) (109)
12.Analysis of Net Debt
30-Sep-17 31-Dec-16
EURm EURm
Senior credit facility:
Revolving credit facility(1)- interest at 2 1
relevant interbank rate + 1.35%(6)
Term loan facility(2)- interest at relevant 486 741
interbank rate + 1.60%(6)
US$292.3 million 7.50% senior debentures 254 279
due 2025 (including accrued interest)
Bank loans and overdrafts 149 167
Cash (597) (443)
2019 receivables securitisation 184 182
variable funding notes
2022 receivables securitisation variable funding 4 114
notes (including accrued interest)(3)
2018 senior notes (including accrued interest)(4) 453 488
EUR400 million 4.125% senior notes due 400 404
2020 (including accrued interest)
EUR250 million senior floating rate notes due 250 249
2020 (including accrued interest)(5)
EUR500 million 3.25% senior notes due 501 496
2021 (including accrued interest)
EUR500 million 2.375% senior notes due 494 -
2024 (including accrued interest)
EUR250 million 2.75% senior notes due 248 249
2025 (including accrued interest)
Net debt before finance leases 2,828 2,927
Finance leases 11 14
Net debt including leases 2,839 2,941
(1) Revolving credit facility ('RCF') of EUR845 million
(available under the senior credit facility) to be repaid in 2020.
The RCF was increased by EUR220 million in February 2017. (a)
Revolver loans - EUR6 million, (b) drawn under ancillary facilities
and facilities supported by letters of credit - nil and (c) other
operational facilities including letters of credit - EUR5
million.
(2) Term loan facility due to be repaid in certain instalments
from 2018 to 2020. In January and February 2017, the Group prepaid
EUR260 million of drawings under the term loan facility.
(3) In May 2017, the EUR175 million receivables securitisation
programme was amended and restated, extending the maturity to 2022
and reducing the variable funding notes margin from 1.70% to
1.375%.
(4) EUR200 million 5.125% senior notes due 2018 and US$300
million 4.875% senior notes due 2018.
(5) Interest at EURIBOR + 3.5%.
(6) The margins applicable under the senior credit facility are
determined as follows:
Net debt/EBITDA ratio RCF Term Loan Facility
Greater than 3.0 : 1 1.85% 2.10%
3.0 : 1 or less but more than 2.5 : 1 1.35% 1.60%
2.5 : 1 or less but more than 2.0 : 1 1.10% 1.35%
2.0 : 1 or less 0.85% 1.10%
13.Other Reserves
Other reserves included in the Condensed Consolidated Statement
of Changes in Equity are comprised of the following:
Reverse Cash flow Foreign Share- Own shares Available-for-sale
acquisition hedging reserve currency based reserve Total
reserve translation payment
reserve reserve
EURm EURm EURm EURm EURm EURm EURm
At 1 January 575 (22) (1,193) 165 (33) 1 (507)
2017
Other
comprehensive
income
Foreign - - (136) - - - (136)
currency
translation
adjustments
Effective - 3 - - - - 3
portion
of changes in
fair value
of cash
flow hedges
Total - 3 (136) - - - (133)
other
comprehensive
income/(expense)
Share-based - - - 12 - - 12
payment
Shares - - - - (11) - (11)
acquired
by
SKG Employee
Trust
Shares - - - (11) 11 - -
distributed
by
SKG Employee
Trust
At 575 (19) (1,329) 166 (33) 1 (639)
30 September
2017
At 1 January 575 (22) (1,109) 168 (38) 1 (425)
2016
Other
comprehensive
income
Foreign - - (124) - - - (124)
currency
translation
adjustments
Effective - (2) - - - - (2)
portion
of changes in
fair value
of cash
flow hedges
Total - (2) (124) - - - (126)
other
comprehensive
expense
Share-based - - - 14 - - 14
payment
Shares - - - - (10) - (10)
acquired
by
SKG Employee
Trust
Shares - - - (15) 15 - -
distributed
by
SKG Employee
Trust
At 575 (24) (1,233) 167 (33) 1 (547)
30 September
2016
14.Venezuela
Hyperinflation
As discussed more fully in the 2016 annual report, Venezuela
became hyperinflationary during 2009 when its cumulative inflation
rate for the past three years exceeded 100%. As a result, the Group
applied the hyperinflationary accounting requirements of IAS 29 -
Financial Reporting in Hyperinflationary Economies to its
Venezuelan operations at 31 December 2009 and for all subsequent
accounting periods.
In 2017 and 2016 management engaged an independent expert to
determine an estimate of the annual inflation rate. The level of
and movement in the price index at September 2017 and 2016 are as
follows:
30-Sep-17 30-Sep-16
Index at period-end 57,780.7 10,179.0
Movement in period 418.0% 295.3%
As a result of the entries recorded in respect of
hyperinflationary accounting under IFRS, the Condensed Consolidated
Income Statement is impacted as follows: Revenue EUR25 million
decrease (2016: EUR24 million increase), EBITDA EUR24 million
decrease (2016: EUR4 million decrease) and profit after taxation
EUR27 million decrease (2016: EUR12 million decrease). In 2017, a
net monetary loss of EUR12 million (2016: EUR12 million net
monetary gain) was recorded in the Condensed Consolidated Income
Statement. The impact on our net assets and our total equity is an
increase of EUR150 million (2016: EUR70 million increase).
Exchange Control
The Group consolidates its Venezuelan operations at the variable
DICOM rate. The Group believes that DICOM is the most appropriate
rate for accounting and consolidation, as it believes that this is
the rate at which the Group extracts economic benefit. On this
basis, in accordance with IFRS, the financial statements of the
Group's operations in Venezuela were translated at 30 September
2017 using the DICOM rate of VEF 3,345.00 per US dollar and the
closing euro/US dollar rate of 1 euro = US$1.1806.
Control
The nationalisation of foreign owned companies or assets by the
Venezuelan government remains a risk. Market value compensation is
either negotiated or arbitrated under applicable laws or treaties
in these cases. However, the amount and timing of such compensation
is necessarily uncertain.
The Group continues to control operations in Venezuela and, as a
result, continues to consolidate all of the results and net assets
of these operations at the period end in accordance with the
requirements of IFRS 10.
In 2017, the Group's operations in Venezuela represented
approximately 2% (2016: 2%) of its EBITDA, 2% (2016: 2%) of its
total assets and 3% (2016: 4%) of its net assets. Cumulative
foreign translation losses arising on its net investment in these
operations amounting to EUR1,081 million (2016: EUR988 million) are
included in the foreign currency translation reserve.
Supplementary Financial Information
Alternative Performance Measures
Certain financial measures set out in this report are not
defined under International Financial Reporting Standards ('IFRS').
An explanation for the use of these Alternative Performance
Measures ('APMs') is set out within Financial Key Performance
Indicators on pages 40-42 of the Group's 2016 annual report. The
key APMs of the Group are set out below.
APM Description
EBITDA Earnings before exceptional items,
share-based payment expense,
share of associates' profit
(after tax), net
finance costs, income tax expense,
depreciation and depletion
(net) and intangible assets
amortisation.
EBITDA
EBITDA Margin % x 100
Revenue
Pre-exceptional Basic EPS (cent) Profit attributable to
owners of the parent,
adjusted for exceptional items
included in profit before tax and
income tax on exceptional items
x 100
Weighted average number of
ordinary shares in issue
Return on Capital Employed % Last twelve months ('LTM')
pre-exceptional
operating
profit plus share of associates'
profit (after tax)
x 100
Average capital employed
(where capital
employed is the average of
total equity and net debt at the
beginning and end of the LTM)
Free Cash Flow Free cash flow is the result
of the cash inflows
and outflows from our
operating activities,
and is before those arising
from acquisition
and disposal activities.
Free cash flow (APM)
and a reconciliation
of free cash flow to
cash generated from operations
(IFRS measure) are included
in the management commentary.
The IFRS cash flow is included
in the Condensed Consolidated
Financial Statements.
Net Debt Net debt is comprised of
borrowings net of cash
and cash equivalents
and restricted cash.
Net Debt to EBITDA (LTM) times Net debtEBITDA (LTM)
Reconciliation of
Profit to EBITDA
3 months to 3 months to 9 months to 9 months to
30-Sep-17 30-Sep-16 30-Sep-17 30-Sep-16
EURm EURm EURm EURm
Profit for the 128 137 303 352
financial
period
Income tax expense 42 50 112 147
Share - - - (1)
of associates'
profit (after tax)
Net finance costs 46 32 159 111
(after
exceptional items)
Share-based payment 4 4 13 14
expense
Depreciation, 100 100 302 293
depletion
(net)
and amortisation
EBITDA 320 323 889 916
Return on Capital Employed
Q3, 2017 Q3, 2016 Q2, 2017
EURm EURm EURm
Pre-exceptional operating profit plus share 795 838 799
of associates' profit (after tax) (LTM)
Total equity - current period end 2,575 2,356 2,488
Net debt - current period end 2,839 2,953 2,985
Capital employed - current period end 5,414 5,309 5,473
Total equity - prior period end 2,356 2,181 2,252
Net debt - prior period end 2,953 2,953 3,121
Capital employed - prior period end 5,309 5,134 5,373
Average capital employed 5,361 5,221 5,423
Return on capital employed 14.8% 16.1% 14.7%
Supplementary Historical Financial Information
EURm Q3, 2016 Q4, 2016 FY, 2016 Q1, 2017 Q2, 2017 Q3, 2017
Group and 3,424 3,441 13,521 3,573 3,590 3,667
third
party
revenue
Third 2,050 2,060 8,159 2,129 2,104 2,121
party
revenue
EBITDA 323 320 1,236 278 292 320
EBITDA 15.7% 15.5% 15.1% 13.0% 13.9% 15.1%
margin
Operating 219 206 815 168 190 216
profit
Profit 187 155 654 109 136 170
before
income tax
Free cash 164 104 303 16 30 152
flow
Basic 56.4 42.3 189.4 31.5 42.8 52.7
earnings
per
share -
cent
Weighted 234 235 235 235 235 235
average
number
of shares
used
in
EPS
calculation
(million)
Net debt 2,953 2,941 2,941 2,931 2,985 2,839
EBITDA 1,242 1,236 1,236 1,233 1,212 1,209
(LTM)
Net debt 2.38 2.38 2.38 2.38 2.46 2.35
to
EBITDA
(LTM)
LEI: 635400CPLP8H5ITDVT56Classification: Additional regulated
information required to be disclosed under the laws of a Member
State
View source version on businesswire.com:
http://www.businesswire.com/news/home/20171101005487/en/
This information is provided by Business Wire
(END) Dow Jones Newswires
November 01, 2017 03:00 ET (07:00 GMT)
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