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Smurfit Kappa: 4Q11 Results Show Continued FCF

SKG (Ba2/BB/BB+) reported another set of decent numbers that were in line with estimates. Sales were +4% yoy at EUR1,819m with EBITDA -5% yoy at EUR245m. The company generated EUR199m of FCF during the quarter as a result of seasonal working capital and lower capex. Net leverage decreased by 0.1x to end the year at 2.7x (2.3x through the secured notes.

The outlook for 2012 is for macro uncertainty but continued strong FCF generation through the cycle. The company also announced a 15c per share dividend per share (EUR33m). SKG is also seeking the consent of lenders to amend its SFA. Key terms include extending the revolver, TLB and TLC to 2016 with a 50bps fee for term loan consents and 65bps for revolver consents.

The company needs 66.66% approval but notes that a significant number of investors are on board. The consent also allows for flexibility to refinance the 2015 sub bond in a manner efficient to the company.