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European Paper Sector Grows 15% Through Increased Packaging Demand
Feb 07, 2018


The investment bank singled out Stora Enso, Smurfit Kappa and Mondi.


Justin Jordan, equity analyst at Jefferies, said that secular pulp demand growth underpins Stora Enso’s performance, with packaging giants Smurfit Kappa and Mondi were supported by triple tailwind of e-commerce growth, improving European industrial production and accelerating consumer spending.


Stora Enso led the way with 29.5% gain in 2017, Smurfit Kappa rose 29.3% with DS Smith up 21.9%. Additionally, BillerudKorsnas fell 10.5% on mill technical issues which were stock specific, while RPC declined 14.8% on accounting concerns.


Jordan said a 3.5% 2017 global pulp demand growth and limited pulp capacity additions beyond mid-2018, and singled out Stora Enso’s sector leading 15% EPS CAGR.


He added that Smurfit Kappa’s 8% free cash flow gives flexibility for selective expansion/efficiency projects and M&A, while Mondi offers sector leading Return on capital employed, probable €1.00-€1.50 2018 special dividend and upside from recent announced European containerboard price hikes.


Jordan told Packaging News there was a 3-4% growth in European box volumes in 2017, and set to grow similarly 3-4% in 2018.


He added that global pulp demand is up 3.5% – principally in Asia, due mainly to tissue and hygiene sales.