Smurfit Kappa to continue raising prices amid ‘unprecedented’ cost inflation

Irish paper and packaging group Smurfit Kappa has said it is likely to further increase its prices in a sign that major companies will have to continue to pass on rising costs and struggle with inflation for the foreseeable future.

Smurfit has reported strong annual profits, but said it will continue to raise prices in order to recover high costs after having seen “unprecedented cost inflation”.

Smurfit Kappa generated revenues of €10.1bn in 2021, representing a yearly increase of 18%. Pre-tax earnings rose 13% to €1.7bn.

The group said a huge demand for packaging products and a 19% rise in prices helped it deliver record earnings last year. 

It said price increases are likely to continue for the first half of this year, and there is no sign of demand slowing.

However, group chief executive Tony Smurfit said he remains concerned over supply chain disruptions and an increase in such disruption as product demand rises further.

Product demand was driven by the high level of e-commerce and online shopping transactions over the worst of the global Covid restrictions. 

Smurfit’s customers include the likes of consumer goods giants Nestle, Procter & Gamble, and Unilever.

Smurfit said energy and raw material prices remain elevated and it expects to have to continue to recover those costs throughout 2022.

Another major international company, French dairy products giant Danone, is set to release annual results later this month.

The company has indicated that its cost-of-goods-sold inflation was in the region of 9% in the second half and expects that rate to level out at around 8% over the course of this year.

In another sign of far-reaching inflationary stubbornness, Spain’s prime minister Pedro Sanchez said Spanish electricity prices — which have surged since the first half of last year — will likely continue to rise in the coming months.

“All forecasts tell us that” prices will continue to increase in the next few months, Mr Sanchez said. 

He also renewed calls to reform Europe’s energy pricing regulations so as to decouple “the price of gas from the evolution of the price of electricity”.

On more positive footings, the UK’s largest housebuilder Barratt said British homes will likely remain affordable and demand will stay strong despite a climate of rising interest rates, while German economic forecaster the IFO institute said the country is seeing an easing in the shortage of building materials and supply bottlenecks.

However, earlier this month the IFO raised its outlook on German inflation, saying prices are likely to rise 4% this year, up from its December forecast for 3.3% inflation.

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