Dublin-headquartered Smurfit Kappa Group is considered Ireland’s first true multinational. Tony Smurfit was appointed chief executive of the London-listed paper packaging company, which is big enough to be in the FTSE 100, in 2015, having served as chief operations officer since 2002. Speaking at a Business Leaders' Forum lunchtime webinar in March, hosted by forum chair Carol Lynch FCCA, Smurfit discussed how his company had responded to the pandemic.
Dividend deferred
He told the ACCA Ireland webinar’s 400 participants that Smurfit Kappa had benefited from the surge in e-commerce and growing demand for sustainable packaging that occurred in 2020. The decision, made in April last year when the scale of the emerging pandemic was still unknown, to ‘defer dividends until there was clear blue water between us and virus’ had been hugely important, he said.
‘We didn’t want to mislead the market in any way or to go ex-dividend,’ he explained. The decision contributed to ‘a very strong performance that set us up for a great start to this year’. The deferred dividend was ultimately paid in July, followed by an interim dividend at the end of year.
The strong performance in 2020 also brought the company forward in its thinking on investment. ‘Having spent a long time getting the balance sheet into good shape, we thought why not raise some money to invest more quickly in the business?’ Smurfit said.
However, although the company’s share price rose by 12% during the course of 2020, Smurfit believes it remains underrated by investors. ‘Our prospects are better than our leading peer, but we are rated two points lower. If I knew why, I’d change it. However, we’ve come some direction in fixing it, and I’m happy about that.’
Changing communications
As with other organisations, Covid-19 brought a transformation in personal interactions at Smurfit Kappa. ‘When we started the journey, none of us were really using Zoom or Microsoft Teams but, as the year progressed, we all became adept at this medium,’ Smurfit said.
He predicted the changes will remain in place long after the pandemic recedes. ‘The one-hour meeting that involves flying to Amsterdam, for example, is not going to happen again any time soon,’ he said. ‘For the foreseeable future, CEOs like me will be very cruel with travel.’
The focus on virtual communications also yielded positive results in terms of overall connectivity, he added. ‘We conducted virtual visits with every facility during last quarter, which was normally something that wouldn’t have happened. It was extremely efficient and worked very well for everyone.’
Building sustainability
Smurfit Kappa has set itself the target of being the most sustainable packaging company in the world, with a robust programme on emissions reduction and a stated goal of becoming carbon-neutral. As to whether sustainability actions provide a competitive advantage or should be considered more a ‘fact of life’, Smurfit said the focus on paper packaging gave the company an advantage over suppliers of other materials, and a stronger knowledge base.
The focus on sustainability is also changing perceptions of the company with a key audience. ‘Twenty or 30 years ago, paper was considered an old industry,’ he pointed out. ‘Now young graduates see us as much more interesting, and that is getting us better talent as we go forward.’
That sense of progressiveness, hand in hand with greater investment, is also driving diversity. He said that Smurfit Kappa’s graduate intake in Latin America, for example, was now 55% female.
Finance function
Smurfit attributed much of the success of the business over the years to financial acuity. ‘When we merged with Kappa, the biggest strength the other side saw in us was our finance function. Knowledge of finance is at the core of everything we stand for.’
He commended the role that Smurfit Kappa’s CFO Ken Bowles and his team play. ‘They are fantastic in the information they can give to the organisation in a seamless manner, with all the controls attached to that,’ he said. ‘The finance function is the backbone of Smurfit Kappa.’
Describing his own leadership style, he said he believes in ‘trying to get the best out of people by letting them be the best’ and recognised he did not have a monopoly on wisdom or knowledge. ‘I try to make sure people are happy and interested in their job, and to be honest with them. Empathy is really important in a leader. If you are empathetic, people will work with you.’
Looking to the year ahead and beyond, Smurfit said perspective was important. ‘It’s amazing how many crises we go through in our lives. The rollout of vaccines gives us hope that we will get out of this, and there will be an almighty party when we do. The world can expect a fantastic period of growth ahead, and then there will be a hangover to contend with. However, let’s not get ahead of ourselves – we have a way to go before then!’
For more information
Details of ACCA Ireland’s programme of events, held throughout the year
