Exhibit 1
2003 Fourth Quarter and Full Year Results
3 months ended 31 December, 2003
11 February, 2004:JSG Funding plc (the 'Group') today announced results for the 3 months and 12 months ended 31 December, 2003.
| | 4Q '03 € m | 4Q '02 € m | Change % | Full Year '03 € m | Full Year '02 € m | Change % | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Net sales | 1,174 | 1,165 | 1% | 4,746 | 4,710 | 1% | |||||||
| EBITDA* | 151 | 171 | (12% | ) | 627 | 605 | 4% | ||||||
| Free cash flow | 35 | 30 | 17% | 178 | 146 | 22% | |||||||
| Pre-tax profit/(loss) | (19 | ) | 20 | — | 12 | 236 | (95% | ) |
- *
- Pre-exceptional EBITDA of subsidiaries only
2003 fourth quarter results represent the first full reported quarter in which the Group's capital structure is broadly comparable with the corresponding period in 2002. Jefferson Smurfit Group ('JSG') was acquired by Madison Dearborn during the third quarter of 2002. 2003 full year results, however, reflect the material changes to the Group's capital structure year on year which distorts comparisons.
During 2003, the Group addressed each significant minority position within the structure to improve cash flow generation capability. The results include the acquisition and integration of SSCC's former European packaging assets, the disposal of Smurfit MBI and, the acquisition of the majority of former Spanish associate, Papelera Navarra.
At the time of the Madison Dearborn acquisition of JSG the ownership of certain non-cash generative and non-strategic assets was transferred to the 'newcos' (fellow subsidiaries of Jefferson Smurfit Group Limited). During 2003 substantial progress was made on the disposal of these assets. The disposal programme is ahead of schedule and the €125 million debt associated with the newcos was fully paid down prior to the year end.
The Group also completed the acquisition of a sack plant in Poland and benefited from one-off gains principally related to property development at the K Club during 2003.
Fourth quarter financial performance reflected a weak macro-economic environment, continuing price pressure in European paper markets and the continuing relative strength of the euro. Volumes in recycled containerboard and corrugated, excluding acquisitions, were marginally ahead of last year. Kraftliner volumes increased year-on-year helped by soft comparisons in 2002. Latin American performance during the quarter was positive across all countries, except in our largest country of operation, Mexico, which continued to be adversely affected by the US economy, the migration of manufacturing businesses to Asia and high raw material and other input costs.
Fourth Quarter, 2003: Year-on-year performance
Fourth quarter net sales of €1,174 million increased 1% against €1,165 million in the fourth quarter of 2002. Excluding the effect of acquisitions, disposals and currency movements, sales decreased €12 million or 1% on the comparable period in 2002.
Fourth quarter EBITDA, before exceptional items, of €151 million decreased 12% against €171 million in the fourth quarter of 2002. Excluding the effect of acquisitions, disposals and currency movements, EBITDA, before exceptional items, decreased €25 million or 15% on the comparable period in 2002. EBITDA, before exceptional items, of €151 million represents a margin of 12.8% on net sales against 14.6% in the fourth quarter of 2002.
Fourth Quarter, 2003: Quarter-on-quarter performance
Fourth quarter net sales were unchanged on the third quarter of 2003. Excluding the effect of currency movements, fourth quarter sales increased €4 million or less than 1% on the third quarter of 2003.
Fourth quarter EBITDA, before exceptional items, of €151 million increased 4% against €145 million in the third quarter of 2003. Excluding the effect of currency movements, EBITDA, before exceptional items, increased €7 million or 5% on the third quarter of 2003. EBITDA, before exceptional items, of €151 million represents a margin of 12.8% on net sales against 12.4% in the third quarter of 2003.
Full year, 2003: Year-on-year performance
Full year net sales of €4,746 million increased 1% against €4,710 million in 2002. Excluding the effect of acquisitions, disposals and currency movements, sales decreased €42 million or approximately 1% compared with 2002.
EBITDA, before exceptional items, of €627 million increased 4% against €605 million in 2002. Excluding the effect of acquisitions, disposals and currency movements, EBITDA, before exceptional items, decreased €11 million or 2% on 2002. EBITDA, before exceptional items, for 2003 represents a margin of 13.3% on net sales against 12.8% in 2002. Adjusting 2003 for the K Club property development gain gives an EBITDA margin of 12.9%.
Product Market Overview
European fourth quarter volumes, in kraftliner, recycled containerboard and corrugated, show double digit growth on the fourth quarter of 2002. Kraftliner volumes, which increased 19% year-on-year, in the fourth quarter, benefit from soft comparisons in 2002. Growth in recycled containerboard and corrugated reflects the acquisition of SSCC's European packaging assets in March, 2003 and former Spanish associate, Papelera Navarra, in June, 2003. Excluding acquisitions, recycled containerboard and corrugated volumes, increased by 4% and 2%, respectively, on the comparable period in 2002. Kraftliner prices declined during the fourth quarter while recycled containerboard and corrugated prices remained relatively stable.
Full year 2003 European volumes of kraftliner, recycled containerboard and corrugated also increased on 2002 levels. Kraftliner volumes increased 5% year-on-year. Recycled containerboard and corrugated volumes increased 28% and 26% year-on-year reflecting the acquisitions outlined above and the acquisition of Munksjö in March, 2002 which benefited volume comparisons in the first quarter of 2003. Excluding the impact of acquisitions, recycled containerboard and corrugated volumes were in line with 2002. Average prices in 2003, for kraftliner and recycled containerboard were 5% lower than 2002 while corrugated prices declined 2% on 2002 levels.
Latin American fourth quarter volumes, in containerboard and corrugated, also show double digit growth on the fourth quarter of 2002 supported by the impact of acquisitions and the gradual recovery of the economy in Argentina. Excluding acquisitions, fourth quarter volumes, in both containerboard and corrugated, increased 14% and 10% respectively on 2002, principally driven by recovery in Argentina.
Full year 2003 Latin American volumes of containerboard and corrugated, increased 14% and 11% respectively, a significant element of this being due to acquisitions and consolidations. Excluding acquisitions, containerboard and corrugated volumes increased 8% and 1% year-on-year. In US dollar terms, 2003 average prices for containerboard were flat year-on-year while 2003 average corrugated prices were generally 1% higher than average prices in 2002.
Profit before tax
The Group reported a small loss before tax in the fourth quarter of €19 million compared to a profit of €20 million in 2002. Subsidiaries accounted for a loss of €21 million while associates contributed a profit of €2 million, against profits of €15 million and €5 million in 2002 respectively. The fourth quarter 2003 loss is adversely impacted by €26 million of exceptional charges during the quarter. Exceptional charges relate to restructuring costs in our European operations, mainly reflecting the closure of the Lestrem Mill and Noveant sack plant, both in France, and other restructuring activities. Fourth quarter 2002 exceptional charges were €9 million.
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Full year 2003 profit before tax of €12 million declined from €236 million in 2002. This decline mainly reflects the net interest charges associated with the Group's leveraged capital structure. Profit before tax also includes net exceptional charges of €29 million. Exceptional charges include restructuring costs in our European operations of €35 million offset by gains on asset sales of €6 million. In 2002, exceptional charges at subsidiary level of €4 million include €24 million for restructuring charges mainly in Europe offset by gains of €20 million on the sale of the US voting equipment and commercial printing businesses.
Summary cash flows for the fourth quarter and full year 2003 are set out in the following table:
| | JSG Funding 3 months to 31 Dec 2003 € Million | JSG Funding 3 months to 31 Dec 2002 € Million | JSG Funding 12 months to 31 Dec 2003 € Million | JSG Funding/JSG* 12 months to 31 Dec 2002 € Million | |||||
|---|---|---|---|---|---|---|---|---|---|
| (Loss)/profit before tax—subsidiaries | (21 | ) | 15 | 2 | 193 | ||||
| Exceptional items | 17 | (3 | ) | 11 | (20 | ) | |||
| Depreciation and amortisation | 72 | 69 | 295 | 262 | |||||
| Non cash interest expense | 15 | 10 | 59 | 10 | |||||
| Working capital change | 29 | 1 | 63 | 21 | |||||
| Capital expenditure (incl. capital creditors) | (67 | ) | (56 | ) | (207 | ) | (209 | ) | |
| Sales of fixed assets | 4 | (1 | ) | 12 | — | ||||
| Tax paid | (8 | ) | (22 | ) | (59 | ) | (130 | ) | |
| Dividends from associates | — | 2 | 1 | 6 | |||||
| Other | (6 | ) | 15 | 1 | 13 | ||||
| Free cash flow | 35 | 30 | 178 | 146 | |||||
Investments | (2 | ) | (15 | ) | (181 | ) | (306 | ) | |
| Sale of businesses and investments | 7 | 1 | 36 | 27 | |||||
| Share issues | — | — | — | 11 | |||||
| Dividends | (1 | ) | (1 | ) | (7 | ) | (64 | ) | |
| Transaction related movements | (11 | ) | (67 | ) | (57 | ) | (1,781 | ) | |
| Net cash (outflow) | 28 | (52 | ) | (31 | ) | (1,967 | ) | ||
Net cash/(debt) acquired/disposed | 1 | — | 56 | (150 | ) | ||||
| SSCC I/C debt repaid | — | — | (97 | ) | — | ||||
| Non-cash interest accrued | (11 | ) | (10 | ) | (41 | ) | (10 | ) | |
| Currency translation adjustments | 54 | 41 | 152 | 128 | |||||
| Decrease / (Increase) in net borrowing (excluding leases) | 72 | (21 | ) | 39 | (1,999 | ) | |||
- *
- For comparison purposes, the financial results of Jefferson Smurfit Group plc and subsidiary companies (JSG) for the periods prior to its acquisition on 3 September, 2002 have been combined with those of JSG Funding plc for periods following such acquisition.
Fourth Quarter, 2003: Cash Flows
Free cash flow in the fourth quarter of €35 million compares to €30 million in 2002. Cash flows, in the fourth quarter reflect a subsidiary loss before tax of €21 million, a decrease in working capital of €29 million, exceptional items of €17 million and a non-cash interest expense of €15 million. Depreciation and amortisation at €72 million was broadly unchanged from the fourth quarter of 2002. Capital expenditure, excluding capital creditors, in the fourth quarter represents over 100% of depreciation compared to over 90% in 2002. Capital expenditure levels are normally higher in the fourth quarter of each financial year.
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Full Year, 2003: Cash Flows
Free cash flow for the full year of €178 million compares to €146 million in 2002. This increase reflects reduced tax payments, a working capital inflow of €63 million and continuing disciplined capital expenditure.
Full year depreciation and amortisation increased from €262 million in 2002 to €295 million reflecting additional goodwill amortisation following the changed capital structure of the Group. Capital expenditure for the full year at €207 million, represented 82% of depreciation compared to 85% in 2002. This level of expenditure is in line with our targets and is adequate for our current business needs.
Investments in 2003 of €181 million include the acquisition of SSCC's European packaging assets and the majority of former Spanish associate, Papelera Navarra. In addition, the Group paid the final deferred amount of €55 million in connection with the acquisition of Nettingsdorfer, completed in December 2000.
Net borrowing at December 2003, was €3,101 million (including €28 million of capital leases) compared to €3,135 million at December 2002 (including €23 million of capital leases). The relative strengthening of the euro year-on-year decreased the value of non-euro debt and resulted in a currency translation gain of €53 million and €152 million in the quarter and twelve months to December 2003 respectively. Net debt to capitalisation of 77% at December 2003 compared to 78% at December 2002.
Total tax payments in 2003 amounted to €59m, compared to €130m in 2002. The decrease is primarily attributable to tax deductions for higher interest payments associated with the Group's leveraged capital structure.
Performance Review and Outlook
Gary McGann, Chief Executive Officer, commented "Economic weakness together with a significant strengthening of the euro against the dollar adversely impacted demand growth in 2003. The introduction of expected containerboard capacity additions also impacted paper pricing. Difficult operating conditions were offset by improved productivity and cost efficiencies across our operations and strong performances from our Latin American businesses (excluding Mexico). Our Mexican operations were affected by reduced export demand from the US, increased domestic competition and the continued migration of manufacturing to Asia.
Managing each of the factors within our control has served to deliver acceptable profitability and strong cash flow in 2003. We continue to make progress towards the objective of increased sustainable performance and to improve operating margins at each point of the industry cycle. We are delivering improved cashflow in a difficult operating environment. This reflects a continued focus on a market-led, fully integrated packaging system.
While there are initial indications of economic recovery, 2004 is also expected to be challenging. Our reported results for 2003, together with an improving product price environment, contribute to a belief that we can produce a solid financial performance in 2004."
Website access to reports
The Registrant's annual report on Form 20-F, current reports on Form 6-K, the April 2003 registration statement on Form F-4 and all amendments to those reports are made available free of charge through the Registrant's website (smurfit-group.com) as soon as practicable after such material is electronically filed with or furnished to the Securities and Exchange Commission.
| Contacts | Information | |||||||
| Gary McGann | Chief Executive Officer | Jefferson Smurfit Group | +353 1 202 7000 | Beach Hill, Clonskeagh | ||||
| Tony Smurfit | Chief Operating Officer | Jefferson Smurfit Group | +353 1 202 7000 | Dublin 4, Ireland | ||||
| Ian Curley | Chief Financial Officer | Jefferson Smurfit Group | +353 1 202 7000 | Ph + 353 1 202 7000 | ||||
| Mark Kenny | K Capital Source | +353 1 631 5500 | smurfit@kcapitalsource.com | |||||
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JSG Funding plc
Summary Group Profit and Loss Account
| | JSG Funding 3 months to 31 Dec 2003 € 000 Unaudited | JSG Funding 3 months to 31 Dec 2002 € 000 Unaudited | JSG Funding 12 months to 31 Dec 2003 € 000 Unaudited | JSG Funding/JSG * 12 months to 31 Dec 2002 € 000 Audited | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Turnover | ||||||||||
| Continuing operations | 998,978 | 1,055,000 | 4,111,814 | 4,153,230 | ||||||
| Acquisitions | 174,771 | — | 530,146 | — | ||||||
| Disposals | — | 109,567 | 104,355 | 556,425 | ||||||
| 1,173,749 | 1,164,567 | 4,746,315 | 4,709,655 | |||||||
| Cost of sales | 848,568 | 848,368 | 3,419,820 | 3,418,144 | ||||||
| Gross profit | 325,181 | 316,199 | 1,326,495 | 1,291,511 | ||||||
| Net operating expenses | 242,962 | 205,158 | 982,345 | 940,424 | ||||||
| Restructuring charges | 26,496 | 9,049 | 35,006 | 24,462 | ||||||
| Operating profit subsidiaries | ||||||||||
| Continuing operations | 41,004 | 93,586 | 259,909 | 296,413 | ||||||
| Acquisitions | 14,719 | — | 41,609 | — | ||||||
| Disposals | — | 8,406 | 7,626 | 30,212 | ||||||
| 55,723 | 101,992 | 309,144 | 326,625 | |||||||
| Share of associates' operating profit | 2,624 | 5,745 | 12,155 | 124,697 | ||||||
| Share of associates' restructuring costs | — | — | — | (7,541 | ) | |||||
| Total operating profit | 58,347 | 107,737 | 321,299 | 443,781 | ||||||
| Profit on sale of assets and businesses | — | — | 5,560 | 20,440 | ||||||
| Group net interest | (72,856 | ) | (76,266 | ) | (297,737 | ) | (143,083 | ) | ||
| Share of associates' net interest | (338 | ) | (234 | ) | (2,062 | ) | (74,773 | ) | ||
| Total net interest | (73,194 | ) | (76,500 | ) | (299,799 | ) | (217,856 | ) | ||
| Other financial expense | (4,063 | ) | (10,775 | ) | (15,266 | ) | (10,775 | ) | ||
| (Loss) / profit before taxation | (18,910 | ) | 20,462 | 11,794 | 235,590 | |||||
| Taxation | ||||||||||
| Group | 7,654 | 21,001 | 59,287 | 90,899 | ||||||
| Share of associates | 1,250 | 1,024 | 3,067 | 18,385 | ||||||
| 8,904 | 22,025 | 62,354 | 109,284 | |||||||
| (Loss) / profit after taxation | (27,814 | ) | (1,563 | ) | (50,560 | ) | 126,306 | |||
| Equity minority interests | 3,715 | 6,524 | 16,768 | 29,030 | ||||||
| Retained (losses) / profits | € (31,529 | ) | € (8,087 | ) | € (67,328 | ) | € 97,276 | |||
- *
- For comparison purposes, the audited financial results of Jefferson Smurfit Group plc and subsidiary companies (JSG) for the periods prior to its acquisition on 3 September, 2002 have been combined with those of JSG Funding plc for periods following such acquisition.
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JSG Funding plc
Segmental Analyses
Sales—third party
| | JSG Funding 3 months to 31 Dec 2003 €000 | JSG Funding 3 months to 31 Dec 2002 €000 | JSG Funding 12 months to 31 Dec 2003 €000 | JSG Funding/JSG * 12 months to 31 Dec 2002 €000 | ||||
|---|---|---|---|---|---|---|---|---|
| Packaging | 762,846 | 624,798 | 2,968,784 | 2,536,018 | ||||
| Specialities | 236,962 | 263,951 | 991,874 | 868,149 | ||||
| Europe | 999,808 | 888,749 | 3,960,658 | 3,404,167 | ||||
| United States and Canada | — | 109,566 | 104,355 | 556,425 | ||||
| Latin America | 173,941 | 166,252 | 681,302 | 749,063 | ||||
| €1,173,749 | €1,164,567 | €4,746,315 | €4,709,655 | |||||
| Associates' third party sales | €59,126 | €1,567,025 | €208,526 | €6,381,920 | ||||
| Share of associates' third party sales | €22,704 | €468,884 | €80,074 | €1,911,093 | ||||
- *
- For comparison purposes, the audited financial results of Jefferson Smurfit Group plc and subsidiary companies (JSG) for the periods prior to its acquisition on 3 September, 2002 have been combined with those of JSG Funding plc for periods following such acquisition.
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JSG Funding plc
Segmental Analyses
Profit before taxation
| | JSG Funding 3 months to 31 Dec 2003 €000 | JSG Funding 3 months to 31 Dec 2002 €000 | JSG Funding 12 months to 31 Dec 2003 €000 | JSG Funding/JSG * 12 months to 31 Dec 2002 €000 | |||||
|---|---|---|---|---|---|---|---|---|---|
| Packaging | 53,916 | 72,193 | 213,918 | 220,110 | |||||
| Specialities | 14,693 | 15,172 | 88,020 | 59,806 | |||||
| Associates | 2,206 | 4,487 | 9,447 | 23,728 | |||||
| Europe | 70,815 | 91,852 | 311,385 | 303,644 | |||||
| Packaging | — | 14,502 | 7,775 | 35,080 | |||||
| Associates | — | — | — | 92,408 | |||||
| United States and Canada | — | 14,502 | 7,775 | 127,488 | |||||
| Packaging | 24,429 | 11,879 | 86,180 | 79,767 | |||||
| Associates | 418 | 612 | 506 | 4,517 | |||||
| Latin America | 24,847 | 12,491 | 86,686 | 84,284 | |||||
| Asia (Associates) | — | 646 | 2,202 | 4,044 | |||||
| Unallocated central costs | (3,231 | ) | (4,796 | ) | (22,461 | ) | (38,567 | ) | |
| Profit before unallocated goodwill, interest, exceptional items and taxation | 92,431 | 114,695 | 385,587 | 480,893 | |||||
| Unallocated goodwill | (11,651 | ) | (8,684 | ) | (44,548 | ) | (15,884 | ) | |
| Group net interest | (72,856 | ) | (76,266 | ) | (297,737 | ) | (143,083 | ) | |
| Share of associates' net interest | (338 | ) | (234 | ) | (2,062 | ) | (74,773 | ) | |
| Profit before exceptional items | 7,586 | 29,511 | 41,240 | 247,153 | |||||
| Restructuring charges | (26,496 | ) | (9,049 | ) | (35,006 | ) | (24,462 | ) | |
| Profit on sale of assets and businesses | — | — | 5,560 | 20,440 | |||||
| Share of associates' exceptional costs | — | — | — | (7,541 | ) | ||||
| (Loss) / profit before taxation | €(18,910 | ) | €20,462 | €11,794 | €235,590 | ||||
- *
- For comparison purposes, the audited financial results of Jefferson Smurfit Group plc and subsidiary companies (JSG) for the periods prior to its acquisition on 3 September, 2002 have been combined with those of JSG Funding plc for periods following such acquisition.
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JSG Funding plc
Summary Group Balance Sheet as at 31 December 2003
| | JSG Funding 31 Dec 2003 € 000 Unaudited | JSG Funding 31 Dec 2002 € 000 Audited | ||
|---|---|---|---|---|
| Assets Employed | ||||
| Fixed Assets | ||||
| Intangible assets | 1,455,133 | 1,543,545 | ||
| Tangible assets | 2,435,946 | 2,214,254 | ||
| Amounts due by fellow subsidiaries (newcos) | 273,796 | 240,856 | ||
| Amounts due by Parent | 3,468 | 3,579 | ||
| Financial assets | 80,642 | 165,243 | ||
| 4,248,985 | 4,167,477 | |||
| Current Assets | ||||
| Stocks | 477,432 | 470,207 | ||
| Debtors | 911,443 | 1,016,181 | ||
| Amounts due by fellow subsidiaries (newcos) | — | 4,412 | ||
| Cash at bank and in hand | 179,067 | 184,331 | ||
| 1,567,942 | 1,675,131 | |||
Creditors (amounts falling due within one year) | 1,178,457 | 1,259,583 | ||
| Net current assets | 389,485 | 415,548 | ||
| Total assets less current liabilities | €4,638,470 | €4,583,025 | ||
| Financed by | ||||
| Creditors (amounts falling due after more than one year) | 3,024,052 | 3,027,384 | ||
| Government grants | 15,155 | 12,043 | ||
| Provisions for liabilities and charges | 234,952 | 222,853 | ||
| Pension liabilities (net of deferred tax) | 355,309 | 294,696 | ||
| 3,629,468 | 3,556,976 | |||
| Capital and Reserves | ||||
| Called up share capital | 40 | 40 | ||
| Other reserves | 930,780 | 871,798 | ||
| Profit and loss account | (35,464 | ) | 6,261 | |
| Group shareholders' funds (equity interests) | 895,356 | 878,099 | ||
Minority interests (equity interests) | 113,646 | 147,950 | ||
| 1,009,002 | 1,026,049 | |||
| €4,638,470 | €4,583,025 | |||
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JSG Funding plc
Reconciliation of net income to EBITDA, before exceptional items
| | JSG Funding 3 months to 31 Dec 2003 € 000 Unaudited | JSG Funding 3 months to 31 Dec 2002 € 000 Unaudited | JSG Funding 12 months to 31 Dec 2003 € 000 Unaudited | JSG Funding/JSG * 12 months to 31 Dec 2002 € 000 Audited | |||||
|---|---|---|---|---|---|---|---|---|---|
| Retained (losses) / profits | (31,529 | ) | (8,087 | ) | (67,328 | ) | 97,276 | ||
| Equity minority interests | 3,715 | 6,524 | 16,768 | 29,030 | |||||
| Taxation | 8,904 | 22,025 | 62,354 | 109,284 | |||||
| Share of associates' operating profit | (2,624 | ) | (5,745 | ) | (12,155 | ) | (124,697 | ) | |
| Share of associates' restructuring costs | — | — | — | 7,541 | |||||
| Profit on sale of assets and operations—subsidiaries | — | — | (5,560 | ) | (20,440 | ) | |||
| Restructuring charges | 26,496 | 9,049 | 35,006 | 24,462 | |||||
| Total net interest | 73,194 | 76,500 | 299,799 | 217,856 | |||||
| Depreciation, depletion and amortisation | 72,612 | 70,183 | 298,014 | 265,014 | |||||
| EBITDA | 150,768 | 170,449 | 626,898 | 605,326 | |||||
- *
- For comparison purposes, the audited financial results of Jefferson Smurfit Group plc and subsidiary companies (JSG) for the periods prior to its acquisition on 3 September, 2002 have been combined with those of JSG Funding plc for periods following such acquisition.
Companies (Amendment) Act, 1986
These financial statements do not comprise full accounts within the meaning of the Companies (Amendment) Act, 1986 of Ireland, in so far as such accounts have to comply in full with the disclosure and other requirements of the Act. Full accounts for all years have received unqualified audit reports. Full accounts for all periods up to and including December 31, 2002 have been filed with the Irish Registrar of Companies.
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