Smurfit Kappa Group PLC (SMFTF) Q3 2022 Earnings Call Transcript

Smurfit Kappa Group PLC (OTCPK:SMFTF) Q3 2022 Earnings Conference Call November 2, 2022 4:00 AM ET

Company Participants

Anthony Smurfit – Group CEO & Executive Director

Ken Bowles – Group CFO & Executive Director

Conference Call Participants

Lars Kjellberg – Crédit Suisse

David O’Brien – Goodbody Stockbrokers

Cole Hathorn – Jefferies

James Twyman – Prescient

Kevin Fogarty – Numis

Operator

Ladies and gentlemen, hello, and welcome to the Smurfit Kappa Q3 2022 Trading Update Call. [Operator Instructions]. Just to remind you that this conference call is being recorded. Today, I am pleased to present Mr. Tony Smurfit, Group CEO. Please go ahead with your meeting.

Anthony Smurfit

Thank you, operator, and good morning, and thank you all for taking the time to join us today. I’m joined on the call by our Group CFO, Ken Bowles. And before commencing, we would refer you to the note on forward-looking statements set out in our trading update, which also applies to our discussion today. Please note that Ken and I are calling in from separate locations, so please bear with us should there be any technical issues.

You will see from our release today that we’ve provided an exceptional level of disclosure, recognizing that we are operating in a volatile world to underscore both the strength and quality of our performance. We have delivered a very strong 9-month outturn with revenue growth of 33%, EBITDA growth of 43%, margin of 18.2% and a ROCE of 20.6%. Leverage multiple below 1.4x is at the lowest level in the group’s history and should be seen in the context of significant capital investments to support customers and to optimize our integrated operating model.

You’re all well aware of the very significant challenges that are facing businesses during 2022, particularly around inflation, continued supply chain disruption and uncertainty caused by the war in Ukraine. Our people, their dedication and commitment and our relentless focusing on executing our strategy enables us to deliver against all performance measures for all of our stakeholders. I’m particularly proud of how over the last number of years, but especially recently, we have delivered security supply and world-leading innovative and sustainable packaging to our over 65,000 customers globally.

Volumes for the 9-month period for the group were flat year-on-year. This is against exceptionally strong prior year comparisons which were at the level which we consistently said was unsustainable. Given our scale and geographic reach, demand levels can vary from territory to territory. In Europe, the U.K. and Germany were the weaker regions, while Spain, France and Italy were comparatively stronger. In the Americas, with the exception of our North American business, demand remains reasonable across most of our countries.

Throughout the year, we have seen our volumes return to more normal levels as the COVID world we inhabit normalizes. During the period, we have seen demand shifts from durable goods and at-home experiences to services and away from home and travel-related expenditure by consumers. As noted above, in Europe, the effects of the war in Ukraine and inflation globally are having an impact on volumes. Positively, the long-term secular trends of e-commerce and demand for more sustainable packaging remains strong.

As mentioned in the release, we continue to recover the input cost we have experienced throughout 2022 in our corrugated box system. In 2022, Smurfit Kappa has continued to progress across all aspects of our business, and our EBITDA outturn of nearly EUR 600 million in the quarter and nearly EUR 1.8 billion for the 9-month period, reflects both the quality of our business and the value that we provide to our customers day in and day out. Our relentless focus is to build on the strong foundation we have established, by investing to develop our asset base, to be the most sustainable company in our sector and to provide our customers the broadest range of innovative and specialist packaging.

Over the last two years, we have approved more than EUR 2 billion of capital to optimize our system and to support our customers’ growth. We have also invested to ensure that we are making our products in an ever more sustainable way and progressing towards our own sustainability goals. We continue to see many opportunities across our markets and business areas. Scale and geographic balance provide us with multiple opportunities across different markets and at different times in different product sectors. This is a cornerstone of the Smurfit Kappa business and is a meaningful contributor to today’s performance and tomorrow’s prospects.

Equally, with an eye to what is happening in the world around us, we have ensured that our capital structure is in the best shape that it has ever been in our history with our debt-to-EBITDA multiple below 1.4x. Also I would remind you that it is only 1 year ago when we completed our 2 tranche 8- and 12-year green bonds of EUR 500 million each at rates of just 0.5% and 1%, respectively, and we have no maturities until 2025.

By way of conclusion, I want to thank the whole Smurfit Kappa team for the part they play in navigating a complex environment, consistently delivering for our customers. The steps we have taken have built a business that is really unrecognizable from years past. Smurfit Kappa is now a better, stronger and higher quality business.

I’ll now hand back to the operator for any questions that you may have.

Question-and-Answer Session

Operator

[Operator Instructions]. The first question is from Lars Kjellberg for Credit Suisse.

Lars Kjellberg

I just wanted to get some color on Q3 performance. If you — maybe Ken, I’d direct it to you, you talked a bit about the bridge from the EUR 660 million to EUR 593 million. Also how we should think about the various moving parts into that, into your implied Q4 and full year number? And Tony, when you’re looking at the opportunities you talked about, if you could help us think about what those opportunities are. And as you transition into 2023, how — considering the macro backdrop, how should we think about your continuation and commitment to developing your business and the sustainability targets, et cetera? Those are my questions.

Anthony Smurfit

Okay. Ken, do you want to take the first one?

Ken Bowles

Yes. Sure. Lars, I’ll probably bridge you from ’21 to ’22 rather than quarter-to-quarter because it will be more meaningful, really. Look, as it’s been the feature here, the biggest kind of bridging back has always been energy, and the energy as a headwind in the third quarter was about EUR 215 million. But I think, again, to the underlying question here is if you think about us delivering EUR 600 million in the third quarter with that kind of headwind behind us, I think shows the underlying performance of the business.

Box prices again took another little tick up in the third quarter, something in the order of 2% to 3%. Volumes came back as you can kind of calculate yourself because we’re flat for the 9 months. And again, a little bit of factor around where recovered fiber was, but begin to see a little bit abatement to like around some of the other costs, you would have said we’re kind of top heavy at the half year, particularly in that kind of area of distribution, logistics. And again, some of that volume piece coming off obviously gives you a bit of a benefit into the variable cost of producing because you’re not running at weekends and in secondary shift.

So — but the big moving part for the third quarter really is around energy. On the other side of that, obviously, for the progression on box prices given there are other costs around outside of where energy and raw material sits, particularly around labor inflation and wage inflation for the full year, I suppose the logic, if you like, of kind of pinning it to the EUR 2.3 billion is to kind of take away a lot of that kind of guess work around what the moving parts might be for the remainder. Again, energy probably remains the biggest piece.

I think at the half year, I probably said that headwind was something in the order of EUR 700 million plus. It’s probably around EUR 800 million. But again, savings on the other side of that around where distribution, logistics and some of the other costs start like pallets are kind of abated and kind of plateaued to where they might be at the end of the year. So really, Lars, within that, I suppose it’s, again, maybe a bit more progression in box volumes, we’ll see where they go in the fourth quarter, but everything essentially baked into it to the EUR 2.3 billion.

Lars Kjellberg

And in terms of…

Anthony Smurfit

Sorry, go ahead, Lars.

Lars Kjellberg

No, I was going to say, Ken, you did there to call out some sort of energy headwinds for ’23 as when we spoke in the half year call. Is that something you want to do today? Or it’s so difficult to do?

Ken Bowles

It was the 1 thing I realized that I was wrong, and I was wrong the day after. And if I told you a number now would be wrong in an hour of time because you need to look at where spot prices are going at the moment, it was 34 yesterday. It’s 22 as I wake up this morning, yet the forward prices remain in the mid 120s, 130s, 140s. I think it’s probably a slightly dangerous game given the volatility we’ve seen over the last several months. But I’d probably say is trust us. You can see the performance we put in over the year in terms of how we manage that.

We do have — clearly have some hedging going into ’23 and indeed into ’24. We’ll be able to give you better color, I think, as the winter kind of pushes through when we get to kind of February at the full year. But it’s a very difficult thing to kind of think through it, Lars, given where we are. But I think it’s kind of reflect back on performance and how we’ve managed that as through this volatile environment is probably the best indicator I can give you.

Anthony Smurfit

If I could just add to what Ken said about energy. I mean, Lars, there was a tremendous amount of downtime taken in our sector during August and September based upon the tremendous level of cost, but we’re not unique. I mean, the steel guys would have the same. I’m sure that glass guys is the same and many other industries have shifted over. Even in our own box plants, we shifted over from gas to fossil fuels because it was much cheaper. So around the edges and then, of course, governments have been all conserving. So stock levels of gas are at very, very high levels, and we’ve had a very, very warm October and continuing so far into November.

So it’s too early to say that the real data has passed, but it certainly feels that way at this moment in time with regard to where energy sits for next year. But as Ken just said, the forward rate is still much higher than the spot rate. But every day that goes by, we’ll indicate the forward rate will start coming down as we eat into — as we don’t eat into stock levels and probably see us through the winter.

With regard to opportunities, I mean, we talk about opportunities because we see so many of them. And obviously, some of those are cost-related opportunities that can be for increasing our output on mills and doing what we’ve been doing for the last 15 years, which is improving the efficiency of the footprint of our mill system, R&D taking out costs in our converting system where there is still a myriad of opportunities to reduce cost. And a lot of those costs become even more affordable, so to speak, to take them out because the cost of labor is that we appreciate, is going to continue to go up. So those become much more attractive.

With regard to markets, obviously, we have many specialist areas within our business. And you’ll have seen yesterday that the Sealed Air bought a business called Liquibox, which is in bag-in-box, we are the #2 producer in the world with tremendous plans for bag-in-box but also in specific areas such as life and lamination, digital, we still see very strong growth in those areas for development of the core process of box-making. And then we have over 250 converting facilities, Lars, across the world. And everyone is different, and they’re different at different times.

We see a huge opportunity, for example, in our Fortaleza in Northern Brazil because we have 2% of the market there, and it’s a very fast-growing agricultural region, and we are building a new box plant there to take advantage of that, which will be finished next year. We see customer wins in very different facilities, which we need to take advantage of and invest accordingly.

And then I suppose overlaying all of that is our focus on innovation. And when we say that we have and you have seen our experience centers, when we say we have the best technology for box making in the business, it’s been proven out over and over again by our customers coming to us, looking for us to help them either package differently. New designs are in the sustainability agenda. And so that is — that’s just an ever growing thing that we do, and it’s a huge strategic advantage for us because we have the knowledge in our sector.

And so when we think about opportunities, there’ll be bumps in the road, of course. We always say that success is never a straight line. And obviously, we didn’t expect to see volumes down 3% in the third quarter. But given what’s going on in the world, I think that’s not a bad result. And so I think overall, we’re very happy with the results that we’ve put forward, and we still look forward to the future with big confidence.

Operator

And the next question from David O’Brien from Goodbody.

David O’Brien

Three areas of questions, if that’s okay. Firstly, just on corrugated volumes. I guess, can you give us a flavor? And Tony, what is the direction of travel as you moved through the quarter? Are we looking at order books telling us that activity is strengthening or weakening? Or has it been fairly consistent, particularly as we go into Q4?

And secondly, on European testliner markets, there’s a lot to untangle from our point of view because we’re a little bit removed from the operating environment. We’ve seen the downtime taken. We’ve seen OCC prices come down, gas price come down. But in reality, do you see this downtime coming back online quickly? How viable are some of these businesses? And how have your customers reacted to that, you have again supplied them through a very difficult operating period when others have decided to turn the machines off.

And then the final question, just on the investments you’ve made along, it looks very hard to say exactly where returns on a project like that are going. So maybe to give us a flavor of how a similar investment has gone and particularly if you look Nettingsdorfer’s data, what type of returns or what is the performance of the investment in Nettingsdorfer to give us a clue to how important an investment like the one you’re making in Colombia can be?

Anthony Smurfit

I’ll let Ken take the last one. But just on the first 2, David, just to take — the volume seen in Q4 is pretty similar to what we’ve seen in Q3. We would have normally expected to see a pickup in October for Christmas. That hasn’t happened really. But — and certainly some markets like — as I mentioned on my script, the U.K. and Germany have been, I think, underwhelming in the last 2 or 3 months.

I think specifically on the German market, I think will recover pretty quickly because as the fears of energy subside a little bit, I think the Germans will start spending again. And I think that will start coming back. But every — as I said, every territory is moving in different directions at different times. And we had a huge growth, for example, in Colombia last year, and the 30%, which was way, way, way unsustainable, and they’re sort of line ball with last year, which is a great result considering that kind of growth.

So what we tend to look at is what’s happening in various different territories at various different times. And when you amalgamate it all, it comes up with minus 3%, but it’s very different than different reasons in different markets. And frankly speaking, as Ken mentioned a few seconds ago, that in many respects, it helps us to have less volume because we were running terribly inefficiently last year with — to meet our customers’ demand, with running Saturdays, Sundays, which was also not healthy for our people. So in some sense, we reduced our cost by having a little bit less volume in certain markets and that helps.

But overall, we’d like to see obviously growth, but with a — I keep saying to people with wars going on around on your doorstep, it’s not on inflation. That’s 10%. It’s not really surprising that people are a little bit wary about purchasing things. And obviously, that’s reflecting itself a little bit in volumes. And then I would say in as well as that, I think you are seeing some degree of people being less concerned about the supply chain, less concerned this year about boxes. So probably having a little bit less stock, and that’s a bit of an unwind there.

With regards to downtime, yes, I think a lot of people took a lot of downtime in Q3 because — including ourselves because cost — mainly because of cost. We operate, as you know, an integrated system which will basically use most of our tonnage throughout the year in our own system. So we don’t necessarily need to take downtime except in extremes, like at times like Christmas time where we would build up too much stock during that period of time. So we obviously — we’ll take downtime if we need to just to rebalance inventories as we go into year-end and not grow too much stock, but that’s really all that we will take. The industry will — Ken mentioned that EUR 20 spot is very different to having to take down some EUR 20 spot than taking it at EUR 300 for energy.

So people will make their own decisions based upon their own cost base and more importantly, their own market opportunity. And so I think that’s something that we just continue to follow. Stock levels overall in the industry are not too bad, considering especially the level of demand. But we just have to wait and see what happens over the next couple of months. Ken, do you want to take the investment in Colombia?

Ken Bowles

David, yes, the Cali investment, I suppose that’s a very significant part of our path towards the reduction of CO2 by 55% by 2030, so very much planning for that. At its full ramp-up, that will reduce our CO2 emissions by about 6%, call it, 262,000 tonnes. But these are very long-life projects. And I think Tony mentioned it there when he spoke, when we tend to think about our investment cycles and our capital allocation, we tend to think about the blended portfolio projects that kind of support the 17% return on capital employed.

So along with those kind of high-growth projects we normally have through the corrugated system, we tend to put some of these projects in, plan them across those periods, too, because while they don’t offer 20% returns, the returns are still very, very good. They could be still in the double digits, in the teens, but they tend to get incrementally better over time. And you tend to be able to drive more efficiency at them from an energy perspective and a production perspective, and they tend to give you a lot of stability to the paper machine as well when you put them in.

So they tend to deliver more over the life cycle of 6 to 7 years than other projects. But we tend not to bake that in, because we tend to be, as you know, quite conservative. The Nettingsdorfer example actually is a very good one, which we also mentioned. Like if you think about when we did Nettingsdorfer, I’m going to get carbon credits for probably EUR 10 to EUR 15 a tonne. If you think about where they are now in the context of that boiler and the reduction in CO2, which is about 40,000 tonnes, I think, that project clearly has returns way in excess of 20% when you consider that.

So I think it points to 2 things. I think it points to, one, our ambition on ESG and our sustainability targets, and putting — placing EUR 100 million capital behind that in the environment where I think it’s a strong statement of our absolute goal to get to net 55% down by 2030. And secondly, I think that these are a number long-time projects. We won’t be putting a boiler into Cali for — you might be retired, David, at that age. So it’s a long, long time, but they tend to deliver much better returns over time because of that. Hope that helps you.

Operator

The next question from call Cole Hathorn from Jefferies.

Cole Hathorn

Just following up on what David was saying about your mill system. You’ve often talked about the benefits of your integrated business model. I want to focus more on the paper mill system. In my view, your scale and asset base means that you should be more profitable than the independence in a fragmented market. However, what I think is unappreciated is how you manage your containerboard mill system. And in a challenging market, I would imagine that your profitability is probably substantially better than a number of those smaller fragmented peers.

And doing cycles in your paper mills in the past, I mean your operating teams often talked about your pay per carousel. And given demand visibility from your box business, the largest in Europe, plus some independents, they always call out the production was allocated out from a central team to your mill system to optimize production and delivery costs, effectively allowing you to optimize your operating rate and have less cost absorption. So I’m just wondering, can you give a little bit of color around this kind of the carousel system at Smurfit. And why you think your operating rate should be better probably versus industry and your fixed cost absorption better versus the industry in the paper mill system?

Anthony Smurfit

Thanks, Cole, and Ken, jump in whenever you want. But I mean, basically, our whole model is to have an integrated system that functions, and we’ve been saying this for a long period of time, that functions seamlessly. And for the most part, we get that right. We have lower transportation costs than, I would say, anyone else in the industry because our mill systems are dedicated towards box plants that are close by to them. Together with that, as you say, the carousel system runs, optimizes the grades that we run on our paper machines that are suited to those paper machines whether it’s base of weight or width, and that allows us to be very, very optimized.

And then I suppose the third point that’s really important is that we sell to ourselves, and we have a guaranteed customer. So we don’t have to take downtime. We don’t have to sell to export. We don’t have to sell to places in — if you’re in Italy and if you take the Brazil mill, part of its customer base was in Northern Germany when we took it over. So you can imagine what the transportation cost of that is through an independent third-party corrugator even if the paper was the same price. So the net to the mill was much, much lower.

So the whole system is designed that we are basically balanced, and we were underbalanced because of our growth for the last couple of years, which we’ve now fixed with . And with the exception, as I just mentioned to David, where we have to maybe take a little bit of downtime — where we have to take downtime because of our needs at Christmas time, basically, our system is balanced. So our mills will be optimized, which I can say that nobody else in the industry can do. That’s through the cycle.

So when the markets are weaker, obviously, we make sure that our mills are still running full with an optimized system and the market is strong. We make sure that we do this exact same and then hopefully look for further acquisition or building opportunities in the future as we expand our box system. So it’s a key competitive strength over forever because it’s — as we keep saying to people, our assets are irreplaceable, and our mill system and our box system is irreplaceable. Ken, do you want to add anything?

Ken Bowles

I’d only add 2 small things, Cole, which is the carousel also allows us to innovate, if you like, from paper through the system. So because we’re — as Tony mentioned, we’re buying from ourselves, it allows us to innovate not only at the box level, but at the paper level, which is kind of key to our customers’ target around, say Scope 3, ours isn’t, if you like. And the second piece that’s also related to sustainability, which in the context of green supply chain and chain of custody, our ability through that carousel model and the integrated model at the heart of that to be able to kind of secure recovered fibers from the start right through to us and back again to the kind of circular economy that we — at certain model, we operate is also kind of part of that proposition. So it operates on, as Tony mentioned, operational level very effectively, but also from a sustainability level and a customer supply chain resilience level also incredibly well.

Cole Hathorn

And then you called a little bit earlier about — you called out a little bit earlier on your CapEx projects. I mean you’ve brought out free cash flow on this trading update today. How are you thinking about some of your CapEx spend projects? I mean are you focusing more on kind of the cost optimization-type product? Has there been any shift in the capital allocation when the teams ask for projects up to you?

Ken Bowles

No, I think within that, I suppose, we guided CapEx of about EUR 900 million plus at the half year. That would still be the number we guide now as part of this number. I think the shift happened probably about a year ago when we accelerated a lot of projects because of the demand patterns we were seeing to kind of get ahead of that demand, which allowed us last year to capitalize that demand, but there’s been no shift in change of patterns. It’s — as we always said, it always remains flexible and agile. That’s kind of at the heart of everything we do.

Cost optimization projects, as they come through, tend to have quicker returns. But it sort of goes back to when we spoke even at the time with the equity raise back in 2020 for the updated plan we would have had this year, it sort of goes back to that kind of portfolio approach — portfolio projects that bring you back to an excess of like a 17% return. And to Tony’s point, being able to kind of have a capital plan that allows you to focus on either at the paper end or when we’re kind of paper short, which we fixed at Brazil last year roughly.

And we focus, if you like, on the downstream activities through corrugated when we have that kind of the paper system full and ready to go and we launched for growth. So we’ve always kind of managed to balance the system here, which is our capital allocation remains very much at the heart of everything we do, plus a view to making sure that the integrated model remains strong, and we keep that kind of balance between paper and corrugated and track growth and get ahead of it as it comes.

Operator

And the next question from James Twyman for Prescient.

James Twyman

Yes. I’ve got two questions. Firstly, the 3% volume pool in the quarter that you mentioned, could you just sort of split that out between sort of LatAm and Europe, given you mentioned that there was some pretty rapid growth last year in Colombia, for example, just to get an idea? And then secondly, your volumes you’re seeing are flat for the year. Could you just give an idea about how e-commerce is doing, especially given that we’re obviously comparing with the sort of COVID period the year before? And how much of your sales are in that area? That’s my question.

Anthony Smurfit

I’ll let Ken answer the e-commerce question. But on the 3%, we’re basically the same in both regions. Broadly speaking, I think we are affected more in the North American market than we would have anticipated. And even if it’s only a relatively small amount of our business, when I say North America, I mean, Northern Mexico as well, which is a sort of North American facing business because of the Maquiladora region, and that’s really heavily influenced by the move from durables to — in the United States towards more travel-related stuff that we see and people out and about, but not necessarily spending on their homes, and those markets are very industrially led.

So we’re seeing quite a substantial hit in those areas for this last quarter. And that’s really influencing the Latin American figure quite a bit, even if it’s relatively small. So that’s the really area I’d call out as I called out U.K. in Europe for basically all the year, and now Germany because of, I think, the fear of energy. They’re sort of outlier markets and then the other ones are sort of plus or minus a bit better. And Brazil is doing much better this year, whereas El Salvador is doing worse. But overall, it ends up being around 3% for both regions. Ken?

Ken Bowles

James, e-commerce is always kind of difficult because just about everybody has an e-commerce model now. But I think year-on-year, we’re still seeing strong growth. So I think ’22 over ’21 would probably be in the kind of 10% to 11% in terms of volume growth. So I think while you would have seen some mix change between people consuming at home versus going out, that kind of stuff, I think the reality is that at least, particularly in Europe, is still a model that has a long way to go to maturity and indeed in Latin America. So I think year-on-year, we’re still seeing volume growth at that kind of 10% to 11%.

Anthony Smurfit

James, we’re not heavily as close to any one customer in e-comm. So we have lots of, let’s call it, little customers that continue to do their own e-commerce and plus, some are growing very strongly and some are not. And so if you’re looking for a read through, I think Ken’s point is very valid that we’re still seeing people going online, but that doesn’t necessarily mean that there is the sectors in the business that are not suffering and neither are. But at this time, we haven’t been exposed to those yet. Did that answer your question, James?

James Twyman

Yes.

Operator

The next question is from Kevin Fogarty for Numis.

Kevin Fogarty

It’s really around pricing and what you can say about the outlook here. I don’t know if you can add. I guess, given what you’ve seen in terms of kind of recovered fiber and the energy dynamics in the background, you’ve indicated some potential for price progression in Q4. But I guess given what you’re seeing currently, particularly on the input side, what do you think the prospects are for a price progression to continue into 2023, just given the kind of demand dynamics you report in Q3 from a volume perspective as well. I just sort of wondered if you could sort of tie that all up and think about pricing as you go into next year and sort of question, I guess, bearing in mind the kind on unindexed part of your portfolio, what potential that might be to increase prices as you go into next year.

Anthony Smurfit

Well, I think, Kevin, I think that we have to be realistic. The reality is that our — we push pricing of corrugated and we push pricing on paper, based upon very strong input costs, both on energy and both on all other materials, including wastepaper. Wastepaper, as you’ll be aware, has come down from the mid-200s — sorry, let’s say, low 200s down to less than 100 in the spot market, and the energy market is certainly not as — in the spot area, certainly not as challenged as it was. So in that environment, it’s very difficult to see price increases going forward, and margins in mill systems will expand rapidly if they have the demand in that environment.

And then the question is, will they — some of that be given back to market. And I think the reality is you’d have to expect some of it is going to be given back to market, and you’ve already seen announcement yesterday by one of our German competitors that they’re announcing that they’re going to do so as from sometime in mid-November. So — but today, demand margins have actually very significantly increased in mill systems with the current cost abatements that we’ve seen.

With regards to next year, I mean, I think it’s just too early to say. I mean we have our — with many contracts with inflation clauses built in now that we didn’t have before because clearly, there was inflation — wasn’t a problem until last year, and now we renegotiated all of our contracts with inflation clauses built in, which will have offset some of the issues that are out there. So I think we just have to wait and see what happens with regard to how box prices move as we go into next year. Ken, do you want to add anything?

Ken Bowles

No. I think you’ve got that. I think, Kevin, you get the price of a sneaky 2023 question to be asked rather than I thought.

Operator

There are no further question at the moment. I will hand back the conference to Mr. Smurfit.

Anthony Smurfit

Thank you very much, operator. And just to wrap things up, as I said, we have really navigated in 2022 all the complexities that have been presented to us. And the year — at the end of the year, we’ll have our best year ever, and we’ll be in the best shape ever, both operationally and financially, and we deliver — we will deliver an expected record EBITDA outcome of somewhere around EUR 2.3 billion. Of course, in Smurfit Kappa, we are never complacent, but we do have incredible conviction about the strength of the business that we are operating and its long-term prospects, which is wholly undiminished despite the very complex environment that we’re operating in. So I want to thank you for your time on the call, and I wish you a very good day. Thank you, operator.

Operator

That concludes the conference for today. Thank you for participating. You may all disconnect.

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