Europe's largest paper and packaging producer Smurfit Kappa expects the opening of its first North African plant in Morocco to set the stage for further expansion in a fast growing region for consumer goods, its chief financial officer said today.
Smurfit Kappa, which operates in 22 European countries and 13 in South, Central and North America, opened the €35m plant in Rabat today, part of a €4.7 billion investment drive over the last five years.
Its finance chief Ken Bowles likened it to another relatively small investment in the Greek port city of Thessaloniki in 2017.
Tthe acquisition of a small box plant there became a platform to expand into Bulgaria and Serbia two years later.
"Thessaloniki wouldn't necessarily be where you start world domination and Morocco fits that profile. Then you look, does Tunisia offer you a market? Does Algeria?" Bowles said in an interview at Smurfit's suburban Dublin headquarters.
"Morocco is the starting of a real presence in North Africa," he added.
The Rabat plant, which will generate 30% of its power from 1,500 solar panels, follows a pattern of investments in other emerging economies where the consumption of packaging can grow at a much faster pace than "the relatively stable but not particularly exciting" rates in Europe.
Bowles said Smurfit would like to grow in Ecuador and become a much bigger player in Brazil following recent investments there.
It has also expanded in Poland, Peru and Mexico, where it is benefiting from the country's so-called "nearshoring" boom.
Smurfit reported a 13% rise in first quarter core profit in April, but saw volumes fall for a third successive quarter.
It expected at the time that demand would pick up as the year went on following encouraging signs in April.
Bowles said the picture has not changed much since then with cautious consumers pulling back in some areas while still clearly spending on services and on experiences with a resulting "minor impact" on packaging.
"Consumers clearly are still worried about inflation and interest rates and the fear of recession, and that's clearly having an impact on volumes," Bowles said.
Bowles said the impact on volumes referred to the first part of the year. Smurfit Kappa is due to report its half year results on August 2.
Tony Smurfit, the company's group CEO, said its first corrugated operation in North Africa is an exciting step for Smurfit Kappa.
"We continue to innovate and give our customers a great product in a sustainable way. We're combining our global scale and expertise with our local team's best-in-class knowledge to provide the best service to our customers," Mr Smurfit said.
"Morocco's geographical location complements our operations in Europe and adds to our global footprint which is a competitive advantage," he added.
Shares in the company moved higher in Dublin trade today.
