5 May 2017: Smurfit Kappa Group plc (‘SKG’ or ‘the Group’) today announced results for the 3 months ending 31 March 2017.

2017 First Quarter | Key Financial Performance Measures

€m		Q1 2017		Q1 2016		Change		Q4 2016		Change
Revenue		€2,129		€2,001		6%		€2,060		3%
EBITDA (1)		€278		€281		(1%)		€320		(13%)
EBITDA margin (1)		13.0%		14.0%				15.5%
Operating Profit before Exceptional Items		€168		€179		(6%)		€221		(24%)
Profit before Income Tax		€109		€128		(15%)		€155		(30%)
Basic EPS (cent)		31.5		38.8		(19%)		42.3		(26%)
Pre-exceptional Basic EPS (cent) (1)		32.2		38.8		(17%)		47.4		(32%)
Return on Capital Employed (1)		15.0%		15.3%				15.4%
Free Cash Flow (1)		€16		€7		138%		€104		(84%)
Net Debt (1)		€2,931		€3,029		(3%)		€2,941		-
Net Debt to EBITDA (LTM) (1)		2.4x		2.5x				2.4x
1) Additional information in relation to these Alternative Performance Measures (‘APMs’) is set out in Supplementary Financial Information on page 27.

First Quarter Key Points

• Group revenue growth of 6% (3.7% on a days adjusted basis)
• EBITDA of €278 million with margin of 13%
• ROCE at 15.0% in line with Group target
• Improved free cash flow year-on-year
• Containerboard price increases in both Europe and the Americas implemented and ongoing
• Proposed final dividend for 2016 of 57.6 cent per share, a 20% increase year-on-year, payable on 12 May

Performance Review and Outlook

Tony Smurfit, Group CEO, commented:

“We are pleased to report that SKG has again delivered a strong set of results. The Group reported good revenue growth of 6%, or 3.7% on a days adjusted basis, and EBITDA of €278 million versus the same period last year. These results, against a backdrop of significant recovered fibre cost inflation of approximately €30 million year-on-year, reflect the continued strength of our business. We expect improved margins as paper price increases translate into higher box prices.

“In the first quarter our corrugated volumes were generally good across most markets with the Group recording growth of 3%. With solid demand, tight inventories and higher input costs, containerboard prices across all grades have been, and continue to be increased. These increases have provided the backdrop for necessary box price increases which will be progressively implemented during 2017.

“We are also pleased to report that our cash flow and debt ratios improved in what is traditionally a softer quarter.

“The geographic spread of our business, the integrated model which we operate, the strongest suite of business applications in our industry, and, most importantly, the tremendously talented people that work in SKG, give us great confidence for our future.

“While there are always political and economic risks, and individual markets invariably have challenges from time to time, we are increasingly well positioned to capitalise on a positive pricing environment in 2017.”

About Smurfit Kappa

Smurfit Kappa, a FTSE 100 company, is one of the leading providers of paper-based packaging solutions in the world, with around 45,000 employees in approximately 370 production sites across 34 countries and with revenue of €8.2 billion in 2016. We are located in 21 countries in Europe, and 13 in the Americas. We are the only large-scale pan-regional player in Latin America.

With our pro-active team, we relentlessly use our extensive experience and expertise, supported by our scale, to open up opportunities for our customers. We collaborate with forward thinking customers by sharing superior product knowledge, market understanding and insights in packaging trends to ensure business success in their markets. We have an unrivalled portfolio of paper-packaging solutions, which is constantly updated with our market-leading innovations. This is enhanced through the benefits of our integration, with optimal paper design, logistics, timeliness of service, and our packaging plants sourcing most of their raw materials from our own paper mills.

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Forward Looking Statements

Some statements in this announcement are forward-looking. They represent expectations for the Group’s business, and involve risks and uncertainties. These forward-looking statements are based on current expectations and projections about future events. The Group believes that current expectations and assumptions with respect to these forward-looking statements are reasonable. However, because they involve known and unknown risks, uncertainties and other factors, which are in some cases beyond the Group’s control, actual results or performance may differ materially from those expressed or implied by such forward-looking statements.

Contacts

Garrett Quinn Smurfit Kappa T: +353 1 202 71 80 E:ir@smurfitkappa.com

2017 First Quarter | Performance Overview

The Group delivered a 6% increase in revenue year-on-year with solid underlying¹ progression in both Europe and the Americas, up 4% and 15% respectively. The Group reported EBITDA of €278 million and an EBITDA margin of 13% with the anticipated margin squeeze being driven predominantly by higher recovered fibre costs. The Group also reported ROCE of 15.0% and its fourth consecutive first quarter of positive free cash flow. These results were driven by solid volume growth across most markets, the Group’s investment in high return capital projects and the strength of our integrated business model.

In Europe, EBITDA increased by 2% to €213 million. Steady box prices, along with the benefits of our ‘Quick Win’ programme and good corrugated volume growth were key drivers of this result against a backdrop of very high recovered fibre cost pressure. Total corrugated volumes were up 4%, positively impacted by solid demand and additional working days in the quarter.

In European recycled containerboard, the Group was successful in implementing a €60 per tonne increase in the first quarter, with additional increases announced for April. Overall demand for recycled containerboard remains robust, with industry inventories remaining tight throughout the quarter.

The recycled containerboard price increases noted above are against a backdrop of increasing recovered fibre costs, which were over 19% higher year-on-year for the quarter and 11% up in March 2017 over December 2016, reflecting high levels of both local and global demand. With recovered fibre prices up on a sustained basis since 2014 (comparatively up 28% in the first quarter of 2017 and 17% in the year 2016), higher recovered fibre prices in the first quarter have resulted in short term margin pressure, which necessitate higher paper prices and in turn higher box prices.

Demand for kraftliner remains very strong. The Group successfully implemented a €50 per tonne increase in our main European markets in the first quarter and an additional €50 per tonne has been announced for implementation in May across all our European markets. The global supply of kraftliner remains extremely tight, and is supportive of the implementation of price increases in Europe, a market which is short approximately one million tonnes of kraftliner.

In the Americas, EBITDA decreased by 9% to €74 million impacted mainly by higher recovered fibre costs of approximately €10 million and soft demand in Argentina. Price increases are underway to recover this margin compression as we progress through 2017. Volumes in the Americas for the first quarter grew 3% excluding Venezuela. Our businesses in Colombia, Mexico and the US represented just under 80% of the region’s EBITDA in the first quarter and we are pleased with their operational performance.

2017 First Quarter | Financial Performance

Revenue of €2,129 million was up €128 million or 6% on 2016. Revenues in Europe increased by €43 million year-on-year or €56 million on an underlying basis. In the Americas revenues increased by €85 million year-on-year or €70 million on an underlying basis.

EBITDA was €278 million, €3 million down on the same period in 2016 with earnings growth in Europe and lower Group centre costs offset by lower earnings in the Americas. The underlying quarter-on-quarter move was an increase of €7 million (the equivalent of almost 3%), which arose mainly in Europe. During the quarter, the Group’s EBITDA was impacted by approximately €3 million from unplanned downtime in our Facture Mill in France.

There were no exceptional items charged within operating profit in the first quarter of either 2017 or 2016.

The exceptional finance cost of €2 million in the first quarter of 2017 represented the accelerated amortisation of the issue costs relating to the debt within our senior credit facility which was paid down with the proceeds of the €500 million bond issue in January. There were no exceptional finance costs in the first quarter of 2016. Basic EPS for the quarter was 31.5 cent, 19% lower than the 38.8 cent earned in 2016. On a pre-exceptional basis, EPS was 32.2 cent for the quarter to March 2017, 17% lower than the 38.8 cent in 2016.

2017 First Quarter | Free Cash Flow

The Group reported a free cash inflow of €16 million in the first quarter of 2017 compared to an inflow of €7 million in 2016. The increase of €9 million reflected lower outflows mainly in respect of working capital.

Capital expenditure amounted to €71 million, approximately 67% of depreciation, compared to €107 million or 111% of depreciation in 2016. Capital expenditure is expected to be broadly in line with depreciation in 2017.

The working capital move was an outflow of €77 million compared to an outflow of €98 million in the first quarter of 2016. The outflow was the combination of an increase in stocks and, to a lesser extent, debtors partly offset by an increase in creditors. At the end of March, working capital amounted to €704 million (2016: €628 million), representing 8.3% of annualised revenue compared to 7.0% at December 2016 and 7.9% at March 2016.

Cash interest in the quarter was €40 million compared to €36 million in the first quarter of 2016, the increase is mainly as a result of the Group’s exposure to the relatively high interest rates in Latin America.

Tax payments of €30 million in the first quarter of 2017 were €2 million higher than in the same period of 2016. This was primarily due to the timing of payments.

2017 First Quarter | Capital Structure

Net debt was €2,931 million at the end of the first quarter resulting in a net debt to EBITDA ratio of 2.4 times compared to 2.5 times at the end of the first quarter of 2016 and 2.4 times at the end of 2016. The Group’s balance sheet continues to provide the Group with considerable financial strategic flexibility subject to the stated leverage range of 2.0x to 3.0x through the cycle and SKG’s Ba1/BB+/BB+ credit rating.

On 17 January 2017 the Group took the opportunity to access the bond markets taking advantage of the current low interest rate environment to further extend maturity profile, diversify funding sources and increase liquidity at a historically low coupon for the Group. The proceeds were used to reduce indebtedness under the Group’s senior facilities agreement and existing securitisation facilities and for general corporate purposes. The funding significantly enhances the Group’s liquidity and positions us very strongly from the perspective of our refinancing programme over the next couple of years as we replace more expensive debt.

At 31 March 2017 the Group’s average interest rate was 4.3%, compared to 4.1% at 31 March 2016. The Group’s diversified funding base and long dated maturity profile at 4.1 years provide a stable funding outlook. In terms of liquidity, the Group held cash on the balance sheet of €575 million at the end of the quarter which was further supplemented by available commitments under its revolving credit facility of approximately €832 million.

2017 First Quarter | Operating Efficiency

Cost Take-out Programme

Since the programme’s inception in 2008 the Group has achieved cost savings of over €850 million and the Group continues to view these projects as a key tool in combating cost inflation creep throughout the business. In 2017, as in previous years, we expect to offset wage inflation through internal cost take-out initiatives.

Capital Expenditure (‘Quick Win’) Programme

In 2016 the Group completed the investment stage of the ‘Quick Win’ capital expenditure programme. The benefits of these high return investments have been delivered since 2014 and are expected to deliver a total incremental EBITDA of €75 million by the end of 2017.

Commercial Offering and Innovation

We are committed to leading our industry in innovation which continues to be validated by the awards we have won for our leading design and solutions offering. In the first quarter of 2017 the Group won awards across Europe in the Netherlands, Russia and Poland. Our solutions are backed by our industry leading business applications such as Pack Expert, Innobook and Shelfsmart. These applications allow us to collaborate with our customers using scientifically backed data to solve their challenges, and increasingly, helping them to sell more.

On 18 May the Group will host an innovation event for customers in the Netherlands, with over one hundred and fifty customers from across Europe expected to attend. Hundreds of Smurfit Kappa award winning solutions and services will illustrate how packaging innovation drives business success, today and in the future. External speakers will discuss with our customers, our European leadership team and our award winning designers “the future of packaging in a digital world”.

2017 First Quarter | Regional Performance Review

Europe

Europe delivered an improved EBITDA result of €213 million, up €4 million or 2% year-on-year, and on an underlying basis the result was €5 million higher, impacted by €1 million in adverse currency moves. The margin for the quarter was 13.6%, this compared to 13.7% in the same quarter of 2016. This result was delivered against a backdrop of significantly higher recovered fibre costs, which we have been able to offset through volume growth, our focus on cost efficiencies and the benefits of our capital investment programme.

Box pricing was broadly flat against the fourth quarter of 2016 and down 1% on the first quarter of 2016 on a constant currency basis. On the back of already implemented containerboard price increases, and ongoing increases in the second quarter, SKG plans to increase box prices through 2017 in order to recover corrugated margins.

Overall box volumes were up 4% for the quarter, positively impacted by solid demand in most markets and the benefit of additional working days. The Group expects full year 2017 box volume growth to be around 2% for the year. The more commodity like sheet business was up 2% for the quarter, predominantly due to additional working days offset in part by the increased integration of sheet volume. Box volumes represented over 88% of our corrugated volume in Europe in the quarter.

The price of recovered fibre was 19% higher year-on-year and 11% up in March 2017 over December 2016, driven by both strong domestic, and export market demand. Higher recovered fibre prices have resulted in short term margin pressure, which necessitate higher paper prices and in turn higher box prices. With continued demand both domestically and in export markets for recovered paper, the Group expects the medium term trend for recovered fibre pricing to remain at a high level.

In European recycled containerboard, the Group was successful in implementing a €60 per tonne increase in the first quarter, with additional increases announced for April. Overall demand for recycled containerboard remains robust, with overall industry inventories remaining very tight throughout the quarter.

Kraftliner continues to be a key part of our product offering allowing the Group to cater for customers’ requirements when kraftliner is needed. Internal demand for kraftliner was up 4% in the quarter and demand remains very strong. A €50 per tonne increase has been implemented in our main European markets in March with further increases announced for May implementation. The global supply of kraftliner remains extremely tight, and is supportive of the implementation of price increases in Europe.

Our Sack business and Machine Glazed (“MG”) business are benefitting from extremely strong demand with healthy orderbooks buoyed by increased demand in Africa and the Far East for sacks, and increased demand for MG paper as a result of recent international plastic bag bans (France, Kenya and Morocco). This further reinforces paper’s position as “the” sustainable packaging solution.

The Americas

In the Americas, EBITDA decreased by 9% year-on-year to €74 million with a reduced margin of 13.1% compared to 17.0% in the first quarter of 2016. The main driver of the reduced margin was higher recovered fibre costs across the region up approximately €10 million year-on-year. Volumes in the Americas for the first quarter grew 3% excluding Venezuela where the economic situation continues to deteriorate.

On 4 April the Group opened its first experience centre in the Americas. Located in Dallas, US, it will allow the Group to showcase how we leverage our unique tools and insights to help our customers succeed in their marketplace. We plan to open two additional centres in Cali, Colombia and Mexico City by the end of 2017.

In Colombia the Group’s operations have continued to operate well with EBITDA in line year-on-year but with margin pressure driven by higher recovered fibre prices, up 50% year-on-year. Box price initiatives continue to progress well and volumes remain strong up 6% year on year.

In Mexico the Group’s operations continue to operate well, with improved box prices and volumes up 4% year-on-year offsetting increases in recovered fibre prices, up 6%. The Los Reyes Mill project which will enable the Group to produce an additional 100,000 tonnes of recycled containerboard is scheduled to start up in late summer this year with incremental Group contribution expected in 2018.

In the US the Group’s margins were also impacted by higher recovered fibre costs, up over 50% year-on-year for the quarter. The US operations have containerboard price increases and in turn box price increases currently in progress to recover margin in the coming months.

The Group’s Brazilian operations have performed well with volumes up 7% year-on-year and margins improving with lower, stable recovered fibre prices compared to the levels at the end of 2016. Chile has performed well with improved EBITDA year-on-year. In Argentina the Group’s results were strongly impacted by lower demand as the local economy has not yet recovered from recession, albeit the outlook remains positive due to the country’s progressive economic policies.

The Dominican Republic had a good quarter with volumes up 9% year-on-year, however the Group’s Central American business had a challenging start to the year due to lower volumes.

In Venezuela the Group’s corrugated shipments were down 59% year-on-year. However, the Group’s operations continue to perform well in extremely difficult circumstances. The business represented 1.5% of Group EBITDA in the first quarter. As we previously indicated, the macro situation in Venezuela remains uncertain, and conditions have continued to deteriorate during the quarter. The effect of high inflation without a corresponding devaluation of the exchange rate would result in a net monetary loss which may distort some of the Group’s key metrics. We continue to monitor events as they unfold. Net assets in Venezuela increased to €148 million as at 31 March 2017 (31 December 2016: €91 million) as a result of hyperinflation.

Summary Cash Flow

Summary cash flows(1) for the first quarter are set out in the following table.

						3 months to			3 months to
						31-Mar-17			31-Mar-16
						€m			€m
EBITDA						278			281
Cash interest expense						(40)			(36)
Working capital change						(77)			(98)
Current provisions						-			(4)
Capital expenditure						(71)			(107)
Change in capital creditors						(55)			8
Tax paid						(30)			(28)
Sale of fixed assets						2			-
Other						9			(9)
Free cash flow						16			7
Share issues						1			-
Purchase of own shares						(11)			(10)
Sale of businesses and investments						4			-
Purchase of businesses and investments						(10)			(31)
Net cash inflow/(outflow)						-			(34)
Deferred debt issue costs amortised						(4)			(2)
Currency translation adjustment						14			55
Decrease in net debt						10			19

(1) The summary cash flow is prepared on a different basis to the Consolidated Statement of Cash Flows under IFRS (‘IFRS cash flow’) and as such the reconciling items between EBITDA and decrease/(increase) in net debt may differ to amounts presented in the IFRS cash flow. The principal differences are as follows:

(a) The summary cash flow details movements in net debt. The IFRS cash flow details movements in cash and cash equivalents.

(b) Free cash flow reconciles to cash generated from operations in the IFRS cash flow as shown in the table on the next page. The main adjustments are in respect of cash interest, capital expenditure, tax payments and the sale of fixed assets and businesses.

(c) The IFRS cash flow has different sub-headings to those used in the summary cash flow.

• Current provisions in the summary cash flow are included within change in employee benefits and other provisions in the IFRS cash flow.
• The total of capital expenditure and change in capital creditors in the summary cash flow includes additions to intangible assets which is shown separately in the IFRS cash flow. It also includes capitalised leased assets which are excluded from additions to property, plant and equipment and biological assets in the IFRS cash flow.
• Other in the summary cash flow includes changes in employee benefits and other provisions (excluding current provisions), amortisation of capital grants, receipt of capital grants and dividends received from associates which are shown separately in the IFRS cash flow.

Reconciliation of Free Cash Flow to Cash Generated from Operations

							3 months to			3 months to
							31-Mar-17			31-Mar-16
							€m			€m
Free cash flow							16			7
Add back:				Cash interest			40			36
				Capital expenditure (net of change in capital creditors)			126			99
				Tax payments			30			28
Less:				Sale of fixed assets			(2)			-
				Profit on sale of assets and businesses – non-exceptional			(5)			(2)
				Receipt of capital grants (in ‘Other’ in summary cash flow)			-			(2)
				Non-cash financing activities			(2)			(1)
Cash generated from operations							203			165

Capital Resources

The Group's primary sources of liquidity are cash flow from operations and borrowings under the revolving credit facility. The Group's primary uses of cash are for funding day to day operations, capital expenditure, debt service, dividends and other investment activity including acquisitions.

At 31 March 2017, Smurfit Kappa Treasury Funding Limited had outstanding US$292.3 million 7.50% senior debentures due 2025. The Group had outstanding €124 million and STG£54 million variable funding notes issued under the €240 million accounts receivable securitisation programme maturing in June 2019, together with €5 million variable funding notes issued under the €175 million accounts receivable securitisation programme maturing in April 2018.

Smurfit Kappa Acquisitions had outstanding €200 million 5.125% senior notes due 2018, US$300 million 4.875% senior notes due 2018, €400 million 4.125% senior notes due 2020, €250 million senior floating rate notes due 2020, €500 million 3.25% senior notes due 2021, €500 million 2.375% senior notes due 2024 and €250 million 2.75% senior notes due 2025. Smurfit Kappa Acquisitions and certain subsidiaries are also party to a senior credit facility. At 31 March 2017, the Group’s senior credit facility comprised term drawings of €312.6 million, US$51.3 million and STG£106.9 million under the amortising term loan facility maturing in 2020. In addition, as at 31 March 2017, the facility included an €845 million revolving credit facility of which €6 million was drawn in revolver loans, with a further €7 million in operational facilities including letters of credit drawn under various ancillary facilities.

The following table provides the range of interest rates as of 31 March 2017 for each of the drawings under the various senior credit facility loans. Following a reduction in the Group’s leverage in December 2016, the margins under the senior credit facility were reduced by 0.25%.

Borrowing Arrangement			Currency			Interest Rate
Term Loan Facility			EUR			0.978% - 1.030%
			USD			2.332%
			GBP			1.609%
Revolving Credit Facility			EUR			0.729%

Borrowings under the revolving credit facility are available to fund the Group's working capital requirements, capital expenditure and other general corporate purposes.

In January 2017 the Group issued €500 million of seven-year euro denominated senior notes at a coupon of 2.375%, the proceeds of which were used to prepay term debt under the senior credit facility, reduce indebtedness under existing securitisation facilities and for general corporate purposes. In February 2017 the Group increased the revolving credit facility under the senior credit facility by €220 million thereby further enhancing liquidity.

Market Risk and Risk Management Policies

The Group is exposed to the impact of interest rate changes and foreign currency fluctuations due to its investing and funding activities and its operations in different foreign currencies. Interest rate risk exposure is managed by achieving an appropriate balance of fixed and variable rate funding. As at 31 March 2017, the Group had fixed an average of 80% of its interest cost on borrowings over the following twelve months.

The Group’s fixed rate debt comprised €200 million 5.125% senior notes due 2018, US$300 million 4.875% senior notes due 2018 (US$50 million swapped to floating), €400 million 4.125% senior notes due 2020, €500 million 3.25% senior notes due 2021, €500 million 2.375% senior notes due 2024, €250 million 2.75% senior notes due 2025 and US$292.3 million 7.50% senior debentures due 2025. In addition the Group had €349 million in interest rate swaps with maturity dates ranging from October 2018 to January 2021.

The Group’s earnings are affected by changes in short-term interest rates as a result of its floating rate borrowings. If LIBOR/EURIBOR interest rates for these borrowings increase by one percent, the Group’s interest expense would increase, and income before taxes would decrease, by approximately €8 million over the following twelve months. Interest income on the Group’s cash balances would increase by approximately €6 million assuming a one percent increase in interest rates earned on such balances over the following twelve months.

The Group uses foreign currency borrowings, currency swaps, options and forward contracts in the management of its foreign currency exposures.

Condensed Consolidated Income Statement – First Quarter

			3 months to 31-Mar-17 Unaudited						3 months to 31-Mar-16 Unaudited
			Pre- exceptional 2017		Exceptional 2017		Total 2017		Pre- exceptional 2016		Exceptional 2016		Total 2016
			€m		€m		€m		€m		€m		€m
Revenue			2,129		-		2,129		2,001		-		2,001
Cost of sales			(1,522)		-		(1,522)		(1,411)		-		(1,411)
Gross profit			607		-		607		590		-		590
Distribution costs			(167)		-		(167)		(154)		-		(154)
Administrative expenses			(272)		-		(272)		(257)		-		(257)
Operating profit			168		-		168		179		-		179
Finance costs			(61)		(2)		(63)		(61)		-		(61)
Finance income			4		-		4		10		-		10
Profit before income tax			111		(2)		109		128		-		128
Income tax expense							(36)						(38)
Profit for the financial period							73						90
Attributable to:
Owners of the parent							74						90
Non-controlling interests							(1)						-
Profit for the financial period							73						90
Earnings per share
Basic earnings per share - cent							31.5						38.8
Diluted earnings per share - cent							31.3						38.4

Condensed Consolidated Statement of Comprehensive Income – First Quarter

			3 months to		3 months to
			31-Mar-17		31-Mar-16
			Unaudited		Unaudited
			€m		€m
Profit for the financial period			73		90
Other comprehensive income:
Items that may be subsequently reclassified to profit or loss
Foreign currency translation adjustments:
- Arising in the period			30		(64)
Effective portion of changes in fair value of cash flow hedges:
- Movement out of reserve			2		2
- New fair value adjustments into reserve			-		(2)
			32		(64)
Items which will not be subsequently reclassified to profit or loss
Defined benefit pension plans:
- Actuarial gain/(loss)			6		(57)
- Movement in deferred tax			(1)		7
			5		(50)
Total other comprehensive income/(expense)			37		(114)
Total comprehensive income/(expense) for the financial period			110		(24)
Attributable to:
Owners of the parent			108		(20)
Non-controlling interests			2		(4)
Total comprehensive income/(expense) for the financial period			110		(24)

Condensed Consolidated Balance Sheet

			31-Mar-17		31-Mar-16		31-Dec-16
			Unaudited		Unaudited		Audited
			€m		€m		€m
ASSETS
Non-current assets
Property, plant and equipment			3,290		3,085		3,261
Goodwill and intangible assets			2,497		2,484		2,478
Available-for-sale financial assets			21		21		21
Investment in associates			17		17		17
Biological assets			114		95		114
Trade and other receivables			26		36		29
Derivative financial instruments			39		23		42
Deferred income tax assets			184		188		190
			6,188		5,949		6,152
Current assets
Inventories			800		732		779
Biological assets			13		8		10
Trade and other receivables			1,606		1,527		1,470
Derivative financial instruments			3		12		10
Restricted cash			8		8		7
Cash and cash equivalents			567		353		436
			2,997		2,640		2,712
Total assets			9,185		8,589		8,864
EQUITY
Capital and reserves attributable to owners of the parent
Equity share capital			-		-		-
Share premium			1,984		1,983		1,983
Other reserves			(485)		(490)		(507)
Retained earnings			1,002		668		853
Total equity attributable to owners of the parent			2,501		2,161		2,329
Non-controlling interests			169		149		174
Total equity			2,670		2,310		2,503
LIABILITIES
Non-current liabilities
Borrowings			3,280		3,300		3,247
Employee benefits			875		856		884
Derivative financial instruments			11		18		12
Deferred income tax liabilities			169		152		183
Non-current income tax liabilities			30		27		30
Provisions for liabilities and charges			70		56		69
Capital grants			14		14		14
Other payables			13		11		13
			4,462		4,434		4,452
Current liabilities
Borrowings			226		90		137
Trade and other payables			1,728		1,667		1,705
Current income tax liabilities			41		48		21
Derivative financial instruments			33		11		27
Provisions for liabilities and charges			25		29		19
			2,053		1,845		1,909
Total liabilities			6,515		6,279		6,361
Total equity and liabilities			9,185		8,589		8,864

Condensed Consolidated Statement of Changes in Equity

		Attributable to owners of the parent
		Equity share capital		Share premium		Other reserves		Retained earnings		Total		Non- controlling interests		Total equity
		€m		€m		€m		€m		€m		€m		€m
Unaudited
At 1 January 2017		-		1,983		(507)		853		2,329		174		2,503
Profit for the financial period		-		-		-		74		74		(1)		73
Other comprehensive income
Foreign currency translation adjustments		-		-		27		-		27		3		30
Defined benefit pension plans		-		-		-		5		5		-		5
Effective portion of changes in fair value of cash flow hedges		-		-		2		-		2		-		2
Total comprehensive income for the financial period		-		-		29		79		108		2		110
Shares issued		-		1		-		-		1		-		1
Acquired non-controlling interests		-		-		-		-		-		(15)		(15)
Hyperinflation adjustment		-		-		-		70		70		8		78
Share-based payment		-		-		4		-		4		-		4
Shares acquired by SKG Employee Trust		-		-		(11)		-		(11)		-		(11)
At 31 March 2017		-		1,984		(485)		1,002		2,501		169		2,670
Unaudited
At 1 January 2016		-		1,983		(425)		619		2,177		151		2,328
Profit for the financial period		-		-		-		90		90		-		90
Other comprehensive income
Foreign currency translation adjustments		-		-		(60)		-		(60)		(4)		(64)
Defined benefit pension plans		-		-		-		(50)		(50)		-		(50)
Total comprehensive (expense)/income for the financial period		-		-		(60)		40		(20)		(4)		(24)
Hyperinflation adjustment		-		-		-		9		9		2		11
Share-based payment		-		-		5		-		5		-		5
Shares acquired by SKG Employee Trust		-		-		(10)		-		(10)		-		(10)
At 31 March 2016		-		1,983		(490)		668		2,161		149		2,310

An analysis of the movements in Other reserves is provided in Note 13.

Condensed Consolidated Statement of Cash Flows

			3 months to			3 months to
			31-Mar-17			31-Mar-16
			Unaudited			Unaudited
			€m			€m
Cash flows from operating activities
Profit before income tax			109			128
Net finance costs			59			51
Depreciation charge			90			87
Amortisation of intangible assets			11			8
Amortisation of capital grants			-			(1)
Equity settled share-based payment expense			4			5
Profit on sale of assets and businesses			(5)			(2)
Net movement in working capital			(79)			(99)
Change in biological assets			5			2
Change in employee benefits and other provisions			(8)			(15)
Other (primarily hyperinflation adjustments)			17			1
Cash generated from operations			203			165
Interest paid			(42)			(37)
Income taxes paid:
Overseas corporation tax (net of tax refunds) paid			(30)			(28)
Net cash inflow from operating activities			131			100
Cash flows from investing activities
Interest received			1			1
Business disposals			4			-
Additions to property, plant and equipment and biological assets			(125)			(97)
Additions to intangible assets			(1)			(2)
Receipt of capital grants			-			2
Increase in restricted cash			(1)			(3)
Disposal of property, plant and equipment			7			2
Purchase of subsidiaries and non-controlling interests			(9)			(30)
Deferred consideration paid			(1)			(1)
Net cash outflow from investing activities			(125)			(128)
Cash flows from financing activities
Proceeds from issue of new ordinary shares			1			-
Proceeds from bond issue			500			-
Proceeds from other debt issues			-			250
Purchase of own shares			(11)			(10)
Increase in other interest-bearing borrowings			11			10
Repayment of finance leases			-			(1)
Repayment of borrowings			(366)			(170)
Deferred debt issue costs paid			(7)			(1)
Net cash inflow from financing activities			128			78
Increase in cash and cash equivalents			134			50
Reconciliation of opening to closing cash and cash equivalents
Cash and cash equivalents at 1 January			402			263
Currency translation adjustment			8			25
Increase in cash and cash equivalents			134			50
Cash and cash equivalents at 31 March			544			338

An analysis of the net movement in working capital is provided in Note 11.

Notes to the Condensed Consolidated Interim Financial Statements

1. General Information

Smurfit Kappa Group plc (‘SKG plc’ or ‘the Company’) and its subsidiaries (together ‘SKG’ or ‘the Group’) manufacture, distribute and sell containerboard, corrugated containers and other paper-based packaging products such as solidboard, graphicboard and bag-in-box. The Company is a public limited company whose shares are publicly traded. It is incorporated and domiciled in Ireland. The address of its registered office is Beech Hill, Clonskeagh, Dublin 4, D04 N2R2, Ireland.

2. Basis of Preparation and Accounting Policies

The consolidated financial statements of the Group are prepared in accordance with International Financial Reporting Standards (‘IFRS’) issued by the International Accounting Standards Board (‘IASB’) as adopted by the European Union (‘EU’); and those parts of the Companies Act 2014 applicable to companies reporting under IFRS. The financial information presented in this report has not been prepared in accordance with International Accounting Standard 34 – ‘Interim Financial Reporting’ (‘IAS 34’).

The financial information presented in this report has been prepared in accordance with the Group’s accounting policies. Full details of the accounting policies adopted by the Group are contained in the financial statements included in the Group’s annual report for the year ended 31 December 2016 which is available on the Group’s website; smurfitkappa.com. The accounting policies and methods of computation and presentation adopted in the preparation of the condensed consolidated interim financial statements are consistent with those described and applied in the annual report for the financial year ended 31 December 2016. There are no new IFRS standards effective from 1 January 2017 which have a material effect on the condensed consolidated interim financial information included in this report.

The condensed consolidated interim financial statements include all adjustments that management considers necessary for a fair presentation of such financial information. All such adjustments are of a normal recurring nature. Certain tables in this interim statement may not add precisely due to rounding.

The condensed consolidated interim financial statements presented do not constitute full statutory accounts. Full statutory accounts for the year ended 31 December 2016 will be filed with the Irish Registrar of Companies in due course. The audit report on those statutory accounts was unqualified.

3. Segmental Analyses

The Group has determined operating segments based on the manner in which reports are reviewed by the chief operating decision maker (‘CODM’). The CODM is determined to be the executive management team responsible for assessing performance, allocating resources and making strategic decisions. The Group has identified two operating segments: 1) Europe and 2) The Americas.

The Europe segment is highly integrated. It includes a system of mills and plants that primarily produces a full line of containerboard that is converted into corrugated containers. The Americas segment comprises all forestry, paper, corrugated and folding carton activities in a number of Latin American countries and the United States. Inter-segment revenue is not material. No operating segments have been aggregated for disclosure purposes.

Segment profit is measured based on EBITDA^(1).

		3 months to 31-Mar-17						3 months to 31-Mar-16
		Europe		The Americas		Total		Europe		The Americas		Total
		€m		€m		€m		€m		€m		€m
Revenue and results
Revenue		1,563		566		2,129		1,520		481		2,001
EBITDA		213		74		287		209		82		291
Segment exceptional items		-		-		-		-		-		-
EBITDA after exceptional items		213		74		287		209		82		291
Unallocated centre costs						(9)						(10)
Share-based payment expense						(4)						(5)
Depreciation and depletion (net)						(95)						(89)
Amortisation						(11)						(8)
Finance costs						(63)						(61)
Finance income						4						10
Profit before income tax						109						128
Income tax expense						(36)						(38)
Profit for the financial period						73						90

⁽¹⁾ EBITDA is defined within Alternative Performance Measures set out in Supplementary Financial Information.

4. Exceptional Items

			3 months to			3 months to
The following items are regarded as exceptional in nature:			31-Mar-17			31-Mar-16
			€m			€m
Exceptional finance costs			2			-
Exceptional items included in net finance costs			2			-

Exceptional finance costs of €2 million in the first quarter of 2017 represented the accelerated amortisation of the issue costs relating to the debt within our senior credit facility which was paid down with the proceeds of the €500 million bond issued in January.

5. Finance Costs and Income

			3 months to			3 months to
			31-Mar-17			31-Mar-16
			€m			€m
Finance costs:
Interest payable on bank loans and overdrafts			15			12
Interest payable on other borrowings			28			27
Exceptional finance costs associated with debt restructuring			2			-
Foreign currency translation loss on debt			5			7
Fair value loss on derivatives not designated as hedges			3			6
Net interest cost on net pension liability			5			6
Net monetary loss-hyperinflation			5			3
Total finance costs			63			61
Finance income:
Other interest receivable			(1)			(1)
Foreign currency translation gain on debt			(3)			(8)
Fair value gain on derivatives not designated as hedges			-			(1)
Total finance income			(4)			(10)
Net finance costs			59			51

6. Income Tax Expense

Income tax expense recognised in the Condensed Consolidated Income Statement

			3 months to		3 months to
			31-Mar-17		31-Mar-16
			€m		€m
Current tax:
Europe			35		28
The Americas			15		18
			50		46
Deferred tax			(14)		(8)
Income tax expense			36		38
Current tax is analysed as follows:
Ireland			1		3
Foreign			49		43
			50		46

Income tax recognised in the Condensed Consolidated Statement of Comprehensive Income

			3 months to		3 months to
			31-Mar-17		31-Mar-16
			€m		€m
Arising on defined benefit plans			1		(7)

The tax expense in 2017 is €2 million lower than the same period in 2016 due to lower earnings. The income tax expense is higher by €10 million in Europe and lower by €12 million in the Americas. The €6 million movement in deferred tax primarily arises from the reversal of timing differences.

There is no income tax credit associated with exceptional items in 2017.

7. Employee Benefits – Defined Benefit Plans

The table below sets out the components of the defined benefit cost for the period:

			3 months to		3 months to
			31-Mar-17		31-Mar-16
			€m		€m
Current service cost			7		10
Gain on settlement			-		(2)
Net interest cost on net pension liability			5		6
Defined benefit cost			12		14

Included in cost of sales, distribution costs and administrative expenses is a defined benefit cost of €7 million (2016: cost of €8 million). Net interest cost on net pension liability of €5 million (2016: €6 million) is included in finance costs in the Condensed Consolidated Income Statement.

The amounts recognised in the Condensed Consolidated Balance Sheet were as follows:

			31-Mar-17		31-Dec-16
			€m		€m
Present value of funded or partially funded obligations			(2,289)		(2,320)
Fair value of plan assets			1,930		1,953
Deficit in funded or partially funded plans			(359)		(367)
Present value of wholly unfunded obligations			(516)		(517)
Net pension liability			(875)		(884)

8. Earnings per Share

Basic

Basic earnings per share is calculated by dividing the profit attributable to owners of the parent by the weighted average number of ordinary shares in issue during the period less own shares.

			3 months to		3 months to
			31-Mar-17		31-Mar-16
Profit attributable to owners of the parent (€ million)			74		90
Weighted average number of ordinary shares in issue (million)			235		234
Basic earnings per share (cent)			31.5		38.8

Diluted

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. These comprise convertible shares issued under the Share Incentive Plan, which were based on performance and the passage of time, and deferred shares held in trust issued under the Deferred Annual Bonus Plan, which are based on the passage of time.

			3 months to		3 months to
			31-Mar-17		31-Mar-16
Profit attributable to owners of the parent (€ million)			74		90
Weighted average number of ordinary shares in issue (million)			235		234
Potential dilutive ordinary shares assumed (million)			2		2
Diluted weighted average ordinary shares (million)			237		236
Diluted earnings per share (cent)			31.3		38.4

Pre-exceptional

			3 months to		3 months to
			31-Mar-17		31-Mar-16
Profit attributable to owners of the parent (€ million)			74		90
Exceptional items included in profit before income tax (Note 4) (€ million)			2		-
Pre-exceptional profit attributable to owners of the parent (€ million)			76		90
Weighted average number of ordinary shares in issue (million)			235		234
Pre-exceptional basic earnings per share (cent)			32.2		38.8
Diluted weighted average ordinary shares (million)			237		236
Pre-exceptional diluted earnings per share (cent)			32.0		38.4

9. Dividends

The Board has recommended a final dividend of 57.6 cent per share for 2016 payable on 12 May 2017 to all ordinary shareholders on the share register at the close of business on 21 April 2017, subject to the approval of the shareholders at the AGM on 5 May 2017.

10. Property, Plant and Equipment

			Land and buildings		Plant and equipment		Total
			€m		€m		€m
Three months ended 31 March 2017
Opening net book amount			1,004		2,257		3,261
Reclassifications			4		(4)		-
Additions			1		66		67
Acquisitions			-		1		1
Depreciation charge			(13)		(77)		(90)
Retirements and disposals			(2)		-		(2)
Hyperinflation adjustment			21		17		38
Foreign currency translation adjustment			4		11		15
At 31 March 2017			1,019		2,271		3,290
Year ended 31 December 2016
Opening net book amount			988		2,115		3,103
Reclassifications			42		(43)		(1)
Additions			11		465		476
Acquisitions			10		56		66
Depreciation charge			(48)		(309)		(357)
Retirements and disposals			(1)		(11)		(12)
Hyperinflation adjustment			25		21		46
Foreign currency translation adjustment			(23)		(37)		(60)
At 31 December 2016			1,004		2,257		3,261

11. Net Movement in Working Capital

			3 months to		3 months to
			31-Mar-17		31-Mar-16
			€m		€m
Change in inventories			(18)		(10)
Change in trade and other receivables			(120)		(98)
Change in trade and other payables			59		9
Net movement in working capital			(79)		(99)

12. Analysis of Net Debt

			31-Mar-17		31-Dec-16
			€m		€m
Senior credit facility:
Revolving credit facility(1) – interest at relevant interbank rate + 1.10%(5)			1		1
Term loan facility(2) – interest at relevant interbank rate + 1.35%(5)			482		741
US$292.3 million 7.50% senior debentures due 2025 (including accrued interest)			280		279
Bank loans and overdrafts			169		167
Cash			(575)		(443)
2018 receivables securitisation variable funding notes			4		114
2019 receivables securitisation variable funding notes			186		182
2018 senior notes (including accrued interest)(3)			479		488
€400 million 4.125% senior notes due 2020 (including accrued interest)			400		404
€250 million senior floating rate notes due 2020 (including accrued interest)(4)			249		249
€500 million 3.25% senior notes due 2021 (including accrued interest)			501		496
€500 million 2.375% senior notes due 2024 (including accrued interest)			494		-
€250 million 2.75% senior notes due 2025 (including accrued interest)			247		249
Net debt before finance leases			2,917		2,927
Finance leases			14		14
Net debt including leases			2,931		2,941

(1)			Revolving credit facility ('RCF') of €845 million (available under the senior credit facility) to be repaid in 2020. The RCF was increased by €220 million in February 2017. (a) revolver loans - €6 million, (b) drawn under ancillary facilities and facilities supported by letters of credit – nil and (c) other operational facilities including letters of credit - €7 million.
(2)			Term loan facility due to be repaid in certain instalments from 2018 to 2020. In January and February 2017, the Group prepaid €260 million of drawings under the term loan facility.
(3)			€200 million 5.125% senior notes due 2018 and US$300 million 4.875% senior notes due 2018.
(4)			Interest at EURIBOR + 3.5%.
(5)			Following a reduction in leverage at 31 December 2016, the margins on the RCF and term loan reduced by 0.25% to 1.10% and 1.35% respectively effective February 2017.

The margins applicable under the senior credit facility are determined as follows:

Net debt/EBITDA ratio				RCF			Term Loan Facility
Greater than 3.0 : 1				1.85%			2.10%
3.0 : 1 or less but more than 2.5 : 1				1.35%			1.60%
2.5 : 1 or less but more than 2.0 : 1				1.10%			1.35%
2.0 : 1 or less				0.85%			1.10%

13. Other Reserves

Other reserves included in the Condensed Consolidated Statement of Changes in Equity are comprised of the following:

			Reverse acquisition reserve		Cash flow hedging reserve		Foreign currency translation reserve		Share- based payment reserve		Own shares		Available- for-sale reserve		Total
			€m		€m		€m		€m		€m		€m		€m
At 1 January 2017			575		(22)		(1,193)		165		(33)		1		(507)
Other comprehensive income
Foreign currency translation adjustments			-		-		27		-		-		-		27
Effective portion of changes in fair value of cash flow hedges			-		2		-		-		-		-		2
Total other comprehensive income			-		2		27		-		-		-		29
Share-based payment			-		-		-		4		-		-		4
Shares acquired by SKG Employee Trust			-		-		-		-		(11)		-		(11)
Shares distributed by SKG Employee Trust			-		-		-		(10)		10		-		-
At 31 March 2017			575		(20)		(1,166)		159		(34)		1		(485)
At 1 January 2016			575		(22)		(1,109)		168		(38)		1		(425)
Other comprehensive income
Foreign currency translation adjustments			-		-		(60)		-		-		-		(60)
Total other comprehensive expense			-		-		(60)		-		-		-		(60)
Share-based payment			-		-		-		5		-		-		5
Shares acquired by SKG Employee Trust			-		-		-		-		(10)		-		(10)
Shares distributed by SKG Employee Trust			-		-		-		(14)		14		-		-
At 31 March 2016			575		(22)		(1,169)		159		(34)		1		(490)

14. Venezuela

Hyperinflation

As discussed more fully in the 2016 annual report, Venezuela became hyperinflationary during 2009 when its cumulative inflation rate for the past three years exceeded 100%. As a result, the Group applied the hyperinflationary accounting requirements of IAS 29 – Financial Reporting in Hyperinflationary Economies to its Venezuelan operations at 31 December 2009 and for all subsequent accounting periods.

In 2017 and 2016 management engaged an independent expert to determine an estimate of the annual inflation rate. The level of and movement in the price index at March 2017 and 2016 are as follows:

		31-Mar-17		31-Mar-16
Index at period-end		19,277.1		2,924.6
Movement in period		72.8%		13.6%

As a result of the entries recorded in respect of hyperinflationary accounting under IFRS, the Condensed Consolidated Income Statement is impacted as follows: Revenue €7 million increase (2016: €5 million decrease), EBITDA €10 million decrease (2016: €3 million decrease) and profit after taxation €18 million decrease (2016: €5 million decrease). In 2017, a net monetary loss of €5 million (2016: €3 million loss) was recorded in the Condensed Consolidated Income Statement. The impact on our net assets and our total equity is an increase of €60 million (2016: €5 million increase).

Exchange Control

The Group consolidates its Venezuelan operations at the variable DICOM rate. The Group believes that DICOM is the most appropriate rate for accounting and consolidation, as it believes that this is the rate at which the Group extracts economic benefit. On this basis, in accordance with IFRS, the financial statements of the Group’s operations in Venezuela were translated at 31 March 2017 using the DICOM rate of VEF709.75 per US dollar and the closing euro/US dollar rate of 1 euro = US$1.069.

Control

The nationalisation of foreign owned companies or assets by the Venezuelan government remains a risk. Market value compensation is either negotiated or arbitrated under applicable laws or treaties in these cases. However, the amount and timing of such compensation is necessarily uncertain.

The Group continues to control operations in Venezuela and, as a result, continues to consolidate all of the results and net assets of these operations at the period end in accordance with the requirement of IFRS 10.

In 2017, the Group’s operations in Venezuela represented approximately 1.5% (2016: 1.1%) of its EBITDA, 2.5% (2016: 1.3%) of its total assets and 5.9% (2016: 3.0%) of its net assets. Cumulative foreign translation losses arising on its net investment in these operations amounting to €993 million (2016: €951 million) are included in the foreign currency translation reserve.

Supplementary Financial Information

Alternative Performance Measures

Certain financial measures set out in this report are not defined under International Financial Reporting Standards (‘IFRS’). An explanation for the use of these Alternative Performance Measures (‘APMs’) is set out within Financial Key Performance Indicators on pages 40-42 of the Group’s 2016 annual report. The key APMs of the Group are set out below.

APM		Description
EBITDA		Earnings before exceptional items, share-based payment expense, share of associates’ profit (after tax), net finance costs, income tax expense, depreciation and depletion (net) and intangible assets amortisation.
EBITDA Margin %		EBITDA x 100 Revenue
Pre-exceptional Basic EPS (cent)		Profit attributable to owners of the parent, adjusted for exceptional items included in profit before tax and income tax on exceptional items _________________x 100 Weighted average number of ordinary shares in issue
Return on Capital Employed %		Last twelve months (‘LTM’) pre-exceptional operating profit plus share of associates’ profit (after tax)______x 100 Average capital employed (where capital employed is the average of total equity and net debt at the beginning and end of the period)
Free Cash Flow		Free cash flow is the result of the cash inflows and outflows from our operating activities, and is before those arising from acquisition and disposal activities.   Free cash flow (APM) and a reconciliation of free cash flow to cash generated from operations (IFRS measure) are included in the management commentary. The IFRS cash flow is included in the Condensed Consolidated Financial Statements.
Net Debt		Net debt is comprised of borrowings net of cash and cash equivalents and restricted cash.
Net Debt to EBITDA (LTM) times		Net debt_____ EBITDA (LTM)

Reconciliation of Profit to EBITDA
			3 months to		3 months to
			31-Mar-17		31-Mar-16
			€m		€m
Profit for the financial period			73		90
Income tax expense			36		38
Net finance costs (after exceptional items)			59		51
Share-based payment expense			4		5
Depreciation, depletion (net) and amortisation			106		97
EBITDA			278		281

Return on Capital Employed

			Q1, 2017		Q1, 2016		Q4, 2016
			€m		€m		€m
Pre-exceptional operating profit plus share of associates’ profit (after tax) (LTM)			820		796		832
Total equity – current period end			2,670		2,310		2,503
Net debt – current period end			2,931		3,029		2,941
Capital employed – current period end			5,601		5,339		5,444
Total equity – prior period end			2,310		2,128		2,328
Net debt – prior period end			3,029		2,930		3,048
Capital employed – prior period end			5,339		5,058		5,376
Average capital employed			5,470		5,198		5,410
Return on capital employed			15.0%		15.3%		15.4%

Supplementary Historical Financial Information

€m			Q1, 2016		Q2, 2016		Q3, 2016		Q4, 2016		FY, 2016		Q1, 2017
Group and third party revenue			3,280		3,375		3,424		3,441		13,521		3,573
Third party revenue			2,001		2,049		2,050		2,060		8,159		2,129
EBITDA			281		312		323		320		1,236		278
EBITDA margin			14.0%		15.3%		15.7%		15.5%		15.1%		13.0%
Operating profit			179		211		219		206		815		168
Profit before income tax			128		184		187		155		654		109
Free cash flow			7		28		164		104		303		16
Basic earnings per share - cent			38.8		52.0		56.4		42.3		189.4		31.5
Weighted average number of shares used in EPS calculation (million)			234		234		234		235		235		235
Net debt			3,029		3,121		2,953		2,941		2,941		2,931
EBITDA (LTM)			1,197		1,224		1,242		1,236		1,236		1,233
Net debt to EBITDA (LTM)			2.53		2.55		2.38		2.38		2.38		2.38

¹ Underlying in relation to financial measures throughout this report excludes acquisitions, disposals, currency and hyperinflation movements where applicable

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