Smurfit Kappa hands over Venezuelan operations to government

Corrugated packaging group Smurfit Kappa has handed over full responsibility for its Venezuelan operations to the government there and will write down net assets of around €60m as a result.

The Venezuelan government took temporary control of Smurfit's assets in August and detained two employees, claiming that the company had abused its dominant position in the market place. The government's price control agency, Sundde, said Smurfit's Carabobo site had impacted national producers with its prices and ordered immediate adjustments for all its products.

But Smurfit refuted the claims at the time, saying they were "without merit".

Smurfit said in a statement on Monday that due to the "continuing actions and interference of the government of Venezuela", it is no longer able to exercise control over its business there.

"Since the notification of the occupation order, the company has been subject to government interference, including through the arbitrary harassment of its employees by the Directorate General of Military Counterintelligence through unauthorised visits which have the effect of intimidating the company’s workforce resulting in increasing absenteeism. In addition, the government of Venezuela has arbitrarily arrested two of the company’s employees, whose immediate and full release is being actively sought through all available means.

"In light of these circumstances, and in order to protect the interests of its stakeholders and mitigate operating risks, SKG has notified the government that full responsibility for the company’s operations and compliance with all applicable regulations have passed to the Venezuelan state from the date of the notification of the occupation order, namely, since 28 August 2018."

Smurfit will deconsolidate its Venezuelan operations in the third quarter, which will result in a writedown of net assets of around €60m.

The company - whose Venezuelan assets represented less than 1% of the group's earnings before interest, taxes, depreciation and amortisation in the first six months of 2018 - said it reserves the right to initiate international arbitration proceedings to protect tits shareholders' interests and seek compensation "for Venezuela's unlawful measures".

At 1600 BST, the shares were down 0.2% to 3,148p.