Venezuela crisis hits home as Irish firm’s factory ‘nationalised’

SMURFIT Kappa has confirmed that the Venezuelan government has taken control of its factory in the country for 90 days in a move that will increase fears that the facility could be nationalised entirely.

The Irish packaging firm, which is led by Tony Smurfit, has an operation in Lurgan, Co Armagh, making corrugated packaging.

Two Smurfit Kappa employees were arrested and are still in custody.

“They are being held for allegedly engaging in what were described as “crimes of speculation, boycott, extraction contraband, destabilising the economy, and corruption”.

Confirmation that Venezuela’s increasingly authoritarian government will control the plant for three months comes a week after the authorities first occupied the factory and ordered the company to cut prices.

Venezuela is sinking into an increasingly dire economic and currency crisis.

Smurfit Kappa said it had become “impossible” for the business to manage its affairs in a way that complies with is normal business standards as a result of the Venezuelan action.

“Consequently, as of August 28, 2018, Smurfit Kappa is not responsible for the use of its

Boss: Tony Smurfit

installations, machinery and equipment, its employees’ safety, that of its surrounding communities, any environmental impact, or the quality of the paper and packaging manufactured in the operations,” it added.

The company said it was making all possible efforts to secure the release of its two employees.

It’s understood that no Irish nationals work at the factory. Venezuela’s government ordered the temporary occupation of the carton production unit in Carabobo state for alleged abuse of a dominant position.

Smurfit Kappa told the market last Thursday that it “entirely refutes” the allegations made against it.

“The group has operated in Venezuela since 1986 to the highest business and ethical standards,” it said, adding that the Venezuelan subsidiary of which the factory is part represented less than 1% of its earnings before interest, tax, depreciation and amortisation in the first half of 2018.

Nine of the 10 company unions last week confirmed their support and desire to continue working with Smurfit Kappa.

Last month Smurfit Kappa’s latest results revealed that it had forked out €17m (£15m) to defend itself from a €9bn (£8bn) takeover approach from US firm International Paper.

The half-year results, which saw Smurfit Kappa post a 27% rise to €724m (£644m) in earnings before interest, tax, depreciation and amortisation, have been seen by investors as vindicating the board’s decision to reject the overtures from International Paper.

The FTSE-100 listed firm told its shareholders that its prospects were better as an independent business.

❝ It’s impossible for the business to manage its affairs... as a result of the Venezuelan action