Irish Smurfit Kappa sees margin pressure this year

DUBLIN (Reuters) - Irish packaging maker Smurfit Kappa Group Plc reported a 1 percent rise in first-quarter core profit and said it expected rising costs, a weak dollar and slowing demand to put pressure on margins this year.

One of the world's biggest makers of paper and cardboard packaging, Smurfit said earnings before interest, tax, depreciation and amortisation (EBITDA) rose to 257 million euros (203 million pounds) in the three months to the end of March.

The group said the positive outcome was helped by continued price recovery for corrugated packaging, with its business in Latin America performing well.

But the group expected rising raw materials costs and a slowdown in demand for corrugated packaging, one of its major products, in coming months, compounded by the weak dollar.

"SKG anticipates that a combination of factors will contribute to greater-than-expected margin pressure throughout the remainder of 2008," Chief Executive Gary McGann said in a statement.

The company has aimed to slash costs and has said it will permanently close its Valladolid mill in northern Spain this year and cut output of recycled containerboard at other plants.

"In 2008 and beyond, we will continue to exercise restraint in our capital programmes, base production decisions on a realistic assessment of demand, and participate selectively in consolidation opportunities presented by current market conditions," McGann said.

(Reporting by Jonathan Saul; Editing by Will Waterman and David Holmes)