Packaging group Smurfit Kappa has taken the benefit of improved trading conditions in Europe and significant cost reductions to post €223 million in profits before finance costs and exceptionals in three months to September.

The pre-exceptional earnings before interest, tax, depreciation and amortisation (Ebitda) were up from €210 million in the three months to June and €172 million in the three months to March.

The merger of Jefferson Smurfit with the Kappa Group a year ago means that comparisons with the previous year are not strictly meaningful. However, Smurfit Kappa said its third-quarter Ebitda rose to €170 million from an equivalent sum of €100 million last year.

Net sales from continuing operations stood at €1.75 billion in the third quarter. "On a combined basis . . . 2006 net sales represent an increase of 1 per cent on net sales in the third quarter of 2005 of €1.73 million," the group said.

Chief executive Gary McGann said the "sequential growth" of the business reflected better market conditions in Europe and the benefits of the group's reform programme.

"The progress we are making in our synergy programme gives us confidence that we are on schedule," he said.

"In our last review, we noted that demand growth and broad-based capacity rationalisation are the factors which are delivering and should sustain improving industry conditions."

While stating that energy price increases had eroded product price rises, the group said it was seeing improved earnings in its mill system.

"The challenge remains to fully recover the cost increases through the system and this is where major effort is being exerted," the group said.

Rising paper prices had put pressure on margins in the corrugated sector but rising box prices helped to recover such increases.