UPDATE 2-Smurfit Kappa earnings up on better prices, demand

* Q2 EBITDA up 20 pct to 221 mln euros

* Expects FY EBITDA growth of around 20 pct

* Plans further price increases into 2011

* Shares up 0.1 pct in lower Irish market

(Adds detail, CEO quotes)

By Padraic Halpin

DUBLIN, Aug 11 (Reuters) - Irish packaging group Smurfit Kappa (SKG.I) said earnings rose 20 percent in the second quarter as better demand and prices, together with leaner costs, helped it beat expectations.

Like others in the packaging industry, Smurfit has been recovering from low industry price levels reached in the recession that shrank demand for consumer products such as the paper-based items it sells.

Smurfit, Europe's leading producer of containerboard and corrugated packaging, became the first major supplier to raise prices this time last year as it tried to repair its profit margins and also respond to higher input costs.

It said on Wednesday that accelerating prices helped earnings before interest, tax, depreciation and amortisation (EBITDA) for the three months to end-June reach 221 million euros ($290.6 million).

That was up from 184 million a year ago and ahead of the 207 million projected by five analysts surveyed by Thomson Reuters I/B/E/S.

The Dublin-based group said government debt worries across the globe had not hit its markets and that it expected to deliver EBITDA growth in the region of 20 percent for the full year, the first guidance it has offered this year.

"Although the concerns about the macroeconomic environment remain, SKG has not seen any sign of slowdown across its businesses to date," Chief Executive Gary McGann said, adding that demand for its products continued to recover in July.

Shares in the group, which also offers luxury packaging for chocolates and cosmetics from Venezuela to Lithuania, rose 0.1 percent by 0923 GMT, outperforming a 1.1 percent lower Irish market .ISEQ.

PRICES ON THE RISE

Smurfit said that in the nine months to June it had raised containerboard prices by 70 percent, kraftliner -- another grade of paper - by 50 percent and corrugated packaging -- which accounts for around 70 percent of its business - by 10 percent.

Like rival South African paper maker Mondi (MNDJ.J), Smurfit has announced further price increases it hopes to implement in the coming weeks. McGann told Reuters he expected those rises to continue into 2011. [ID:nLDE6721ZK] [ID:nWLA0614]

"The context in which this is being done is very strong upward pressure on costs. Raw materials and energy prices are going up. Labour costs are under pressure," McGann said in a telephone interview.

"There's an underlying cost base that's actually driving the need for pricing. We anticipate seeing a continuation of that trend and reasonable ongoing price recovery."

McGann added that the group's aggressive cost cutting, which was on track to generate the planned 300 million in savings between 2008 and the end of this year, would continue beyond 2010.

"This is a business that has ongoing cost pressures just to stand still...There's a lot of heavy lifting done but it's a constant battle and we expect it to continue."

($1=.7604 Euro) (Editing by Jon Loades-Carter and Michael Shields)