DS Smith PLC Publishes Interim Management Statement
DS Smith Plc has published its Interim Management Statement for the period since 30 April 2011.
DS Smith Group
Trading in the period has been robust with a good contribution from the successful acquisition and integration of Otor (now DS Smith Packaging France). Corrugated packaging volumes are up 3%, in line with their previously announced Group target, which reflects their strong FMCG customer base as well as continued progress on margins. Conversion of profit into operating cashflow has been good as their focus on working capital has continued. However, working capital has fallen in absolute terms, year-on-year, despite the acquisition of Otor and increased raw material prices raising the value of inventories and debtors. The financial position of the group has changed very little since the end of their previous financial year on April 30th 2011.
Packaging
Revenue has grown by 13% in the packaging business, which reflects a good recovery of substantial cost increases as well as underlying volume growth. Recovering cost increases will continue by differentiating DS Smith through high standards of service, quality and innovation. Demand for R-Flute®, DS Smith’s proprietary product, continues to grow in the UK, and now that it’s being produced in 2 sites in France, there is a steady increase there too.
Trading in the period benefits from the inclusion of DS Smith Packaging France. Their revenue is growing and the previously announced cost synergies of €13m are making good progress, as are the UK procurement and efficiency savings. These programmes are expected to deliver £6m in total cost savings in 2011/12.
Business development
On 6 July 2011, Unipapel S.A made a binding offer for Spicers. The legal and regulatory process is continuing, but so far we can report that trading at Spicers was satisfactory over the period.
Following the sale, DS Smith will be a focused, international supplier of recycled packaging for FMCG customers with the financial strength to invest in the organic growth of the business and to pursue acquisitions that fit with their core business, whilst maintaining strict financial discipline.
Outlook
DS Smith are confident in the strength of the refocused DS Smith business model, with a long history in recycled corrugated packaging and in the collection of fibre, and a more limited exposure to paper manufacturing. The FMCG customer focus is an important part of their strategy as the resilient demand for consumer goods reduces their exposure to volatile demand. Despite the on-going challenging macro-economic environment and the recent turmoil in global markets, they believe their strategy will ensure a strong trading outlook for the remainder of the year . The Group intends to make further progress towards its medium term financial objectives of margin improvement, return on capital and cash generation as the year progresses.
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