DS Smith Plc, the international supplier of recycled packaging for consumer goods, today issues its pre-close statement for the half-year to 31 October 2011.
DS Smith Group
The encouraging overall trading reported in our IMS of 6 September 2011 has continued. Like-for-like volumes in corrugated packaging are up 3% for the financial year to date and are set against strong comparatives in the corresponding period. This is in line with the previously announced Group targets, reflecting our resilient fast-moving consumer goods (FMCG) customer base. At the same time, we have continued to generate strong cashflow and to make progress on margins. As a consequence of this, and due to a strong contribution from Otor, we expect the half year to 31 October 2011 to show significant EPS growth compared to the comparable period last year.
We have recently completed a refinancing of our revolving credit facility with a new five year facility of £610 million.
Packaging
Our Corrugated Packaging businesses have continued to perform well. We are recovering our input cost increases progressively. Margins are improving due to our focus on offering customers a high standard of service and quality and innovative solutions that differentiate our packaging offering and add value to customers’ supply chains.
Our previously announced operating cost and capital savings programmes are making good progress. Specifically, we are well on track to reach the targeted £10 million run-rate savings from procurement by the end of this financial year, split between cost and capital savings. We now expect to see £9 million benefit from procurement savings in the current financial year (up from £6 million previously). The programme to save £10 million run-rate in operating expenditure in the UK by April 2014 is on course, as is the programme for €13 million of cost synergies from the Otor acquisition.
As part of the strategy to reduce non-integrated paper manufacturing, we have sold one paper mill in this period, Higher Kings Mill, which produced 34kt per annum of specialist paper. The previously announced process to close our paper mill at Hollins (95kt) is on track.
The performance of the Plastics business continues to develop, with strong volume growth, and good cost control.
Office Products Wholesaling
The trading performance at Spicers has been good. The process to dispose of the Spicers business is on track with a binding agreement in respect of the sale signed on 7 September 2011. Completion is expected before 31 December 2011. Accordingly, Spicers will be
treated as a discontinued item in the half year results, (to see appendix download link below)
Delivering against our strategic goals
Following the disposal of Spicers, DS Smith will be a focused, international supplier of recycled packaging for FMCG customers with improving operational performance, and the financial strength to invest in the organic growth of the business and to pursue acquisitions within a fragmented packaging sector. We shall maintain strict financial discipline, pursuing only acquisition opportunities that would result in returns to shareholders in line with our medium term financial targets, as we have done with Otor.
Outlook
We remain confident in our trading outlook for the year, despite the challenging macroeconomic environment and the recent turmoil in global markets. The Group expects to make further progress towards its previously announced medium term financial objectives in this financial year, in terms of margin improvement, return on capital and cash generation.
Forthcoming Dates
Results for the half-year to 31 October 2011 7 December 2011