DS Smith, recycled packaging for consumer goods, has issued its financial results for the six month period ending October 31, 2013.
In a conference call to board members, Miles Roberts, CEO, welcomed Adrian Marsh who joined the company as CFO in September. He was previously head of corporate finance, tax and treasury, Tesco, European CFO at AstraZeneca and CFO Global Building Products at Pilkington.
“We're absolutely delighted Adrian has joined us and he is already having a very good impact on the company,” said Roberts.
Chinese Green Fence
In summary of overall trading, he added the packaging business has continued to gain further market share and corrugated volume growth remains in excess of its target of GDP+1%
“The delivery of synergies from the SCA Packaging acquisition is on target and, while the European market remains challenging, we remain confident of strong progress this year and are excited about the growth opportunities for the Group,” said Roberts.
On a separate note, Jake Thompson of Odey, questioned the impact of the Chinese Green Fence and how recycling contracts might be structured to deal with increasing cost of contamination.
Roberts explained China has put significant restrictions on the import of waste into the country, whether it's waste metal, glass, fibre.
Environmental waste paperwork
“It's not a total surprise because of the environmental problems that some of the import of waste has caused in China,” he said.
“We are far and away the largest recycler of fibre in Europe, but we focus very much on the collection with the major retailers, so our source of fibre tends to be very clean. So we have had the Green Fence put in place.
“In terms of what we export to China and how that's treated, we had an initial delay whilst all the paperwork was looked at and reviewed with the authorities.
“It hasn’t had an effect because we haven't exported low-grade fibre full of contaminants because a huge proportion of what we supply we collected ourselves directly from the retailer, so we know it comes from a good source.”
Roberts added prices for highly contaminated waste in Europe have fallen because that waste can't be exported to China.
More sorting at source
“But, as we haven't delved in it, it hasn't had a huge impact for us. But we do see the price of low-quality fibre and other products really coming under quite a sustained pressure in Europe,” he said.
According to Roberts, long term it could mean more sorting at source in Europe, and that could increase the flow of OCC (old corrugated containers) back into Europe rather than being exported to China.
“We don't see the Green Fence going away. In fact I think some other countries could actually follow that,” he added.
“And while the European market remains challenging we remain confident of strong progress this year and remain very excited about the growth opportunities for the Group.”
The full results of DS Smith half year will be published on December 5.