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DS Smith’s integration of SCA Packaging pays off

By Rod Addy , 12-Oct-2012

DS Smith is making better than expected progress on its integration of SCA Packaging, it has reported.

In particular, the cash synergies delivered by the process are much higher than DS Smith previously predicted: €130m, including €100m of working capital, versus €40m over three years.

€60m of that would likely be realised by April 2012/13, versus a previously expected €13m, the business said.

The group also anticipated that capital expenditure in the current financial year would be £150m, £10m less than previous expectations.

Disposals

In addition, the firm expected to generate a further €100m from the disposal of property and non-core businesses. These represented less than 4% of group revenue and contributed minimally to profits, DS Smith said.

It claimed the cost to deliver the synergies would total €90m. As a result, the company would enjoy a net benefit that would enable it to reduce its debt to target levels a year ahead of schedule.

The acquisition of SCA Packaging, which specialises in a range of packaging for various industries and is Europe’s second largest producer of containerboard paper for corrugated board, was finalised on June 30.

Pan-European coverage

DS Smith made the deal to build a group with pan-European coverage, built out of the two businesses. It said it would improve its innovation and capabilities.

“The improved synergies that we have been able to announce show how the new enlarged group is not just bigger, but far stronger,” said group chief executive Miles Roberts.

“… We are well placed to drive growth in the FMCG (fast moving consumer goods) sector in what remains a challenging economic environment.”

Progress was on track to deliver return on investment in the current financial year, he added.