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Paper struggles dilute DS Smith success

By Rod Addy , 06-Dec-2012

A difficult paper market diluted DS Smith's half year performance, but despite this it posted strong double digit sales and profit growth in its half year results, buoyed by its acquisition of SCA Packaging in June.

The international supplier of recycled consumer goods packaging said paper had been a core challenge during the six months to October 31 2012 as a result of weak demand and overcapacity in the market.

It said it was reviewing its options to reduce the impact this was having and improve return on capital.

“As expected, markets and the paper cycle in particular, remain challenging," said group chief executive Miles Roberts. "However we believe we are well placed to create further significant value for our investors through the robust performance of our corrugated and plastic packaging businesses…”

The company continued to see good growth prospects for these activities, he said.

SCA Packaging

DS Smith said its integration of SCA Packaging was running ahead of schedule. And Roberts said the business was successfully enlarging its geographic footprint and developing and investing in group-wide capabilities for innovation, design, sales and marketing.

“We are pleased with the strategic, operating and financial progress made in the first half, particularly against a challenging economic backdrop,” said Roberts.

Corrugated and plastic packaging sales had delivered strong performances in the fast moving consumer goods (FMCG) market, it said.

Powerful figures

Western Europe delivered powerful figures, with revenue up by half and operating profit almost doubling, up 95.8% in the half year to October 31, versus the same period last year.

The acquisition of SCA Packaging added Central and Northern Europe, Italy, Germany, Austria and Switzerland to DS Smith’s markets.

Declines in the German paper business were offset by packaging wins, particularly in the Nordic countries, DS Smith reported. And it said strong single digit gains from SCA Packaging in Central Europe and Italy again offset weak performance in paper. It had exited low margin sheet businesses in Italy.

Plastic packaging

Plastic packaging delivered strong growth, with revenue up 13.6% and operating profit rising by 31.0%, said DS Smith.

The liquid packaging and dispensing business performed particularly strongly in North America with the continued strong performance of the company’s bag-in-box businesses, where it vowed to continue to take market share and introduce new products.

DS Smith said overall half-year pre-tax profit to October 31 rose 62.5% from £65.3m in the same period last year to £106.1m on revenue up 61.6% from £1.03bn to £1.67bn.

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