DS Smith registers increase in profit in H1, reveals acquisition plans

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DS Smith registers increase in profit in H1, reveals acquisition plans

December 10, 2014 - 20:09

BRUSSELS, Dec. 11, 2014 (PPI Europe) -

DS Smith (DSS) has registered 2.3% growth in its corrugated box volumes in the first half of 2014 ending October 31, as it announced plans to expand its footprint in the Turkish and Greek markets in addition to the recent corrugated business acquisition in Spain. The firm's revenue declined by 5%, mainly due to adverse foreign exchange developments, while its profit before tax climbed by 45% to £123 million ($193 million).

DSS saw growth in its corrugated volume across all markets it operates in, with particularly strong growth in central and eastern Europe.

DSS CEO Miles Roberts said that the firm saw "incredible" growth in Poland, where DSS would need to build one more corrugated plant to satisfy all customer-led demand for its packaging products.

In mature markets, the firm reported flat box volume development in the UK and "positive" advancement in western Europe as well as higher-than-overall corrugated box growth in Italy.

DSS said that despite the positive sales results, its divisions in France, Benelux and Spain recorded falling margins.

The firm also announced that it signed a five-year contract with the multinational consumer goods company Mondelez to supply its entire corrugated packaging needs in Europe.

M&As to continue:DSS recorded a net £9 million inflow from its acquisitions and disposals in H1. In the period, the firm bought the Croatian injection moulding company Kaplast and the Italian recycled paper company Italmaceri. It also sold its Scandinavian foams business for £23 million.

Last month, the firm received a binding offer for the purchase of its 60,000 tonne/yr white-top testliner mill in Nantes, France. The prospective buyer is reportedly the US private equity firm OpenGate Capital. According to RISI sources, the deal is expected to be finalized by the end of January 2015.

DSS is also strengthening its corrugated packaging footprint across Europe. In November, DSS announced it acquired the Spanish corrugated packaging business Andopack for £35 million.

Last week, the firm announced that it is in talks to acquire several corrugated packaging businesses in western Turkey and Greece.

Roberts said that he views the Turkish and Greek markets as strategic for his firm now that the Greek economy is "starting to move forward" and the Turkish market lacks the presence of a pan-European corrugated packaging supplier.

DSS said that the firm continues to pursue its strategy of reducing its internal paper supply from 70% to 50%, citing the importance of "flexibility for its customer solutions." The firm added that it intends to reach its goal either through paper capacity reduction or via growth in corrugated packaging capacity.

Mixed prospects for input costs:While commenting on his expectations with regard to the firm's cost developments, Roberts said that steady recycled fiber prices are foreseen, which would, in his view, continue the developments of the past two years.

On the energy side, currently falling oil prices have led to dropping energy prices, although the firm has not seen the effect of lower prices, Roberts said.

"[We have not seen] much effect this year as we hedge. But looking out over the following 12 to 15 months, then we expect those low energy costs could come through, if they hold," Roberts said.

DSS's group finance director Adrian Marsh added: "If we have a milder winter, if Russia doesn't do anything crazy, then we could start to have potential benefit next year and the year after."