DS Smith profits soars on volume growth and Otor factor
The company declared it had seen an 8 per cent volume boost in packaging sales but announced it would be closing a paper mill in England as part of its strategy to shrink its non-core operations.
The Otor factor
DS Smith’s full year results highlighted the importance of the contribution French corrugated producer Otor since the acquisition in went through in September 2010. The company now trades as DS Smith.
Revenues increased by 19.5 per cent to ₤2.75bn with chief executive Miles Roberts revealing almost half of the rise was due to Otor. The ₤136m adjusted operating profit represented a jump of almost 39 per cent. Excluding the contribution of the French asset, this rise was cut to 20 per cent.
The firm also hailed the innovative design the Otor acquisition had brought to the company with the addition of its 50 patents and 10 licences. Cost savings realised from the takeover would now reach ₤13m instead of the initially planned ₤10.3m, said the firm.
Strategy
The firm declared it was making progress on its aim to “become the leading supplier of recycled packaging for consumer goods”.
While the European market for corrugated packaging grew by 3 per cent and the UK by just 1 per cent, the company said had a recorded an 8 per cent packaging sales growth.
It added that it had also introduced a new price review mechanism within customer contracts to enable it to recover rising input costs more quickly. Consequently, the average price review period had dropped from six months to four.
UK packaging operation grew by 22 per cent to ₤917m thanks to volume growth and higher costs, said the company.
European packaging revenue climbed 67 per cent to ₤599m.
“I am very pleased with the performance of the business this year, which has moved the Group closer to delivering our medium term targets,” said Roberts. “The strong performance was achieved in the context of significant increases in input costs, which we have been dedicated to recovering.”
