Pricing discipline and strategy revamp boost profits, says DS Smith
The UK-based corrugated and plastic packaging supplier revealed that year-on-year operating profits jumped 41% to £78.3m (€91.3m) in the six months until the end of October, while revenues climbed by 26% to just over £1bn.
The firm said the successful integration of Otor, which added £10m to the balance sheet, and the disposal of two paper mills and its office supplies business, Spicers, had all boosted company performance. Mill disposal costs relating to these moves had cost it £18m.
Group chief executive Miles Roberts, Group Chief Executive, said: ”We have made considerable strategic progress, with the announced disposal of Spicers and the exit of two paper mills on track, leaving the group focused on its recycled packaging businesses. The integration of Otor shows how our customers are keen to develop their businesses with us as we expand DS Smith’s geographic footprint in Europe.”
Capacity investment
DS Smith said its UK unit had posted operating profits of £40m – a 25% increase compared to the same period last year.
Price increases and contract wins for its recycling operations had driven a revenue hike of 14% to £514m. The company said it had gained greater market share of corrugated packaging in the UK and was investing in new capacity.
In its Continental Europe division (France, Poland and Italy), revenues rose 56% to £386m while operating profit doubled - jumping from £14m in 2010 to £28m in the current period. Excluding acquisition revenues increase 8% and operating profits by 23%, said the firm.
Its French operations had seen good volume and revenue growth, said the company as it announced it would be investing in extra offset capacity in south west France.
DS Smith said performance in Poland had been strong – driven by price increases and increased demand from both FMCG and industrial customers.
The firm said its Italian division had “out-performed the market” – once again citing its “disciplined pricing” policy as a factor. It said it had rolled out packaging design programmes here developed in France.
Its plastic packaging unit, which also includes liquid packaging and returnable transit packing, saw revenue rise by 8% to £134m and operating profits up by 11% to £10.4m.
Strategy re-focus
DS Smith announced it was “pleased” with its refocusing strategy which had seen it concentrate on recycling and packaging – with the added capacity investments, the integration of Otor in France the targeting f FMCG outfits highlighted as key.
“We have built the packaging and recycling businesses through the integration of the Otor business to form DS Smith Packaging France, and by driving the sharing of know-how and best practice through the Group, for example, in the development of pre-print technology in the UK business and the roll-out of R-Flute in Continental Europe,” said DS Smith. “We also have a programme of investment in additional capacity across the corrugated packaging business, with two major projects in the UK and one in France, focusing on high quality product for our demanding FMCG customers.”
