DS Smith credits strategy rethink, acquisitions and efficiency drive for profit leap
The UK-based corrugated packaging firm also hailed the significance of its near completion of the €1.6bn deal to takeover SCA Packaging – due to be finalized this week – in a move that will give it Pan European reach and transform it into the second largest player in the region.
Paper purchaser not integrated producer
While it highlighted the importance of its dynamic acquisition strategy, the company also pinpointed a major rethink in its position in paper that it said had supported all its financial aims as year-on-year pre-tax profits leapt 44% to £110m, operating profits rose 28% to £142m on revenues of just under £2bn.
“Underpinning the delivery of all our financial targets has been the Group’s decision to be a net purchaser of paper, rather than a fully integrated producer,” said DS Smith today. “By being long in packaging and short in paper, we have had the ability to adjust corrugated prices quickly where we have needed to and to take decisions which may have short-term impacts on volume, where they have benefited the financial performance overall.”
The company said the 12% increase in revenues had been driven by 2% volume growth in corrugated box sales combined with “strict pricing discipline” and the swift recovery of raw material price increases.
French without tears and other cost savings
Miles Roberts, group chief executive, praised the above-expectations performance of its French subsidiary Otor - acquired two years ago.
The France-based outfit had delivered savings of €10m in the financial and was on target to achieve its full €13m figure.
“The full year benefits from our 2010 Otor acquisition are ahead of our original plans, and the integration of the business has been well received by our customers across Europe,” he said.
DS Smith also outlined a raft of other efficiencies achieved in the 12-month period.
A UK efficiency target of £10m by April 2014 was on track with synergies of almost £8m already delivered. The firm’s procurement division achieved a £13m saving in the financial year – 30% above target.
Roberts added: “2011/12 has been a pivotal year for DS Smith. Building on the success of the previous year we further improved the operational and financial performance of the business, with substantial improvements in revenue, growth, profitability, and returns on capital. Alongside our organic growth and business improvement we also significantly re-shaped the Group in line with our strategic aim to become the leader in recycled packaging for consumer goods.”
The company chief said the firm was confident about the year ahead, despite “challenging” economic conditions in Europe.
Unsurprising he highlighted the completion and integration of SCA as 2012/13’s key project as he said the deal would “transform our pan-European market position”.
