DS Smith interim results in line with expectations
Thursday, September 18, 2014
In an interim management statement, DS Smith announced that it had made progress in line with its plans. The statement was released prior to the firm's AGM, which was held on 17 September.
Eastern Europe and the UK were highlighted as leading growth, which was in line or ahead of its mid-term plan of GDP plus one percent. UK growth was attributed to an increase in shelf-ready packaging.
“Volume performance has been strong as pan-European customers seek to consolidate their supplier bases,” said group chief executive Miles Roberts. “Notwithstanding continued headwinds in many of our markets, performance has been in line with our plans. The market remains fragmented, providing opportunities for growth."
The firm suggested market trends favour fewer, larger suppliers, such as itself.
“It’s becoming increasingly difficult to operate unless you can serve the global FMCG companies on a pan-European basis,” said group finance director Adrian Marsh. “There are not that many companies that can.”
Its strategy to supply recycled packaging was highlighted with the switch of 120,000 tonnes of production from kraftliner to testliner in the past year. Roberts said that it expected that switch to continue despite the recent €30/tonne increase in testliner prices.
“The consumer wants recycled,” he said. “We can replace kraftliner due to our expertise.”
Roberts said that the firm would resist any increase in kraftliner price from mills, but said that if prices did go up, it would be able to pass through costs.
“Our margins are increasing because we provide tools to help our customers reduce their own costs,” he said. “Clients are more receptive to that than they have been for years.”
He added that one FMCG client had improved sales more during a recent trial using the firm’s offering than it had in previous years. This is due to the increasing importance of consumer decision making in store at the point of sale.
This is reflected in the firm’s investment in a new point-of-sale and display factory in Germany, which is under construction.
“We need that facility to come on stream to take advantage of the opportunities,” he said.
DS Smith shares opened at 281p, rising to a high of 290p following the interim statement.