DS Smith reports revenue growth but profit fall in half-year results

By Richard Stuart-Turner, Friday 08 December 2017

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DS Smith has posted revenue growth of 19% but a 1% fall in pre-tax profit in its half-year results.

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Roberts: "Our profits are absolutely where we expected them to be"

For the six months to 31 October 2017, the London-headquartered packaging giant recorded pre-tax profit of £144m, down slightly from the £146m it achieved in H1 2016, or down by 5% under constant currency conditions.

The company said its earnings were affected by “substantial increases” in raw material costs, including rising fibre costs and paper prices.

In a call to investors yesterday (7 December), DS Smith chief executive Miles Roberts said: “Our profits are absolutely where we expected them to be and we’re very pleased with that, delivering on all of our financial KPIs.”

He added the firm’s recovery of input costs is progressing as expected.

DS Smith’s revenue for the six-month period was £2.8bn, up from the £2.4bn recorded at the same stage last year. The company said this represented a 14% increase under constant currency conditions.

UK revenue was up by 18% to £550m, from £466m in H1 2016, and adjusted operating profit for the region jumped by 22% from £45m in H1 2016 to £55m.

The business attributed its revenue increase to organic volume growth of 5.2%, with all regions seeing growth, as well as continued success with e-commerce and pan-European customers.

“Structural shifts, including changes in consumer preferences, the increased relevance of our packaging at point-of-sale, and the rise in e-commerce are all underpinning the growth of packaging,” said Roberts.

The firm said its summer acquisition of US-based Interstate Resources, its first fibre-based corrugated packaging business, has seen integration ahead of expectations with positive reaction from employees and customers.

Meanwhile, the company’s proposed €208m (£181m) acquisition of Romanian packaging and paper firms EcoPack and EcoPaper, announced in October, is on track to complete next month.

Looking ahead, the board said the company’s outlook remains positive as it begins its second half with good momentum. It sees opportunities for growth, both in Europe and in North America, and while input cost pressures remain, it will continue to recover those costs as planned. The board has increased the dividend by 7% to 4.9p per share.

DS Smith’s share price rose from 537.5p to a high of 561p yesterday morning but has since fallen to 519.5p at the time of writing. The company will join the FTSE 100 later this month.

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