DS Smith upbeat on trading

By Richard Stuart-Turner, Thursday 06 September 2018

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Packaging giant DS Smith has reported trading in line with its expectations in an update relating to the period since 1 May 2018.

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Roberts: "I am pleased with our momentum in the year to date"

In the trading statement, released ahead of its AGM yesterday (5 September), the London-headquartered group said its focus on sustainable packaging in resilient and growing sectors, including FMCG and e-commerce, is consistently driving market share gains, and that it has seen “good like-for-like volume growth” in the year to date, with progress in all geographic regions.

It added the recovery of input cost increases from earlier in the calendar year is also in line with its expectations, with the consequent positive margin impact.

US-based Interstate Resources, the fibre-based corrugated packaging business that DS Smith acquired last year, continues to perform “very strongly” with integration going well, the group said.

It has added additional capacity and further enhanced its customer offering via the acquisition of Corrugated Container Corporation, which completed on 1 June 2018.

Three days later the business announced its proposed acquisition of Europac. The group said the required regulatory approval process is progressing as expected and it is anticipating completion in calendar Q4 2018.

“I am pleased with our momentum in the year to date, in a period when we also announced a significant acquisition and associated equity fundraising to expand our position in the important Iberia region,” said DS Smith group chief executive Miles Roberts.

“The corrugated packaging industry continues to demonstrate excellent growth prospects, driven by changing shopping habits, e-commerce, and the ever-increasing relevance of sustainability. DS Smith is in a strong position, as a market leader, to capitalise on these opportunities, and the board looks to the future with confidence.”

In June DS Smith initiated a strategic review of its plastic packaging business as it increases its focus on the production of fibre products. The group said progress on this review has been “positive” and that further updates “will be provided as appropriate”.

In response to a question asked about the review during a call to investors yesterday, Roberts said: “As you can imagine, there’s quite a bit of work to do on the asset to fully review it and prepare it for what we want to do. That work has gone extremely well. At the same time, we’ve had a lot of inbound interest. It’s a very attractive business, it’s growing quite nicely.

“There are a number of other players out there who have smaller positions but really quite synergistic. So we remain really very optimistic about the attractiveness of this asset, and I’d say the work is going absolutely as we expected. And to be honest with you, it’s going well.”

DS Smith’s share price was down by 0.6p to 492.5p following the release of the trading update and stood at 490.5p at the time of writing.

The group, which turns over around £5.7bn, reported a 21% boost in annual profit to £473m in July. It has recently pledged to manufacture 100% reusable or recyclable packaging by 2025.

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