DS Smith beats forecast despite drop in half-year revenue

The packaging and office product group recorded £1.02bn in revenue in what it described as a “relatively good first half”. Pre-tax profit for the period fell by 21% to £35m in the six months to 31 October.

Outgoing chief executive Tony Thorne said trading conditions remained uncertain, but the firm said it would beat the expectations announced in the pre-close statement in October.

“Second-half performance will be dependant on the level of demand in the new calendar year, and the speed of our recovery of the significant cost increases within our supply chain,” he said.

McBride chief executive Miles Roberts will succeed Thorne next year.

The firm said the trading environment for paper and corrugated packaging remained difficult, input costs had risen substantially and the firm had increased corrugated case material prices accordingly.

It highlighted that European CCM stocks had fallen significantly in the past nine months, and demand had fallen in line with box demand. The FMCG market, particularly retail-ready packaging, had held up better than industrial and consumer durables, DS Smith said.

UK paper and corrugated packaging sales fell by 16% to £367.2m. DS Smith said the new lightweight machine at its Kemsley site was performing well and that the closure of a machine at the site meant it had been able to maintain inventories without taking downtime.

The continental Europe business is forecast to continue to perform satisfactorily, but is likely to be hit by high prices for CCM. The division’s results benefited from cost reductions to offset falling volumes.

Operating profit for plastic packaging products more than doubled, despite a 3% drop in revenue, helped by lower polymer costs and sales into new markets such as the US.

Chairman Peter Johnson said prompt action at the beginning of the year had helped maintain the firm’s position in a difficult trading environment.

“Our focus on maintaining the group’s sound financial position was reflected in continued good cash generation,” he said.

DS SMITH HALF-YEAR RESULTS

Revenue £1,018m (1,102.8m in 2008)
Operating profit £48.5m (£54.4m)
Pre-tax profit £34.7m (£44.1m)

UK paper and corrugated revenue £367.2m (£437m)
European paper and corrugated revenue £171.7m (191.2m)
Plastic packaging revenue £120m (£123.9m)

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