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SCA buy gives DS Smith 60% boost to sales and profit

December 6, 2012 Comments Off

DS Smith has reported a more than 60% rise in both sales and profits for its first half as a result of its acquisition of SCA Packaging

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In half-year results published this morning, for the six months to 31 October, the group posted a 62% year-on-year rise in revenue to £1.67bn, while pre-tax profit rose 62.5% to £106.1m.

The increase was driven by the inclusion of SCA’s figures since 30 June, when the £1.4bn acquisition completed, and by around 1% in organic growth.

Geographically, the locations of the increases reported today highlight the group’s strategy of becoming a pan-European business.

More than half of the additional sales, some £324m, was contributed by former SCA businesses in Germany, Austria, Switzerland and northern Europe.

A further £170m turnover was added in DS Smith’s central Europe and Italy business segment; while a further £148m was added in the Western Europe region.

In terms of the integration of SCA into the DS Smith network, today’s results revealed that the process was ahead of schedule.

They also reported that margins were improving in both corrugated and plastics businesses as a result of stepping away from low-margin business and lower input costs.

Paper weakness

However, the results highlighted a tough climate for DS Smith’s paper operations, where, the statement said, both pricing and volumes have suffered due to weak demand and overcapacity.

The paper market’s weakness hit the UK business in particular, where a 5% decline in sales and a 35% drop in operating profit was reported.

In today’s statement, chief executive Miles Roberts said: “We are pleased with the strategic, operating and financial progress made in the first half, particularly against a challenging economic backdrop.

“We are developing and investing in group-wide capabilities for innovation, design, sales and marketing. With these factors working together, we are starting to see growth in customers across the enlarged business.”

“As expected, markets and the paper cycle in particular, remain challenging.

“However we believe we are well placed to create further significant value for our investors through the robust performance of our corrugated and plastic packaging businesses, where we continue to see good growth prospects, allied to acquisition synergy benefits that are ahead of our initial expectations.”

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DS SMITH FIRST HALF 2012/13
Six months to 31 October 2012 (£m)

Overall
Revenue 1,671.8 (2011: 1,034.5)
Pre-tax profit 106.1 (65.3)

UK
Revenue 490.3 (514.4)
Operating profit 26.0 (39.9)

Western Europe
Revenue 444.6 (296.3)
Operating profit 37.6 (19.2)

DACH (Germany, Austria, Switzerland) and Northern Europe
Revenue 327.7 (3.4)
Operating profit 26.1 (0.2)

Central Europe and Italy
Revenue 257.1 (86.5)
Operating profit 19.9 (8.6)

Plastic Packaging
Revenue 152.1 (133.5)
Operating profit 13.6 (10.4)

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