6th Dec 2018 12:14
LONDON (Alliance News) - Packaging giant DS Smith on Thursday announced it will be exploring opportunities to sell its plastics division, as it reported growth in its five global regions.
Shares in DS Smith were down 4.7% in midday trading at 311.11 pence each.
The FTSE 100-listed company reported a sharp rise in group profit and revenue, resulting in the company increasing its interim payout.
DS Smith said, following an initial review, it has concluded its Plastics division is an "attractive asset with good growth prospects".
As a result, the company is "now exploring opportunities" to sell the division.
The company said the division traded well in the period but short-term profit was hurt by higher polymer prices and "the normal lag in recovery through prices".
The Plastics division recorded pretax profit of GBP12 million in the six months to October 31, a 25% decrease on the GBP16 million recorded last year. The division generated a 1.7% increase in revenue to GBP182 million from GBP179 million last year.
For the 2018 financial year ended April 30, the division reported pretax profit of GBP32 million on revenue of GBP346 million. DS Smith's Plastics division comprises flexible packaging and dispensing, extruded and injection moulded products and foam products.
The company's group pretax profit, excluding plastics division, for the six months to October-end increased 27% to GBP162 million from GBP128 million the year before. Revenue, excluding plastics division, increased 15% to GBP3.07 billion from GBP2.66 billion last year.
The packaging firm said the rise in revenue reflected the full recovery of paper prices through box selling prices, contributions from acquisitions - particularly in North America - and volume growth in corrugated boxes.
The company declared an interim dividend of 5.2 pence, a 13% rise on the 4.6p paid out last year.
The company said organic volume growth in the half year rose 3.2%, ahead of the 1% target. The "very strong" growth was achieved "despite corrugated box prices rising to fully recover the higher price of paper", DS Smith added.
"We are very pleased with the progress we have made over the last six months. We have strong momentum in the market, delivering good top line growth and substantially increased profit levels. We continue to win market share through our strong fast-moving consumer goods presence and our leadership in both e-commerce and sustainable packaging," said Chief Executive Officer Miles Roberts.
DS Smith's UK business reported a 4.3% rise in first half revenue to GBP577 million from GBP553 million.
The company said corrugated box volumes were "strong", reflecting "continued success" with large fast-moving consumer goods customers and a "leading position" in e-commerce, which was replicated in the company's other European regions.
In Western Europe, DS Smith's revenue increased 8.0% to GBP784 million from GBP726 million. The company said corrugated box volumes were in line with the group average, with a good performance in France and Iberia, but particularly strong in Benelux.
The region's growth was driven by underlying rise in box prices.
Central Europe & Italy reported a 14% increase in revenue to GBP815 million from GBP717 million last year. Organic corrugated box volumes increased alongside the group average, reflecting, in particular, "a very good" performance from Italy, driven by e-commerce.
DS Smith said Ecopaper and Ecopack - a combined integrated packaging and paper group in Romania - also aided growth in the region.
In North America, DS Smith reported tripling its revenue to GBP341 million from GBP110 million last year. The company said the strong growth was driven by good trading conditions for paper operations in the region and the benefit of recent acquisition being accounted for a full period.
DS Smith said it continues to see "exciting opportunities" and remains confident about its group outlook.
The company said the recovery of paper price increases - which has been ongoing in the past 12 to 18 months - is "now completed".
Roberts added: "DS Smith is extremely well positioned to capitalise on these ongoing growth trends and we are confident about the future prospects for the business."
DS Smith said it has a "clear trajectory" of achieving its medium-term growth target of reducing net debt to earnings before interest, tax, depreciation and amortisation of "less than or equal to" two times.
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