6th Mar 2019 08:22
LONDON (Alliance News) - FTSE 100-listed packaging firm DS Smith PLC said Wednesday it has agreed to sell its plastics unit for USD585 million, about GBP450 million, to private equity firm Olympus Partners, meanwhile trading continued to be strong.
DS Smith explained the sale will see the firm receive net cash of GBP400 million after taxation and expenses. The proceeds will be used to reduce its debt.
For the year ended October, the unit generated GBP28 million in pretax profit for the firm. DS Smith in total generated GBP292 million pretax profit on revenue of GBP5.77 billion for the year ended April 2018.
"I am delighted to confirm that we have reached an agreement for the sale of our Plastics division," DS Smith Chief Executive Officer Miles Roberts said.
"The transaction is attractive both financially and strategically for DS Smith as, together with the acquisition of Europac, we reinforce our position as a leader in sustainable packaging with a clear focus on our fibre-based business," Roberts added.
DS Smith also added that trading since the start of November had "continued to be strong" and in line with its expectations.
Corrugated box volume growth has continued, with market share gains driven by its large and e-commerce customers as well as its heavy weighting towards fast moving consumer goods clients.
"The Christmas period was especially busy for our e-commerce focussed customers with our sector leading offering supporting our customers over this critical period," DS Smith explained in a statement.
"Our US business continues to perform well with strong margins and returns ahead of our acquisition case," DS Smith added. "Group margins are expected to progress further in the second half of our financial year and operating cashflow generation is stronger than in the comparable period last year."
Roberts added: "We are pleased with the performance of the business during the second half of the year. While macroeconomic conditions remain uncertain, we are confident of continued strong demand for our innovative and high quality sustainable packaging and the resilience of our FMCG-focussed customer base."
"At the same time," Roberts continued, "the sale announced today will further strengthen our robust balance sheet and the Board continues to view the prospects for the business with confidence."
Shares in DS Smith were 1.0% higher at 352.70 pence early Wednesday.
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