5th Mar 2008 07:01
Smith (DS) PLC05 March 2008 5 March 2008 DS SMITH PLC INTERIM MANAGEMENT STATEMENT DS Smith Plc, the international packaging manufacturer and office productswholesaler, today publishes its Interim Management Statement, in respect of theperiod since 1 November 2007. DS Smith Group Trading in the third quarter of financial year 2007/08 has been in line withmanagement's expectations at the time of the Group's interim resultsannouncement in December. The Group has maintained its significant year-on-yearprogress, benefiting particularly from the recovery of higher input costs inPaper and Corrugated Packaging and the improved performance in Office ProductsWholesaling. Save for the effects of the acquisitions referred to below, there has been nosignificant change to the financial position of the Group since the publicationof the results for the six months to 31 October 2007. The Group's balance sheetis strong. Paper and Corrugated Packaging As previously reported, the rate of growth in demand for corrugated packaging inthe European market has slowed since the summer of 2007. The industry supplyand demand for recycled corrugated case material (CCM) is in reasonable balanceand the pricing environment in both CCM and corrugated boxes has remained firm.Input costs of energy and waste paper, the principal raw material for recycledCCM, which are at historically high levels, have recently experienced furtherrises. Our UK Paper and Corrugated Packaging segment continued to perform well whilethe Continental European Corrugated Packaging segment, which is a net buyer ofCCM, has made good progress in recovering the input cost increases which havesqueezed its margins. As announced on 1 February, DS Smith has acquired from M-real Corporation theNew Thames Paper Mill, which is located adjacent to the Group's prime UK papermill at Kemsley, as well as the 50% balance of Grovehurst Energy Limited, themills' energy and services supplier, not already owned by DS Smith. Thetransaction was completed on 29 February for a consideration of £60 million incash. In addition, DS Smith incurred a net cash cost of £7 million from aone-off payment, net of tax, towards the costs of the transfer of the associatedpension scheme to a third party. The acquired facility currently produces fine uncoated paper and, using thelatest paper-making technology, DS Smith intends to invest, over the next 12months, a further circa £37 million in the modification of the acquired facilityto enable it to produce high-quality lightweight recycled CCM with effect fromJanuary 2009. The total cost of the project is expected to be circa £104million and will be funded from the Group's existing debt facilities. Theacquisition and investment will materially strengthen the long-termcompetitiveness of DS Smith's important UK Paper and Corrugated Packagingbusiness and give the Group a significant capability in the growth segment ofhigh-quality lightweight CCM. The project is expected to generate goodfinancial returns in its first full year of operation (2009/10) and provide verygood returns for shareholders. On 4 March 2008, the Group acquired Multigraphics Holdings Ltd from fundsmanaged by 3i and from the Multigraphics management team. Multigraphicsspecialises in the design and printing of retail and promotional displaymaterial, has annual revenue of circa £11 million and employs 137 people. Itsgross assets at 29 February 2008 were £5.7 million. DS Smith's UK corrugatedpackaging business is a substantial supplier of high-quality printed displaymaterial. This acquisition further strengthens the Group's position in thisfast-growing sector of the market. Plastic Packaging We continued to grow revenue well in Plastic Packaging. The higher polymercosts have maintained the squeeze on margins; we continue to seek to mitigatethe effect of these increased input costs through raising prices and introducingnew products. The returnable transit packaging sector has made good progressbut the liquid packaging and dispensing sector (LP&D) has been affected bycompetitive pressure in Europe; in LP&D our actions to lower costs and enhancethe sales mix are continuing. Office Products Wholesaling Spicers' improved results have been in line with our three-year plan to restoreprofits. Revenue advanced strongly in the UK and the business has continued tobenefit from the actions taken by management. The continental Europeanbusinesses maintained their good progress, particularly as a result of furtherstrong growth in our development markets. Group Outlook for financial year 2007/08 As stated at the time of our Interim Results in December, the Board remainsconfident that the Group will make substantial progress this year. The Group plans to announce its preliminary results for the financial year to 30April 2008 on 26 June 2008. Enquiries DS Smith Plc 020 7932 5000Tony Thorne, Group Chief ExecutiveGavin Morris, Group Finance DirectorPeter Aubusson, Group Communications Manager Financial Dynamics 020 7269 7140Andrew Dowler This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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