18th Apr 2007 07:01
Smith (DS) PLC18 April 2007 18 April 2007 DS SMITH PLC PRE-CLOSE TRADING UPDATE In the light of its recent trading, DS Smith Plc, the international packagingmanufacturer and office products wholesaler, is today advancing the release ofits trading update ahead of its preliminary results announcement for the year to30 April 2007. DS Smith Group As indicated at the time of our interim results in December 2006, DS Smith isbenefiting from both a better pricing environment in the paper and corrugatedpackaging market and the strategic and operational actions taken to improve ourunderlying business base. These actions have enhanced the Group's business mix,increased operational efficiency and lowered operating costs. There has been animproving trend in the Group's performance through the second half of thefinancial year and we anticipate that the pre-exceptional profit before tax forthe full year 2006/07 will be ahead of market expectations and no less than £70million (2005/06: £53.4 million). The exceptional costs associated with the Group's restructuring programme areexpected to be approximately £15 million in 2006/07. These costs were more thanoffset during the financial year by an exceptional profit of £20.5 millionresulting from the sale of the Taplow paper mill site, announced in August 2006. Paper and Corrugated Packaging European demand for corrugated packaging has remained buoyant through the secondhalf of the financial year. This, combined with the tightened supply positionfor recycled corrugated case material (CCM), has contributed to a firmer pricingenvironment in both CCM and corrugated boxes. Although market energy pricesin the UK have eased to some extent, the benefits to date of this have beenpartly offset by continuing energy price increases on the continent and theeffects of lagged price increases resulting from the long-term energy contractsfor some of our operations. The net cost of waste paper has recently risenfurther due to strong demand from Asia and the low price of paper PackagingRecovery Notes. In both the UK and continental Europe, we continue to seek to recover theprevious substantial increases in our input costs of energy and waste paper.During the second half of the financial year, we have increased CCM and boxprices further while maintaining strong sales volumes in all the countries inwhich we operate. In the UK Paper and Corrugated Packaging segment, which is anet seller of paper, we have made encouraging progress in rebuilding margins.In Continental European Corrugated Packaging, which is a net buyer of paper,margins continue to be affected by the higher cost of CCM and energy which wehave not yet been able fully to recover through increased box prices. Lookingahead, in the UK we will drive for further improvement, while on the continentwe will look to recover more fully the higher CCM and energy costs. Plastic Packaging In Plastic Packaging, we expect the level of results in the first half of 2006/07 to be broadly maintained in the second half. As indicated in December, salesvolume in returnable transit packaging has been affected by the project-relateduneven nature of demand for certain of its products. The division is benefitingfrom action taken to strengthen the product range and to improve operatingperformance. The result for the full year 2006/07 will be well ahead of 2005/06and we will push for further steady progress in 2007/08. Office Products Wholesaling As previously indicated, Spicers' result in the seasonally stronger second halfof the year will reflect some initial benefits of the ongoing UK turnaroundprogramme as well as the continued development of the continental businesses.Action taken by the strengthened UK management team is improving the sales mix,raising service levels and lowering costs. Consultation is in progress withemployees with a view to further streamlining the UK distribution networkthrough the proposed closure of one of our London depots. Spicers' continentalEuropean businesses continue to perform satisfactorily. In 2007/08, we willfocus on improving performance through the UK turnaround programme and furtherdevelopment on the continent. Group Outlook As we enter 2007/08, we are maintaining our drive for better pricing to recoverthe high input costs of energy, waste paper and polymer. We expect to makefurther progress in the coming year. The Group's preliminary results for financial year 2006/07 will be released on28 June 2007. Enquiries DS Smith Plc 020 7932 5000Tony Thorne, Group Chief ExecutiveGavin Morris, Group Finance DirectorPeter Aubusson, Group Communications Manager Financial Dynamics 020 7269 7121Richard Mountain/Susanne Walker A conference call for analysts and investors, hosted by Tony Thorne and GavinMorris, will take place today 18 April at 9.00am BST. The dial-in numbers are: UK participants: 0845 634 0047 International participants: +44 20 7154 2638 Alternative back-up number: +353 1 436 4259 A recording of this conference call will be available by telephone from one hourafter the call has ended until 17.00 BST on 25/4/07. The dial-in numbers forthis recording are: UK callers: 020 7769 6425 International callers: +44 20 7769 6425 Replay security code: 902596# A recording will also be available through the Investor Relations section of ourwebsite: www.dssmith.uk.com from 14.00 BST today. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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