13th Oct 2005 07:00
Smith (DS) PLC13 October 2005 13 October 2005 DS SMITH PLC PRE-CLOSE TRADING UPDATE In accordance with its established practice, DS Smith Plc, the internationalpackaging manufacturer and office products wholesaler, today issues thefollowing trading update ahead of its interim results announcement for the halfyear to 31 October 2005, which will be made on 7 December 2005. These figureswill be the first to be produced under International Financial ReportingStandards. Group The outlook for the Group remains broadly unchanged from that stated in the AGMtrading update released on 5 September 2005. As previously indicated, tradingconditions continue to be challenging and it is proving difficult to mitigatethe extraordinary rise in energy costs. The Group's result in the first half ofthis financial year will be significantly lower than the strong result in thecomparable period of last year. We continue to take action to reduce costs,improve the sales mix and actively manage prices. Paper and Corrugated Packaging Selling prices of paper and corrugated packaging continue to be affected bylower box demand and European over-capacity in corrugated case materials (CCM),while the sharp rise in energy costs has exacerbated the erosion of margins. InPaper, we are reducing our emphasis on CCM through growing sales of higheradded-value plasterboard liner while in UK Corrugated Packaging we areincreasingly benefiting from the restructuring we started in autumn 2004. Aspart of our strategic drive to grow our business in eastern Europe, the newgreenfield corrugated packaging factory at our fast-growing Polish business ison course to commence production before the end of November. During the lastmonth, CCM prices have increased in continental Europe but it is too early toknow what effect this will have on our business. Plastic Packaging As reported in September, sales of Plastic Packaging in the early months of thisfinancial year were slow but our forward order book is strengthening,particularly in returnable transit packaging. Margins continue to be affectedby the under-recovery of the polymer cost increases experienced during the lastfinancial year. Polymer prices have been rising again since August and we aredriving hard to recover these higher costs. Restructuring of our Europeanliquid packaging and dispensing operations has resulted in one-off costs in thefirst half of the year. We continue to expect the 2005/06 profits in thisdivision to be strongly weighted towards the second half of the year. Office Products Wholesaling Spicers' developing businesses in continental Europe continue to make progress.Last month, we further extended our European coverage through the acquisition ofTimmermans NV, the largest office products wholesaler in the Benelux region.Although sales at Spicers' established UK and French businesses are ahead oflast year, profit in the UK is being adversely affected by the faster salesgrowth of lower margin electronic office supplies relative to other products.Consequently, Spicers' profit in the first half of this financial year isexpected to be lower than in the first half of 2004/05 and, for the full year,it will be challenging to exceed last year's result. International Financial Reporting Standards (IFRS) DS Smith has today published information about the restatement of its resultsfor financial year 2004/05, as prepared under International Financial ReportingStandards. Full details may be obtained from the Investor Relations/FinancialReports section of the Group's website at:http://www.dssmith.uk.com/invest-report.asp The principal changes to the Group's 2005/06 results, as reported under IFRS,from those that would have been reported under UK GAAP will be: • A charge against operating profit in respect of share-based payments, which will be allocated across the segments. For 2004/05, the UK GAAP results included a nil charge whereas the IFRS charge was £1.1m; this IFRS charge was lower than a typical full year's charge because of the IFRS transitional rules, consequently charges for 2005/06 and future years will be somewhat higher. • Operating profit will no longer include the amortisation of goodwill intangible assets (2004/05: £8.8 million) but it will include the amortisation of intellectual property intangible assets (2004/05: £0.6 million). Given the insignificant amount of the intellectual property amortisation charge, this will not be excluded from any re-presentation of the results on an adjusted basis, as it was previously. • Stating the share of associates' results after interest and tax will reduce profit before tax but not affect earnings per share. For 2004/05, the effect of stating associates' results after interest and tax is a reduction of £0.9 million compared with UK GAAP. • The segmental analysis will report UK Paper and Corrugated Packaging and Continental European Corrugated Packaging as separate segments. Enquiries DS Smith Plc 020 7932 5000Tony Thorne, Group Chief ExecutiveGavin Morris, Group Finance DirectorPeter Aubusson, Group Communications Manager Financial Dynamics 020 7269 7291Richard Mountain/Robert Gurner A conference call for analysts and investors, hosted by Tony Thorne and GavinMorris, will take place today 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 for one week from 1.00pmBST today. The dial-in numbers for the recording are: UK callers - 020 7769 6425 International callers - +44 20 7769 6425 Security code for the replay - 581016# This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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