DS Smith to further grow in geographic scale and quality of service in addition to its recent acquisitions
The company has issued a trading update in respect of the period since May 1, 2015 and said volume growth remains good, reflecting customer support for its products and service proposition on a pan-European basis.
Ongoing challenging market conditions
“Our outlook remains positive as volumes continue to grow despite the ongoing challenging market conditions,” said Roberts.
“The Board expects continued performance in line with our medium term financial targets.
“We have a clear vision of further growing DS Smith, both in geographic scale and quality of service, and our most recent acquisitions, together with the customer and market opportunities for growth, give us real confidence for the future.
“The volumes have remained good, for the last full-year, we were just over 3%, and we’re pleased with the progress we’ve made in the first period of this year. We do have some new businesses that have just joined us and we’re working through where they are.
“When we bought SCA that business had been losing volume for a number of years, and within a few months we’d turned that round to a positive and it’s only improved since then.”
He added over the period, the firm continued to strengthen its business with a number of transactions. On May 31, it completed the acquisition of Duropack for €305m, a recycled corrugated packaging business with positions across Southeastern Europe.
“The integration work to date has progressed very well and we now expect cost synergies of €15m per annum and cash synergies of €18m to be delivered within three years of ownership compared to the original estimates of €12m and €13m respectively,” said Roberts.
“And on July 31, we completed the acquisition of the corrugated activities of Grupo Lantero, for approximately €190m.
Wansbrough Mill
“The business is well invested with a strong focus in the FMCG sector and significantly strengthens our business in Spain, an important and growing market, increasing our market shares to approximately 10%, and again, we’re very pleased with the progress we’ve been making on integration.”
On May 18, the Group completed the sale of StePac, a specialist modified atmosphere packaging business based in Israel, for $31m and on August 26, it announced to employees the proposed closure of Wansbrough Mill and the commencement of employee representative consultation.
“We set out a number of mills for disposal post the SCA acquisition. A number have been sold or closed. The remainder of the mills we have, there’s always an active review, but there’s nothing imminent on that,” said Roberts.
“With the new acquisitions that we have made, one of them has a small mill and a larger mill and we’re just working through exactly what the future for those assets remain.
“But the point is to keep our shareholders exposed as to these assets to the minimum that’s needed, and we’ll never stop reshaping our asset portfolio, as in line with how we see the future, but there’s nothing imminent that’s going to come along in the near future.”
According to Roberts, Europe is very much the focus for DS Smith because it has strong synergies and the customer reaction is tremendous.
“When we go into new geographies where we haven’t been before the reception from the big customers is absolutely tremendous, so because of that the shareholder returns we can generate from acquisitions in Europe is very strong, and the pipeline is good,” he added.
“The pull from our customers for our offering into other markets remains very strong. We are doing more work in North America but just really on the service provision, so we don’t have any facilities there in corrugated, this is all about how we give all the design and the frontend services to the big customers, and we’re delighted to receive that strong pull.”
