Packaging
DS Smith Plc Interim Management Statement
Wednesday 03. September 2008 - DS Smith Plc, the international packaging supplier and office products wholesaler, today publishes its Interim Management Statement in respect of the period since 1 May 2008. DS Smith Plc will be holding its Annual General Meeting today at 12 noon.
DS Smith Group
Overall trading in the first quarter of financial year 2008/09 has been in line with managements expectations as described at the time of the Groups Preliminary Results in June. The Groups total operating result in the quarter was also in line with that of the same period in the previous year. As previously reported, operating performance is being impacted by slowing demand and higher input costs, particularly in our UK businesses. To date, the
effect of this has been offset by better results from our continental European businesses.
As part of its ongoing funding programme, the Group has further strengthened its balance sheet by recently renewing, for a period of five years, its syndicated revolving credit facility.
The Group now has a facility of £287.5 million (2007/08: £250 million) expiring in 2013 (2007/08: 2010). Save for the refinancing referred to above, there has been no significant change to the financial position of the Group since the publication of the results for the financial year to 30 April 2008.
Packaging
European demand for corrugated packaging (boxes) is slowing; industry statistics indicate that in the first six months of 2008 the market was down by over 1% on the same period in 2007, with the second quarter being weaker than the first. This lower demand has resulted in a significant fall in corrugated case material (CCM) prices in continental Europe, although CCM prices in the UK have remained firmer due to the strength of the euro. The high level of energy and waste paper input costs is exerting pressure on CCM margins throughout the
industry; a number of continental producers have recently announced CCM price increases to recover these costs. In box manufacturing, the continuing move towards higher value-added retail-ready boxes is contributing to a greater level of capacity utilisation, especially in the UK.
In our UK Paper and Corrugated Packaging segment, we have outperformed the market in boxes and are benefiting from the actions taken to strengthen our position in the fast-moving consumer goods sector of the market. The segments overall results have been affected by lower CCM sales and higher input costs. The project to commission the lightweight CCM machine at Kemsley Mill in January 2009 remains on schedule.
The Continental European Corrugated Packaging segment, which is a net buyer of CCM, has made substantial progress. The Polish business has achieved good growth, particularly in higher value-added products, supported by further investment. Sales have also advanced well in Italy, while the French business is benefiting from operational improvements at its main facilities.
In Plastic Packaging, performance in liquid packaging and dispensing has been encouraging, while in returnable transit packaging it has been more variable depending upon the market sector served. A programme to recover the recent further increases in polymer costs through price increases is underway.
Office Products Wholesaling
Against a backdrop of slowing demand for office products, Spicers has experienced a decline in volumes of traditional office products. Sales of electronic office supplies have grown strongly as Spicers has increased its participation in this important, although lower margin, sector of the market. We maintain our drive to rebuild profits in the UK and
continue the progress of our continental European businesses.
Outlook
It is still early in the Groups financial year. Despite the tough trading environment, the Groups good market positions, continued tight operational discipline and strong balance sheet underpin the Boards confidence in achieving a robust performance in 2008/09.
The Group plans to announce its results for the half year to 31 October 2008 on 3 December 2008.