DS Smith pre-tax profits down 84.6%

The company saw its pre-tax profits fall from £109.1 million in 2007/08 to £16.8 million, while operating profits from its UK operations also fell from £68.5 million to £36.5 million – a drop of 46.7%.

And, while both its overall and UK revenues increased – by 7.1% (2007/08; £1.967 billion – 2008/09; £2.106 billion) and 4.3% (2007/08; £753.2 million – 2008/09; £785.8 million) respectively, the company explained that like-for-like revenue in the UK actually fell by 4.4%, excluding the New Thames Mill which it purchased in February 2008.

Commenting on the results, DS Smith chairman Peter Johnson, said: “All our activities were affected by the global recession and its impact on demand for our products. To underpin our financial strength, we have undertaken a programme of actions to reduce costs and improve cash generation.

“As part of this, the Board is recommending a reduced final dividend of 1.8 pence. The programme will reinforce the Group's financial position through the downturn and enable DS Smith to emerge stronger as the market recovers,” he said.

Severnside

In the results, the company said that Severnside Recycling, which is one of the UK's largest waste paper and cardboard collectors, performed “satisfactorily” in 2008/09, despite “large swings” in recovered material prices and lower sales volumes.

In particular, it cited the impact that it's newly converted 260,000 tonne-a-year capacity paper machine at Kemsley, which began production in January 2009, had on increasing the need for waste paper.

And, it also explained that Severnside had developed its “value-added waste management services” in response to “growing demand”, driven by government efforts to reduce the amount of waste sent to landfill.

St Regis

Commenting on the fortunes of its St Regis group of mills, the company acknowledged that it had been hit by “significantly lower sales volumes” and a “squeeze” on margins, due to falling prices for the corrugated card material (CCM) it produces and high input costs, which particularly took affect in the second half of the financial year.

The fall in demand for CCM led to the company closing one of its machines at the Kemsley mill, with the closure and accompanying redundancies taking effect on May 1 (see letsrecycle.com story https://www.letsrecycle.com/do/ecco.py/view_item?listid=37&listcatid=2787&listitemid=31209).

Prospects

The results also warned that the company's UK operations would face further pressure in the current financial year, but claimed that its cost-cutting efforts would help to improve the situation.

“As we enter 2009/10, the recent trends in both demand and pricing across the UK Paper and Corrugated Packaging segment have been adverse and energy and waste paper input costs are exerting further pressure on our margins,” it said.

“We have taken action to reduce costs and raise operational performance and are focused on maximising the opportunities presented by our strong market positions,” it added.

And, commenting on the future prospects for DS Smith as a whole, group chief executive Tony Thorne, said: “Economic indicators continue to show a global economy in recession. The timing of any recovery remains uncertain. Although it is early in our financial year, trading is in line with our expectations.

“Our consistent strategy to build leadership positions is standing us in good stead in the downturn, and we are confident that this, combined with the continued implementation of our action programme, will underpin our results. We expect to benefit strongly from the upturn when it arrives,” he added.