Shares in DS Smith Recyclings parent group soared today on the back of strong results but the company is proposing to shut its Hollins paper mill in Darwen, Lancashire.
The full year results of DS Smith plc, to 30 April 2011 saw the company gaining an 8% volume growth and reporting increased market share in the packaging sector.
The Hollins closure would be part of an ongoing plan to reduce the groups annual capacity by 250,000 tonnes. However, there will be expansion at the companys main cardboard mill at Kemsley in Kent.
This is to see more investment to make high performance papers to support the companys recycled packaging products for the retail sector.
At present, Hollins is the only mill producing high quality recycled presentation liners in the UK for packaging products. It is possible that the expansion at Kemsley will mean the recycled pulp mixture made from office papers will be used at the St Regis mill rather than being exported to France as happens at present.
The M-real Alizay mill in France, which uses the office paper derived pulp made at Kemsley, is likely to shut this autumn. threatening the end of the Evolve recycled paper brand.
In terms of financial numbers, in the year to 30 April 2011, DS Smith said it grew revenue by 19.5% (10.0% excluding Otor, the French corrugated packaging business acquired on 1 September 2010), improved adjusted operating profit margins by 80bps to 5.5% (2009/10: 4.7%) and increased adjusted operating profit by 38.7% (20.0% excluding Otor) to 136.1 million (2009/10: 98.1 million).
Miles Roberts, DS Smith group chief executive, said: Over the coming year, I plan to focus further on business mix building the recycled packaging business in our target regions and reducing non-core activities.
“Increases in input costs have been substantial, with, for example, the market price of recovered fibre rising year-on-year by 75%. Our total input costs in the Packaging business have increased 26% year-on-year, and we have raised prices to recover these costs.
Improved
Our profit performance, with improved return on sales margins, demonstrates the discipline that has been employed in cost recovery and the mix benefit from the higher proportion of FMCG business.
“We have been successful in recovering our costs due to the constructive commercial relationships we have with our customers, where our ability to meet their high standards has been instrumental in differentiating our packaging offering.
Mr Roberts added: The UK packaging business has undergone structural change in the year with the recycling, paper and corrugated packaging businesses now all managed as a single enterprise in order to support the corrugated packaging activities.
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“The recycling business is now rebranded as DS Smith Recycling (formerly Severnside Recycling) and the paper business is now DS Smith Paper (formerly St Regis).
“The UK Packaging business is run by a new Divisional Chief Executive who is leading a programme to make the UK operations more effective and cost efficient, with a target to achieve 10 million annual savings from improved effectiveness by April 2014.
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