It pointed to what it calls a “downswing” in the paper sector with a fall in demand for packaging waste recovery notes (PRNs) hitting performance.
DS Smith, which is an international packaging manufacturer and office products wholesaler, said in a trading update prior to its half year end on 31 October, that the trading environment in the financial year to date has remained difficult,
“particularly for our Paper business”. However, the performance of the other parts of the Group “has been satisfactory and at present we anticipate results for the full year being broadly in line with expectations.”
On paper and corrugated packaging the company said: “Our paper operations are being impacted by the downswing in the paper cycle. As
indicated in the preliminary results announcement, margins have been squeezed by falling paper prices, the fluctuating cost of recovered paper and lower demand for Packaging Recovery Notes, following the government’s decision not to increase recycling targets for 2003.”
Corrugated
The statement continued: “We have achieved good production volumes but with the sales mix including a higher proportion of exports. In corrugated, although prices are weakening, our operations continue to make good progress due to the benefit from acquisitions, better operating efficiencies and targeting higher added value segments. In the first half of the year, profit progress in corrugated is expected partially to offset the lower profit in Paper.”
The comments from DS Smith come in the wake of the controversial decision by the company's mill division, St Regis, to reduce the price it paid for used cardboard to about 30-35 a tonne over the past month. However, the price has now been raised by 15 a tonne and other mills, such as Smurfit, have also increased their prices bringing some comfort to collectors. Prices generally in the domestic are now about 40-45 per tonne.
The used board market is expected to remain firm until at least the New Year because mill stocks have been reduced.
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