Severnside performs well and looks to benefit from higher PRNs

The results, for May to October 2000 saw Group turnover increased by 16.0% to 689.2 million from 594.2 million in the same period last year.
Overall the packaging conglomerate says it “made good
progress in all areas during the first half of the financial
year.”

Chairman Anthony Hichens reported that: “The packaging and
paper business was bolstered by strong paper markets while the office products business benefited from robust sales growth in the wholesaling division.”

Operating profit before goodwill amortisation increased by 59% to 45.0 million from 28.3 million and Group operating margins rose to 6.5% from 4.8%.

Profit before tax, exceptional items and goodwill amortisation was 39.4 million, up from 23.7 million for the same period last year. The
underlying effective tax rate was unchanged at 30%.

Mr Hichens reported a very positive position for [4:Severnside] which handles 1.25 million tonnes of recovered/recycled paper each year.
He said Severnside had benefited from the rise in demand for waste paper and increased price levels from earlier this year.

The company is expecting to benefit from a rise in the value of packaging waste recovery notes (PRNs) next year.
Mr Hichens noted: “The UK packaging waste regulations have again been reviewed by the Government and targets for recycling and recovery of packaging waste in 2001 have been substantially increased. As a result the value of PRNs will increase which should
encourage greater collection and recycling of
paper packaging. The division is well placed to
contribute to this effort to expand the recovery
of packaging waste.”

Corrugated growth has slowed
The chairman reported that the European market for corrugated packaging
was very strong earlier in the year with growth of 4% for the first nine months of the calendar year. “The growth rate has now slowed to
approximately 1% for the third calendar quarter reflecting both slower economic growth in Europe and the strong quarter last year; the UK market
has been notably weaker than the rest of Europe
during the year. Growth in Europe in the final
quarter of the year will look weak as it is
comparable with a period last year that included
the pre-millennium stock build.”

On the waste paper used in its production side, David S Smith reported that European waste paper prices reduced during
the summer after strong rises earlier in the year.

Corrugated case material price increases
were implemented during the first half of the
calendar year and corrugated box plants, particularly
in continental Europe, have had reasonable success
in raising their prices to recover these cost increases.
However, the group noted that margins at box plants remain low.