In a trading update issued at its annual general meeting the group warned that the high sales of PRNs – packaging waste recovery notes -seen last year would not be achieved in the current financial year, May 2003-April 2004.
DS Smith chairman Anthony Hichens said: In financial year 2002/03, the Group demonstrated its resilience and its ability to operate in tough markets.”
But, in the current year, said Mr Hichens: “we have yet to see an improvement in the trading environment and consequently our focus continues to be on raising operational performance and building on our strong market positions.”
The chairman went on to highlight the pressures on its paper division and said: “In June, when we announced our preliminary results, we reported that margins in our substantial paper business were under pressure and this continues. However, we remain confident that the rest of the group will make further progress this year.”
Profits
Mr Hichens pointed out how the split of profits between the two halves of the current year is likely to be different from last year, when a number of factors, including unusually high sales of PRNs, boosted the first half results for May-October 2002.
During this period last year paper PRNs were selling for upwards of 25 whereas now they are as low as 3.50.
DS Smith spokesman Peter Aubusson said that while the company was still committed to the system, it was unhelpful that the government has not published targets for future years.
He explained that three factors were currently hitting the company's paper business. One was the price paper was sold for, the second was the votatility in the price for old-KLS (used cardboard) and the third was the PRN. “The PRN is there normally to support prices and it is currently not supporting prices at all.”
And, he pointed to higher prices on the Continent for recovered material because of higher subsidies.
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