In This Article:
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Packaging Volumes: Increased by 2% on a like-for-like basis.
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Interim Dividend: Recommended 3% increase.
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Statutory Profit: Lower than adjusted profit due to GBP75 million costs related to the IP transaction.
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Free Cash Flow: Essentially neutral despite GBP130 million year-on-year EBITDA decline.
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Leverage: Slightly elevated but comfortable compared to the leverage covenant limit of 3.75 times.
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Investment in Hungary: GBP35 million investment with a return on capital well in excess of 15%.
Release Date: December 05, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
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DS Smith PLC (DITHF) reported a 2% increase in packaging volumes on a like-for-like basis, indicating a recovery in demand.
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The company is making good progress with the recommended all-share offer from International Paper, with an expected completion in Q1 of 2025.
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DS Smith PLC (DITHF) announced a 3% increase in the interim dividend, aligning with the IP deal cooperation agreement.
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The company has successfully offset significant input cost inflation through cost reduction and efficiency improvement efforts.
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Strong performance in North America and Eastern Europe, with continued investment in growth regions like Hungary and Northern France.
Negative Points
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Packaging prices were lower on a year-on-year basis, impacting revenue and operating profit.
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The statutory profit was lower than the adjusted profit due to GBP75 million of costs related to the IP transaction.
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The company faces ongoing challenges in some markets, particularly in Germany and the UK.
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There is uncertainty in the containerboard market with potential pressure from new capacity and fluctuating prices.
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Despite a neutral free cash flow, the company has slightly elevated leverage compared to last year.
Q & A Highlights
Q: With the European containerboard prices declining and new mills coming online, do you foresee continued pressure on board prices? How does this affect your pricing strategy for customers not on index-linked contracts? A: Miles Roberts, Group Chief Executive, acknowledged the recent weakness in containerboard prices but noted the volatility and uncertainty in future pricing. He mentioned that while some mills might be delayed, the company is seeing reasonable increases in packaging volumes. DS Smith remains confident in recovering input costs through value-added services to customers, even for those not on index-linked contracts.
Q: Are you seeing any changes in promotional activities from consumer goods companies that might support volume growth? A: Miles Roberts noted that promotional activity has recovered strongly from the COVID period, particularly in the FMCG sector. However, there has been some weakness in the industrial space. Overall, DS Smith expects like-for-like volume growth to continue, supported by the resilience of the FMCG sector.