UK – DS Smith has reported a 4% decline in revenue for the first half of the 2024-25 financial year, posting £3.37 billion (US$4.2bn) compared to £3.51 billion (US$4.47bn) in the same period last year.
The drop reflects reduced selling prices despite a 2% increase in box volumes.
Group return on sales fell to 6.6%, down from 10.4% in the previous year and below the company’s medium-term target of 10% -12%.
This decline highlights the impact of lower profitability, even as packaging volumes increased. Adjusted operating profit also dropped to £221 million (US$281.60m) from £365 million (US$465.08m), aligning with company forecasts amid ongoing market pressures.
Earnings were heavily impacted, with basic earnings per share from continuing operations plunging by 79% to 3.1p, largely due to reduced profitability and costs linked to the merger.
Adjusted earnings per share also declined by 52% to 8.3p on a constant currency basis. Despite these challenges, an interim dividend of 6.2p per share was declared.
Rising costs and debt levels
Net debt rose slightly to £2.47 billion as of October 31, 2024, up from £2.23 billion (US$2.84bn) in April. The company’s debt-to-EBITDA ratio now stands at 2.8 times, surpassing the medium-term target of two times but comfortably below the covenant limit of 3.75 times.
DS Smith has increased its capital expenditure by 15% to £239 million (US$304.53m), focusing on driving future returns and operational efficiencies.
North America and Eastern Europe led the way in volume growth, while Northern and Southern Europe remained stable, reflecting subdued market demand. Despite current market softness, group CEO Miles Roberts expressed optimism.
“We have delivered a solid performance, with profitability in line with our expectations, despite a continued challenging market environment,” Roberts said.
“Our focus on customer service, product quality, and innovation, alongside cost and productivity initiatives, has helped mitigate the impact of softer market conditions.”
Roberts expects modest growth in packaging volumes and rising prices to offset higher input costs, even as paper prices remain weak.
DS Smith’s performance underscores the challenges of the packaging industry, but the company remains committed to strategic investments and operational improvements to navigate the economic landscape.
In a significant development, DS Smith and International Paper shareholders voted in favor of an all-share merger.
The transaction is expected to close in the first quarter of 2025, with DS Smith incurring £75 million (US$95.56m) in related transaction costs during the reporting period.
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