DS Smith sees strong outlook for more volume growth

Management has been able to pass on most of the higher costs to customers and has also benefitted thanks to the very good organic volume growth growth of 5.2% in corrugated boxes, well ahead of the target of GDP plus 1%.

Growth was attributed to market share gains, with strong volumes again from pan-European customers, particularly due to the ever-growing need for parcel packing from e-commerce companies, which has been boosted by overall European economic growth.

Revenues in the six months to 31 October climbed 19% to £2.8m, or 14% at constant currency rates, with adjusted operating profit rising 11% to £251m or 6% at constant currencies. Adjusted earnings per share were 6% higher at 17.4%, affected by an equity issue in June connected with the acquisition of Interstate Resources in the US.

Statutory EPS of 10.6p was down 14% due higher amortisation and adjusting items, as well as the expanded number of shares in issue.

Interstate, Smith's first fibre-based US business, has delivered an "excellent performance" with integration into the group ahead of expectations. Management have increased their estimate of annualised cost synergies achievable from the acquisition, to $30m by the end of the third full year up from $25m, based principally on greater opportunities to drive operational efficiencies and global supply chain benefits.

Group chief executive Miles Roberts was pleased by the reaction to the acquisition from both employees and customers and said the agreed €208m acquisition of Romania's EcoPack and EcoPaper is on track to complete in January.

He said the outlook remained positive as the second half began "with good momentum".

"Our packaging proposition that delivers real value to our customers is reflected in our volume growth and, while input cost pressures remain, we continue to recover those costs as planned," he said. "We continue to see exciting opportunities for growth, both in Europe and in North America, and, accordingly, the Board remains confident about the outlook for DS Smith."

DS Smith will cap off its year with promotion to the FTSE 100 index on 15 December, it was confirmed last week.

SMDS shares were up almost 3% to 555p not long after trading opened on Thursday.