DS Smith announces improved synergies

DS Smith announces improved synergies

Last week DS Smith Plc held a presentation to update investors on the progress being made on the integration of SCA Packaging, following its acquisition on 30 June 2012.

 

The Group reported that the integration is proceeding well, with good progress across all areas.

Over the first 100 days of ownership of SCA Packaging, DS Smith undertook a detailed analysis of synergies and engaged the management team. The Group has started to implement its synergy plans and reports that the opportunities are greater than it first anticipated.

Cost synergies, previously expected to reach €75 million per annum in year three following completion of the acquisition, are now expected to reach €100 million per annum in year three.

€25 million per annum is expected to be delivered in the financial year 2012/13, as previously indicated. The remainder will be phased evenly over the following two years.

Cash synergies, previously expected to be €40 million over three years following completion of the acquisition, are now expected to be €130 million, which breaks down into €100 million of working capital savings and €30 million of capital expenditure efficiency.

€60 million is expected to be realised by April 2012/13 (previously €13 million). The Group’s capital expenditure in the year 2012/13 is now expected to be £150 million (previously £160 million). The Group also expects €100 million in proceeds from disposal of surplus property and non-core businesses.

The cost to achieve these synergies in total is expected to be €90 million (previously estimated at €80m), and DS Smith report that the management teams are fully in place to deliver the revised targets.

Miles Roberts, Group Chief Executive, said:

“Six months ago DS Smith and SCA Packaging were already two strong packaging businesses, neither of which could reach its full potential on its own.

“The improved synergies that we have been able to announce today show how the new enlarged group is not just bigger, but far stronger.

“Our customers and our employees have responded enthusiastically to the opportunities opened up by the new scale of our business and the scope for further improvement.

“We are firmly on the right path. With a truly pan-European footprint, and a management team that combines the best of both businesses, we are well placed to drive growth in the FMCG sector in what remains a challenging economic environment.

“At the same time we will continue to perform for our shareholders through delivering the greater synergies we have identified, and further improving our business mix.

“As a consequence, we expect to deliver a return on this investment above our cost of capital in this financial year, together with substantial earnings enhancement.”

Stephanie Cornwall
Stephanie Cornwall
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