DS Smith outlook ‘robust’ in the face of falling demand and rising prices

Although overall trading performance in the first half of financial year 2008/09 had been broadly in line with expectations, market demand in the second quarter of the financial year had been weaker and more volatile than in the first. Profit margins in the group’s paper and corrugated packaging businesses were being hit by the weaker market conditions and higher energy and raw material costs and prices were being increased to recover the most recent rises in input costs. However, the company’s project to commission new machinery at Smith’s Kemsley Mill in January 2009 remained on schedule. In the company’s plastic packaging operations, prices had been raised to recover higher input costs but this had been more than offset by the effects of lower sales volumes. Looking forward, the Group expected to achieve “a robust performance in 2008/09, despite the level of demand in our markets and trends in input costs”. Its priority remained “to enforce tight operational discipline”.