DS Smith (SMDS) investor relations material

Executive summary

• Half-year results to October 2024 met expectations, with like-for-like packaging volumes up 2% despite lower packaging prices and higher input costs; cost control and efficiency initiatives partially offset profit pressures.

• Revenue for H1 2024/25 was £3,371m, down 2% constant currency and 4% reported, with adjusted operating profit of £221m, a 38% decline year-over-year.

• Strong customer service, product quality, and sustainability performance supported results, with ongoing innovation and customer partnerships.

• Statutory basic EPS fell 79% to 3.1p, and adjusted basic EPS dropped 52% to 8.3p; interim dividend increased 3% to 6.2p per share.

• Shareholders approved the all-share offer from International Paper, with completion expected in Q1 2025.

Financial highlights

• Revenue declined year-over-year to £3,371m, with a 4% reported and 2% constant currency decrease, mainly due to lower box prices.

• Adjusted operating profit fell 38% to £221m; operating profit before amortisation and adjusting items fell 39%.

• Free cash flow was negative at £69m, impacted by working capital and higher capex.

• Net debt increased to £2,472m; net debt/EBITDA at 2.8x, above medium-term target but within covenant limits.

• Statutory profit was lower than adjusted profit due to £75m of International Paper transaction costs.

Outlook and guidance

• Market conditions expected to remain challenging in H2, with modest volume growth and sequential packaging price increases anticipated to recover higher input costs.

• Box price recovery anticipated in H2, but ongoing paper price weakness persists due to supply-demand dynamics.

• CapEx guidance range lowered to £400–450m, reflecting a more cautious approach amid weaker environment.

• Limited ability to provide detailed full-year financial guidance due to the ongoing offer period.

• Focus remains on customer value-add, productivity improvements, and integration planning with International Paper.