DS Smith (SMDS) H1 2025 earnings summary

Executive summary

• Half-year results met expectations with 2% like-for-like volume growth, but lower packaging prices and higher input costs reduced profitability; cost control and customer service supported performance.

• Integration planning for the International Paper all-share offer is progressing, with expected completion in Q1 2025; both companies' shareholders have approved the deal.

• Statutory and adjusted profits declined sharply year-over-year, with significant transaction costs related to the International Paper deal.

Financial highlights

• Revenue declined 4% year-on-year to £3,371m, mainly due to lower box prices, despite 2% volume growth and some paper price recovery.

• Adjusted operating profit fell 38% to £221m; return on sales dropped to 6.6%; adjusted EPS declined 52% to 8.3p.

• Free cash flow was neutral to negative at -£69m, aided by improved working capital but impacted by higher capex.

• Net debt increased to £2,472m, with net debt/EBITDA at 2.8x, above the prior year but within covenant limits.

• Interim dividend increased by 3% to 6.2p per share.

Outlook and guidance

• Second half expected to remain challenging, with modest volume growth and sequential packaging price increases anticipated to recover higher input costs.

• Box price recovery is expected in H2, but paper price weakness and market volatility remain risks.

• Limited ability to provide detailed full-year guidance due to offer period restrictions.