DS Smith (SMDS) H1 2025 earnings summary

Executive summary

• Half-year results aligned with expectations, with 2% like-for-like packaging volume growth despite lower packaging prices and higher input costs, partially offset by cost reduction and productivity initiatives.

• 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.

• 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.

• Integration planning for the International Paper all-share offer is progressing, with shareholder and U.S. antitrust approvals secured and completion expected in Q1 2025.

Financial highlights

• Revenue declined year-on-year due to lower box prices, offsetting gains from volume and paper price improvements; adjusted operating profit was £221m (down 38% constant currency).

• Operating profit before amortisation and adjusting items fell 39% to £221m; operating profit: £96m (down 69%).

• Free cash flow was negative at £69m, compared to negative £54m in the prior year, impacted by working capital and higher capex.

• Statutory profit was significantly lower than adjusted profit due to £75 million in costs related to the International Paper transaction.

• Dividend per share increased 3% to 6.2p.

Outlook and guidance

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

• Further box price recovery is anticipated in H2, but ongoing paper price weakness remains a risk.

• Guidance is limited due to the offer period, but trends from H1 are expected to persist.

• Focus remains on customer service, pricing, operational and cost efficiencies, and integration planning with International Paper.