DS Smith (SMDS) H2 2024 earnings summary

Executive summary

• Delivered FY2024 results in line with expectations despite weak markets and high inflation.

• Volumes returned to growth in H2, with Q4 improving over Q3 and positive momentum continuing into the new year.

• Continued investment in innovation, sustainability, efficiency and decarbonization, while deepening customer relationships and share of wallet.

• Recommended all-share offer with International Paper announced to create a global sustainable packaging leader.

Financial highlights

• Revenue fell 17% to £6,822m and operating profit fell 19% to £701m year-over-year.

• Adjusted EPS declined 23% to 33.1p; free cash flow was an outflow of £175m versus an inflow of £354m.

• Return on sales was 10.3%, down 20bps; ROACE fell to 10.7% from 14.3%.

• Dividend per share was maintained at 18.0p.

• Net debt was £2,230m and net debt/EBITDA increased to 2.1x from 1.3x, below the 3.75x covenant.

Outlook and guidance

• Improving volumes and continued focus on customer value expected, with packaging price recovery weighted to H2.

• Input cost inflation, particularly in waste paper, is being offset by higher packaging prices; full effects expected in H2 2025.

• FY2025 capex guidance was £400–450m; depreciation guidance £350m, amortisation £95m and tax rate 25%.

• Working capital expected to normalize in FY2025; H2 expected to benefit from lagged price increases and demand recovery.