Reduced costs help DS Smith offset weaker sales prices – letsrecycle.com

Also in the paper sector today, tissue and hygiene product maker Essity published a trading statement which was upbeat, speaking of strong trading after a period of restructuring.

DS Smith

DS Smith said that pricing of its products has remained more resilient than expected, “reflecting our strong customer relationships, ongoing innovation and high service levels”. However, the prices of the products have been under pressure but the company said that reduced input costs and “cost mitigation efforts” have broadly offset the price declines.

There was no mention of the company’s decision to close its depots, most of which are being sold to Veolia.

In its statement, which is a pre-close trading update in respect of the half year ending 31 October  2023, DS Smith said that like for like corrugated box volume performance has improved quarter on quarter, albeit remaining below the prior year.

The company is seen as being hit by weaker demand for cardboard boxes in the face of the cost of living crisis in the UK as well as economic pressures on the European continent.

One major cost area for DS Smith is used cardboard (Old KLS or OCC). The company has benefited from lower prices for the material and in particular is using significant volumes of mixed paper which it can buy at a cheaper rate than it would for cardboard. Some estimates are that the company can use more than 30% mixed paper in making new cardboard.

Miles Roberts, DS Smith group chief executive, said: “Overall, I am pleased with our robust performance during the first half. Despite an ongoing weak macro-economic environment, we expect volume performance to improve, with second half volume performance anticipated to be better than the first half. We continue to invest behind our customers, focusing on providing them with value added solutions and this, together with our strong operational performance, means we are positioned well for the remainder of FY24.”

Essity

The producer of brands such as Plenty and Velvet tissues as well as hygiene products such as Tena, Essity is a significant recycler of mid-grade office papers and similar material for its production processes.

In the nine months to September 30, 2023, the company pointed to: “Higher selling prices, a positive product mix, cost savings and lower costs for raw materials, energy and distribution had a positive impact on earnings. All three business areas developed well with higher sales and higher adjusted EBITA margin.”

The company has significant operations on the European continent and highlighted developments in France. It said: “We are striving to achieve our targets in ESG and for net zero emissions by 2050. In France, we have inaugurated the world’s first production line that manufactures tissue from used food and beverage cartons. This means Essity recycles more than half of all sorted and recycled food and beverage cartons in France.”