The London-headquartered packaging company reported sales of £1.95bn in the six months to 31 October, down 1% on the first half of 2014. The company said this represented a 6% increase under constant currency conditions.
These are the first results the company has published since spending €500m (£354m) on three European businesses over the past six months.
In this half-year, DS Smith has bought Austria-based recycled corrugated board packaging business Duropack (completed 31 May), Spanish business Grupo Lantero (31 July) and Greek FMCG packaging company Cartonpack (13 October).
Operating profit before amortisation, acquisitions and disposals, however, was up 5% to £184m and return on sales was 9.4%, a rise of 50 basis points. DS Smith reported organic volume growth of 3.1%.
In the UK, revenues decreased 5% to £444m, from £465m in the same period of 2014, while adjusted operating profit improved 2% to £47m from £46m in H1 2014.
Chief financial officer Adrian Marsh said organic profit growth was up 7% and the company had already recovered from a rise in paper prices this summer, with good cashflow and a strong balance sheet.
“Margins have improved across the group as well by 50 basis points. We’ve gained market share again; we have a 9.4% return on sales. The return on capital has improved by 100 basis points.
“We’ve continued to deliver on all our targets.”
He said the company remained focused on cash management, something that was critical especially given recent expenditure on acquisitions.
And he said DS Smith continued to expand its European presence despite another period of volatility and downward pressure in various markets in Europe.
Chief executive Miles Roberts said the company had “good momentum” and had delivered on a range of factors.
Regarding M&A he said “there’s nobody that comes near to our coverage” but stressed that the "pipeline" remained strong, with DS Smith still only holding a 16% share of the European market.
The company said it would save money with the closure of the Wansbrough Paper Mill in Somerset and by establishing plants in eastern Europe for plastics production.
DS Smith has also started sourcing paper internationally.
“We’re one of the largest sourcers and we’re choosing our own specifications,” he said.
Marsh added: "It’s a very uncertain environment on papers. We’re looking to better optimise the mills we’ve got. Our mills produce the high-quality lightweight paper we use.”
But he said that mills not making a good return were being considered for disposal.
He said it was a difficult process to close a mill but there was no sustainable model for papermaking in the UK. “Energy costs are pretty much double those in Europe,” he said.
The company also revealed it had entered into an agreement to acquire Milas Ambalaj, a producer of specialist corrugated packaging and displays in Istanbul, Turkey, with a revenue of $25m (£16.7m) and around 240 employees. The business is focused on international FMCG customers.
Completion, subject to the usual conditions, is expected by the end of the DS Smith financial year in April.
Roberts pointed out that Istanbul was Europe’s biggest capital with a population of 20 million, which is projected to double in the next few years.
He said Milas Ambalaj was “a high-quality business focused on display and POS" with “good synergies, good assets and good customer support”.
Milas Ambalaj's turnover adds to the £80m in turnover gained with the acquisition of Cartonpack in neighbouring Greece, which is also FMCG-focused.
“The trend in the FMCG sector is going to be tremendous,” said Roberts.
Consumer semi-durables, such as hairdryers, irons, kettles and toasters are also a focus for the company.
Roberts also welcomed the “dynamic retail environment” with online sales growing substantially.
"There is a sudden growth online. This Christmas is very exciting. Everyone’s buying their Christmas presents in a box and we rather like that.”
The company will pay an increased dividend per share of 4p, an 8% rise.
