Recycled packaging group DS Smith has confirmed that its full-year earnings will be towards the higher range of expectations after a 'transformational' year.
In a statement as it enters the close period at the end of its financial year to April 30th, the FTSE 250 company said it expected revenues to be close to £3.7bn.
Having acquired Swedish rival SCA Packaging for £1.28bn last June, nearly doubling the size of the group, revenues will rise 90% over the prior year and cost synergies from the new addition of €40m versus original guidance of €25m.
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The group core packaging businesses have delivered underlying volume growth in line with its medium-term financial target of gross domestic product growth plus 1.0%, with the original DS Smith business continuing to outperform.
Furthermore, the acquisition should now deliver a return above the cost of capital in the 10 months to April 30th, a year earlier than originally announced, and "is now starting to see an improving trend".
The business reportedly continues to generate strong cash flow and management expects the ratio of net debt to earnings before interest, tax, depreciation and amortisation (EBITDA) to fall to 2.0 times or below by year end.
Miles Roberts, group Chief Executive, wrote: "Looking ahead, whilst the European packaging market remains competitive, we expect to make further significant progress.
"Our packaging businesses continue to grow as we leverage our enlarged and strengthened geographic footprint and further develop our commercial proposition, particularly with our largest pan-European customers.
"We look forward to delivering further substantial progress in the coming year."
Analyst Mike Murphy at broker Numis has raised his earnings-per-share number for 2013 from 16.6p to 16.8p to reflect a slightly lower interest cost and tax rate.
He also said: "We believe too many investors remain anchored to Smiths as a cyclical paper stock and have overlooked the value-added provided in a market which has capital discipline as evidenced by Smith's return on average tangible common shareholders' equity of 21% pre-tax for the year to 2012."
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