DS Smith says SCA integration going well

Packaging firm DS Smith said its purchase of SCA Packaging was expected to deliver a return on investment above the cost of capital this financial year, together with substantial earnings enhancement.

Packaging firm DS Smith said its purchase of SCA Packaging was expected to deliver a return on investment above the cost of capital this financial year, together with substantial earnings enhancement.

The firm said the integration of SCA, which it bought in June, was proceeding well, with good progress across all areas.

Chief Executive Miles Roberts said improved synergies estimates showed how the enlarged group was not just bigger, but stronger.

Cost synergies, previously expected to be €75m per annum in year three following completion of the acquisition, are now expected to reach €100m.

The firm said it expected €25m to be delivered in the financial year 2012/13, with the remainder phased evenly over the following two years.

Cash synergies, previously expected to be €40m over three years following completion of the acquisition, are now expected to be €130m, the company said.

This breaks down into €100m of working capital savings and €30m of capital expenditure efficiency.

Around €60m is expected to be realised by April 2012/13, compared with €13m previously.

The group's capital expenditure in the year 2012/13 is now expected to be £150m, down from an estimated £160m.

Smith said the cost of achieving these synergies in total was expected to reach €90m, up from €80m before.

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