DS Smith Updates SCA Packaging Integration
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DS Smith Plc, U.K., this week reported that the integration of SCA Packaging, following its acquisition this past June, "is proceeding well, with good progress across all areas." During the first 100 days of its ownership of SCA Packaging, the company has undertaken a detailed analysis of synergies and engaged the management team. It has started to implement its synergy plans and reports that "the opportunities are greater than first anticipated."
Cost synergies, the company continues, previously expected to reach EUR 75 million per annum in year three following completion of the acquisition, are now expected to reach EUR 100 million per annum in the third year. EUR 25 million per annum is expected to be delivered in the financial year 2012/13, as previously indicated. The remainder will be phased evenly over the following two years.
Cash synergies, previously expected to be EUR 40 million over three years following completion of the acquisition, are now expected to be EUR 130 million, which breaks down into EUR 100 million of working capital savings and EUR 30 million of capital expenditure efficiency. EUR 60 million is expected to be realized by April 2012/13 (previously EUR 13 million). The Group's capital expenditure in the year 2012/13 is now expected to be £150 million (previously £160 million). It also expects EUR 100 million in proceeds from disposal of surplus property and non-core businesses.
The cost to achieve these synergies in total is expected to be EUR 90 million (previously estimated at EUR 80 million), and the management teams are fully in place to deliver the revised targets. The impact of the revised cost and cash synergies is such that the company now anticipates reducing its net debt/EBITDA ratio to the target level of 2.0x or lower by April 30, 2013, a year earlier than previously indicated.
Miles Roberts, group chief executive, noted that "six months ago DS Smith and SCA Packaging were already two strong packaging businesses, neither of which could reach its full potential on its own. The improved synergies that we have been able to announce show how the new enlarged group is not just bigger, but far stronger. Our customers and our employees have responded enthusiastically to the opportunities opened up by the new scale of our business and the scope for further improvement."
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