DS Smith to sell its Plastics division for $585 million
DS Smith has reached agreement to sell the Plastics division to Olympus Partners.
The Plastics division comprises the plastics operations of DS Smith, including flexible plastics, rigid plastics and foam products. Gross assets of the business as at 31 October 2018 were £223 million and profit before tax for the 12 month period to 31 October 2018 was £28 million.
This sale represents an important step in DS Smith’s continued progress as a leader in sustainable packaging and accelerates the programme of deleveraging, alongside organic cashflow. The cash proceeds are expected to be used to reduce the financial gearing of DS Smith plc, in line with medium-term target of net debt / EBITDA at or below 2.0x. The sale is expected to result in a substantial exceptional gain and be marginally EPS dilutive.
“In the period since 1 November 2018, trading has continued to be strong, in line with expectations. We continue to see good corrugated box volume growth with continued market share gains driven by the quality of our offering to large and e-commerce customers and our FMCG -weighted customer base. The Christmas period was especially busy for our e-commerce focussed customers with our sector leading offering supporting our customers over this critical period. Our US business continues to perform well with strong margins and returns ahead of our acquisition case”.
Group margins are expected to progress further in the second half of our financial year and operating cashflow generation is stronger than in the comparable period last year.
Update on Europac
“The acquisition of Europac completed on 22 January 2019. We are delighted to welcome our new colleagues to the business and are very pleased with the initial progress on integration and the customer reaction so far”.
Miles Roberts, Group Chief Executive, said “I am delighted to confirm that we have reached an agreement for the sale of our Plastics division. The transaction is attractive both financially and strategically for DS Smith as, together with the acquisition of Europac, we reinforce our position as a leader in sustainable packaging with a clear focus on our fibre based business. My colleagues in the Plastics division have worked hard to build the business into the success that it is today, and that quality has been recognised by Olympus Partners. We are pleased with the performance of the business during the second half of the year. While macroeconomic conditions remain uncertain, we are confident of continued strong demand for our innovative and high quality sustainable packaging and the resilience of our FMCG-focussed customer base. At the same time, the sale will further strengthen our robust balance sheet and the Board continues to view the prospects for the business with confidence.“