“In the first six months of ownership, Otor has exceeded our expectations and we have secured additional business equivalent to 4% of the Otor business we acquired,” said the statement. “We re-affirm our previously announced cost synergy target of €10.3m originally estimated at the time of acquisition at €9.3m.”
Costs savings are expected to accrue from cancelling Otor’s French stock exchange listing, general administration, paper purchasing and the procurement of other materials. Harmonizing IT systems to deliver improved efficiency are expected to yield more savings in the longer term,
Revenue synergies
Rachel Stevens, head of investor relations, told FoodProductionDaily.com: “We have been particularly pleased with the revenue synergies achieved with Otor with its customers such as Danone.”
Otor’s other customers include: Lactalis, Bonduelle, Bongrain, Kraft, Proctor & Gamble, Intersnack and Masterfoods.
After the acquisition, the expanded DS Smith Packaging France received addition volume, doubling the firm’s original amount in France.
Trading since the end of October 2010 was said to be good, with like-for-like volume growth in corrugated packaging maintained of 8 per cent.
“We have seen strong (packaging) revenue growth in the period of 27% in the UK and 23% in Europe on a like-for-like basis,” according to the statement. “This has been driven both by volume growth and consistent recovery of rising input costs, albeit with the usual delay.”
The company’s plastics business reported like-for-like revenue growth of 7 per cent and what was described as “excellent volume growth,” driven by bag-in-box products, particularly in North America and good recovery of input costs.
Expectations
Profitability for the period was said to be in line with expectations and there has been no significant change to the financial position of the group since the publication of its half year results covering the period from 1 April to 31 October 2010.
The company said it was on track to achieve its financial objectives of volume growth of three per cent, return on sales margin of between six to eight per cent and return on capital target of between 12 to15 per cent.
Meanwhile, the company declined to comment on the impact of fears about the use of mineral oil in food packaging.
Some leading breakfast cereal companies, including Kellogg and Weetabix, are changing their packaging to limit consumer exposure to the mineral oils.