DS Smith's pre-tax profit fell by 5% at constant currency to £144 million in the six months to 31 October because of costs relating to its August acquisition of Interstate Resources in the US. Group revenues increased on a constant currency basis by 14% to £2.8 billion, driven by volume growth in corrugated boxes in Europe, the contribution from acquired businesses and increased selling prices. Adjusted operating profit was up 6% on a constant currency basis, with margin pressure from higher paper prices in part offset by significant volume growth and two months' contribution from Interstate. The group has increased its estimate of annualised pre-tax cost synergies achievable from the Interstate acquisition from $25 million by the end of the third full year to $30 million over the same period. Organic corrugated box volumes grew by 5.2%, well ahead of the target of GDP+1%, driven by market share gains and strong volumes from pan-European customers, particularly within the e-commerce category. The return on sales for the period was 9%, the midpoint of its target range of 8-10%. In the UK, revenues increased 18% to £550 million while adjusted operating profit has increased 22% to £55 million. In Western Europe, revenue increased by 8% driven by underlying volume growth and increases in box prices, which partially mitigated the input price rises in the period. Adjusted operating profit fell by 7%, principally reflecting the lower proportion of paper manufacturing in the region than the group as a whole, together with the lag between the increase in input costs and the recovery of those costs through corrugated packaging price rises. The company said: "The outlook remains positive as we begin our second half with good momentum. Our packaging proposition that delivers real value to our customers is reflected in our volume growth and, while input cost pressures remain, we continue to recover those costs as planned. We continue to see exciting opportunities for growth, both in Europe and in North America and, accordingly the Board remains confident about the outlook for DS Smith."
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