First half pre-tax profit at recycled packaging group DS Smith (SMDS) has fallen by a quarter to £91 million as a result of its decision to close a paper mill in Wansbrough, Somerset.
The news sends the shares down 3% to 402.9p.
DS Smith announced plans to close the 250-year-old mill in the summer, citing the loss of a major contract and the need for huge investment to bring the mill up-to-date.
The group has also been hit by the weak euro. Revenue fell by 1% on a reported basis but rose by 6% at constant currency to £1.95 billion as a result of its acquisition of Duropack and higher-than-expected corrugated box volume growth of 3.1%.
The £4 billion cap has agreed to buy a corrugated packaging business in Turkey, following the three acquisitions it made in the first half.
DS Smith is continuing to gain market share in Europe and has improved its return on sales by 50 basis points to 9.4%. Its interim dividend has been lifted by 8% to 4p per share.
‘Even with currency headwinds the company has managed to hit recently upgraded returns targets, highlighting the success of the current strategy. We expect further improvement in returns and market share going forward,’ says Trevor Green, head of UK equities at Aviva Investors.