December 7, 2017 / 8:35 AM / 2 years ago

DS Smith first-half profit slips on higher costs

(Reuters) - British packaging company DS Smith Plc said first-half pre-tax profit slipped as gains from acquisitions and strong revenues from European and e-commerce customers were more than offset by higher input costs.

Shares of the company rose 2.8 percent to 554 pence on the London Stock Exchange.

DS Smith, a maker of corrugated cardboard, recycled paper and plastic packaging, said profit before tax fell to 144 million pounds for the six months ended Oct. 31, from 146 million pounds a year earlier.

A rise in fiber costs and paper pricing weighed on earnings, the company said.

However, DS Smith, which is set to join the FTSE 100 this month, expressed confidence in its outlook, saying despite input cost pressures, the company continued to recover those costs as planned.

DS Smith, founded in 1940 as a box-making business in London, serves European fast-moving consumer goods (FMCG) operators and competes with Smurfit Kappa, Mondi and RPC Group.

An increase in input costs due to a surge in paper and pulp prices have hurt the packaging sector, with South Africa-based Mondi, issuing a profit warning in October.

DS Smith raised its dividend by 7 percent in first half, compared with a 15 percent dividend growth in the same period last year.

The company, which entered the U.S. market in June with an 80 percent stake buy in Interstate Resources for $920 million, said revenue surged 18.6 percent to 2.80 billion pounds in the first half.

DS Smith’s 17 of top 20 pan-European customers have significant U.S. operations and the company has been positioning itself to benefit from the weak British pound since the UK’s vote to leave the European Union in June 2016.

Reporting By Justin George Varghese in Bengaluru; Editing by Sunil Nair and Amrutha Gayathri

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