Concern over recovered paper costs

And, London-based paper and packaging firm DS Smith has announced that even though it has achieved an estimated £50 million pre-exceptional profit before tax for the first half of 2007/08, this was only achieved by successfully implementing higher prices to recoup “higher input costs”.

The two companies predict that the high raw material costs will continue throughout the year, with Stora Enso claiming: “High wood and recycled fibre pressure are expected to continue during the fourth quarter of 2007.”

Stora Enso

Stora Enso operates in more than 40 countries and reprocesses newspapers from the UK at its Langerbrugge paper mill in Belgium. This is mainly turned into newspaper.

Writing in its trading statement, company said that its “third quarter 2007 financial results from operations were negatively impacted by continuing high wood and recycled fibre costs and weakening UK dollar.”

The company explained that on a comparable basis, its operating result was consequently slightly below the £150 million it achieved for the third quarter of 2006.

DS Smith

DS Smith, meanwhile, specialises in collecting corrugated card through Cardiff-based Severnside Recycling and recycling it into corrugated case material (CCM) through Berkshire-based St Regis.

Last month, the company explained that the increasing costs of waste paper driven by demand from China, had forced it to raise its prices for new corrugated packaging (see letsrecycle.com story).

The company said: “The Group's overall trading performance in the first half of 2007/08 has been good…Most significantly, the UK paper and corrugated packaging segments has benefited strongly from the price increases implemented in the second half of 2006/07 to recover high input cots. We anticipate the pre-exceptional profit before tax for the first half of the year will exceed £50 million.”

Looking forward, DH Smith warned that alongside higher raw material prices, a general economic slow-down could influence the market for recovered paper products.

The company said: “key influences on the Group's performance will be the rate of recovery of raw material cost increases, the level of demand across our markets in light of any general economic slow-down and the extend of the normal increase in our energy costs during the winter months.”

DS Smith Plc's full results for the six months to 31 October 2007 will be published on December 5. Stora Enso's third quarter 2007 financial results are due to be published on October 25.