Hello and welcome to the DS Smith PLC Q3 trading statement. My name is Jess, and I'll be your coordinator for today's event. Please note this call is being recorded, and for the duration of the call, your lines will be on listen only. However, there will be the opportunity to ask questions. This can begin by pressing star 1 on your telephone keypad to register your question at any time. If at any point you require assistance, please press star 0, and you'll be connected to an operator. I will now hand over to your host, Miles Roberts, to begin today's call. Thank you. Well, thank you very much, everybody. Thank you for joining us today. I'm Miles Roberts, the Group's Chief Executive, and I'm joined by Richard Pike, our CFO. Our statement today covers the trading period since the 1st of November, 2023. I'd like to start by saying, despite the challenging markets, I'm impressed with the resilient performance of our business. We continue serving our customers well, and these strong relationships, our quality and service, have been further highlighted by recent contract wins, including a further five-year extension as the sole corrugated supplier to Mondelez in Europe, together with other substantial wins. Our volumes have shown a continuing improving trend during the period, with North America and Eastern Europe showing good growth in the quarter, offset by a weaker performance in Northern Europe, such that H2 to date is now flat versus last year. Our focus remains on resilient pricing, operational efficiency, and tight cost control, with anticipated containerboard price increases expected to reflect in ongoing packaging prices following the usual customary lag. Hence, our overall trading, together with our outlook for the remainder of the year, remains in line with management's expectations. So I'd now like to invite any questions you may have that Richard or I will answer between us. If you would like to ask a question, please press star 1 on your telephone keypad. Please ensure your line is unmuted locally, as you will be advised when to ask your question. So once again, that's star 1 if you would like to ask a question. And the first question comes from the line of Charlie Muir-Sands from BNP Paribas Exane. Please go ahead. Yes, good morning, gentlemen. Thank you for taking my questions. I've just got two, please. The first one relates to your comment about anticipated containerboard price increases, and obviously the expectation that they subsequently also reflect into box prices. I wondered if you could at all give us an indication as to your expectation of the phasing and the quantum of those. You know, I'm aware of a number of your peers talking about €80 per ton seems to be the, the number that many have gravitated around. I wonder if you think that that is realistic in terms of an achieved price increase, you know, and whether you think that a kind of two-for-one ratio, in terms of percentage increase on the box price with a 3-6-month lag is that still, still the kind of rule of thumb we should be thinking about for that for that side of things. And then the second question relates to the EU's Packaging and Packaging Waste Regulation. Obviously, I had the conclusion of the trilogue earlier this week. I wondered if you had any incremental reflections on, on whether you think that, you know, that latest iteration, you know, is sequentially looking more favorable to you and whether you see incremental opportunities there. Thank you. Yeah, thank you. Thank you very much. In terms of containerboard prices, we've said for a while that we think we've been sort of bumping along the bottom of the pricing. And that is indeed happening. And you're absolutely right. We are seeing, and indeed we are ourselves, charging more for containerboard. And depending on the grounds it's set to, you're absolutely right. Around EUR 18 a ton seems to be the number that is going into the market. I mean, we'll see what happens, but that does seem to be the sort of price increase that we are expecting. But you know, there's always 80% of uncertainty that's certainly where that is. Now we expect to fully recover that. There is a lag, as you've highlighted. The lag on average takes between sort of 3, 4 months, in some cases a bit longer, in some cases a little bit shorter. And typically, paper does make up around half the price of a box, typically, depending on, obviously, the price of paper. So where we are at the moment, we would expect that they can recover their in box prices, which would be, you know, represent probably around about half the price of the box. And you're right. You know, on just turning to the legislation, it has been a very sort of vibrant period for, a busy period for legislation, particularly in the E.U. But there's also been a bit in the U.S. as well. Generally, we've seen that supporting packaging that is much more sustainable, much more sustainable, of course, corrugated is exactly in that area. So with the PPWR, we pay very close attention to it. We have put our views forward consistently now for quite a long time. And many of the exemptions that corrugated has achieved, I think you're absolutely right. I mean, they are much more sustainable reflecting the sustainable nature of our product. The fact that it is fully recycled and actually is generally recycled at very high rates. So I'm very pleased the legislation has reflected that. And I do think, generally, it goes to support the continued replacement of plastic products and fiber-based products. They need another formats as well. So I think it plays to our natural strengths and obviously working closely with our customers as to how this is going to impact them and even how we extend the use of corrugated into formats typically, historically, where plastics have been the sort of the predominant main material. Thank you. The next question comes from the line of Justin Jordan from Davy. Please go ahead. Thank you. I've got two quick questions, gentlemen, if I could. Firstly, just on your comment on flat box volumes in the quarter, can you give us some perhaps incremental color? Because I'm assuming it probably started the quarter slightly negative and ended in February or something as a positive. So perhaps some more color on that and just how it progressed during the quarter would be helpful. And secondly, clearly, on February 8th, DS Smith disclosed that it had been approached by Mondi. And I believe there is clearly a put-up or shut-up date of tomorrow, March 7th, for Mondi to potentially make an offer or walk away. Is there anything you can say, given that clearly the policing that you're under at the moment in terms of Rule 8, just as an update on those potential merger discussions? Thank you, gentlemen. Thank you for questions. In terms of the volumes, during the whole sort of year to date, we have seen an improving trend, obviously, from where we left off last year, even during the second half of our last month. Actually, we saw an improving trend. And we said at the half year that we expect our volumes to return to a positive like-for-like during the second half, and that has happened. And we're now, you know, looking to February. We are positive, as expected. And that means in the overall period, we were flat. So it's, you know, we are pleased with that development. And indeed, we do expect that trend to continue, particularly as we expect some of our large customers to start to, you know, promote and regain a market share. And in terms of, you know, our announcement on the 8th of, so you know, we did release a, an RNS statement. We received a highly prudent expression of interest from Mondi regarding a combination with DS Smith. But we can't give another period. Under the UK Takeover Code, we won't be able to answer. We can't answer any questions on this topic. The next question comes from the line of Cole Hathorn from Jefferies. Please go ahead. Morning, Miles. Thanks for taking the question. Two from my side. Could you give us any commentary on how promotional activity with the customers going? I mean, you mentioned this with the H1 talking about some of the branded goods working with them on campaigns to potentially boost volumes. And you'd also benefit from those mix effects, so just like an update of, you know, how those are progressing, when we should see DS Smith potentially benefiting from that. I imagine it's more an FY25 item. And then on costs, if we think into FY25, as we sit here today, I mean, most of your box price negotiations on the downside have been completed, and now we're looking for containerboard prices. So, you know, box pricing, if anything, should be heading up. I'm just wondering, can you give some color of how you're thinking about the cost dynamics into FY25? Thank you. Thank you, and I'll. Take the first question. We are hugely overweight, as it rightly so, in the FMCGs. FMCG are now our sort of related categories that have the same sort of resilience, resilient characteristics, in them and represent about 80% of our business. And over the last, over the very recent past, we have seen, and we are very focused, obviously, on the larger customers, the ones that typically have a category captain, you know, the driving innovation, the driver of the category floor. If you look over the last 12-18 months, we have seen some categories, you know, private label, taking a little bit more share. And that's obviously we're obviously expecting and indeed, our largest customers have told us a lot about how they're going to regain the share. Now, inflation seems to be moderating really across the U.S. and across the Eurozone. It's really moderating. How do they start to regain share? They are talking a lot about their promotion activity. I'll be honest with you, we've seen a little bit of it, but I am expecting more to come through. But we haven't quite seen that. So it is, you know, we're still waiting for that to for that need to come through. But I think the question is really where they are rather than if. And when we look into FY25, you know, we do expect to see, you know, volumes continue to improve on sort of a like-for-like basis over this year. But we're waiting. But to be really to give you a forecast for next year, Cole, I mean, that's as Miles said, you know, expecting improving demand trends. You know, we do obviously still have inflation rather than deflation. So obviously, we've got a lot of cost reduction efforts ongoing. And as Miles said earlier, you know, we're in the early stages of seeing where paper prices go, which will be quite important in the context of next year's numbers as well. But too early to give you guidance. Just say exactly how that's going to play out. The next question comes from the line of Kevin Fogarty from Numis. Please go ahead. Oh, hi there. Thanks for taking my questions. Too, if I could, often at this time of the year, you'll like progress in terms of cash generation during the second half of the year. I just wondered if you could provide any sort of color on how that's progressed, particularly around working capital. And just secondly, in terms of the markets where you're seeing sort of more volume challenges, I just wondered if you had any granularity on the sort of type of customer that you know you're exposed to there and where the challenges might be, i.e., are we sort of more industrial rather than FMCG where you're seeing those sort of volume challenges. So any particular color you can provide there would be great. Yeah. I'll take the first one, Kevin. And obviously, you're Miles. I'll take the second one. I mean, in terms of key components of our cash, obviously, you know, you've got a feel for sort of where our EBITDA generation is good based on your guidance. Working capital has had a little bit of down pressure in the second half because you've seen slightly further reductions in paper prices and recent reductions in energy prices. But we're working hard on that side of things. As you know, the majority of our working capital decline, including the general money and the hedges, was within the first half, which you've already seen in our numbers. And then you know, our CapEx forecast remains at around the GBP 500 million mark. So those are the key components. Okay. And on the volumes, we've called out particularly that North America is growing really very well. Eastern Europe is also growing quite well. We're pleased with the progress there. Southern Europe over four months is broadly flat. And the area that's still behind is Northern Europe. And I've called it that region is dominated by, for our business, the UK and Germany. And I think, you know, the UK does continue to be a difficult market, you know, for all the reasons we know. I think we need to be keen to sort of follow where the consumer is, the overall effect of inflation, consumer pressure. And that's where we see the weakness. In these regions, our market, our market share has stayed pretty, pretty constant this period. The current period we're talking to against the period from the previous year. So it really is just a market issue. But I said the rest of the regions are already showing some promise. And we very much hope, expect that to continue for the remainder of the second half. Thank you. The next question comes from the line of Brian Morgan from Morgan Stanley. Please go ahead. Hi, good morning, guys. Thanks for the call. Just two questions, if I may. You spoke in December about inventories at customer level, downstream level, being quite low. Just like an update on that, if you don't mind, is it from that point, is it higher, lower, about the same? The second question is just back to PPWR. One of the rules in the PPWR is that e-commerce packaging needs to have a maximum empty space of 40%. If you're familiar with that rule, I'm sure you guys are. But be interested to hear your thoughts on that in terms of where we are right now, seeing that you guys are quite big in the e-commerce space. Yeah. Look, two very, very interesting questions. If you go back sort of a year ago, we were talking about seeing some evidence of destocking from our customers, but we felt that would be temporary, and that would come to an end. And that's exactly what's happened. They've taken a lot of stock out as consumer consumption has come down. And indeed, their promotional activity has come down because you tend to need more stock when you've got a higher level of average promotion. So our customer stock levels, they tell us, you know, always learn their finished goods, but they tell us, you know, are really now at quite a balanced level. So the benefit of promotional activity with our customers, firstly, they're getting a similar product, which is obviously big news for us. But you're absolutely right. It does then have an effect in the supply chain, as well, where they just have to hold a slightly higher level of stock than they have at the moment so they can meet that demand. They don't do promotions and are unable to meet the demand. So that's another thing is our source of confidence about the remainder of the year and obviously looking forward. But ultimately, you know, it does bear with the consumers. But that's quite an interesting sort of support to our outlook. And on the PPWR, again, you know, you're absolutely right. If we look at where most of the consumption is, you know, the support. We're concerned about, you know, recycling targets, amount of recycled material in the product, how it works. We're very pleased with that. If you come into e-commerce, corrugated, again, has a lower target than some other formats because of this reuse target. That's 40% by 2030. E-commerce is still, you know, a modest but growing part of consumer service. And here, we are working with our customers about the reuse of the box. It already happens in a number of categories, in particular things like fashion, so household products, etc., where there's already, on average, 50% in fact, in clothing, it's slightly higher, of the products are returned. And they're returned in the packaging that they were sending. And indeed, that's becoming more of a trend because the seller, the vendor, wants to ensure the product comes back in the right condition. So we already see it in a number of categories. And we think we can get to that target in 2030 working with our customers based on a lot of the technology that we're already using. And indeed, when it's in other categories outside of that, we also have some solutions which we're actually trialing at the moment, which are very complementary to our recycling division that's able to pick up these sort of boxes and make sure they are reused. And this adds more value into the box, let's be honest with you. It makes the box more valuable. It's providing a because it provides more of a service to our customers. So, you know, we're to be honest, we're actually quite thrilled with that. So we think we can really build on this, you know, as a company. Thank you for the question. The next question comes from the line of Pallav Mittal from Barclays. Please go ahead. Good morning. Thank you for taking my question. Two from my side. So in the statement, you mentioned a new FMCG contract win. Can you please give some more color on that in terms of the countries in which you are winning these contracts and also the volume potential? So that's the first one. And then, can you talk about your net short position more in detail in terms of test liner and kraft liner and also with geographies? Are you short and then with geographies, are you long? Well, thank you. On the FMCG contracts, we particularly call that one which is not one of these. We do 100% of their corrugated packaging across Europe. We have for 10 years. And they've extended the contract on a sole supply arrangement, as well for another 5 years. And indeed, we're not only working in the netw ork now. We're working within the US. And that's one of the reasons we're growing so nicely there. Sometimes we are prevented a little bit from talking about the exact contracts that we're buying. But if we look at our large FMCG customers, we continue to take a greater share of their box. This has happened consistently for a number of years. And we're particularly pleased about their reaction to us as we've come out of that whole COVID era where our service and quality were so high. We've been able to build that in the subsequent periods. So if you think of our largest customers, we couldn't take any more. We share one of these because it's really 100%. But if we look at the other large FMCGs, we are very pleased with the progress there, not only in taking a greater share of their volumes but also in the duration of those contracts. So now, you know, we've just signed another contract with a huge proportion of one of our biggest customers' businesses. And it's for five years, exclusive right across a number of their categories with tied into a really exciting innovation program built on sustainability. How are we going to meet these things like the new packaging regulations? How are we going to work with them? This is all more value of building packaging to meet their needs. Of course, ultimately, that plays out to place greater value on the margin in our business. I should say, though, that these things don't always materialize overnight. It sometimes takes a period. So you'll see that volume increase come through over two or three years. The next question comes from the liner that. Sorry. Sorry. I'm just, Pardon me. Apologies. I was just going to come and talk about the paper position. You know, we do run a short paper position. And it's just to say we do that because we think that paper is generally oversupplied in Europe. And we're very able to buy paper. And so in the current downward trajectory, you'll see our results have really been, I think, quite resilient compared to businesses that have far more paper than us. And I think, you know, that just shows, you know, the reason that we do that. You know, and we are seeing, you know, some increases now across the board in kraft liner, test liner. And as I said, that'll just be recovered in the normal way as we have always done in the past. Thank you. Next question comes from the line of James Twyman from Prescient. Please go ahead. Yes. Thank you very much for the talks that you've done. I've got two questions. The first one is in terms of the U.S. business, could you give some idea of the scale of the rise in volume that you're seeing? Because normally, you can get some bigger movements than you see across Europe. And I'm assuming that this is when you're talking about volumes, you're talking about to February, i.e., for four months rather than Q3. If you could confirm that. And then also, I know you're not saying anything about the deal, but just a procedural question, if I may. An offer has to be made by 5:00 P.M. tomorrow. Does that mean that if the timing is extended, that announcement would need to be made before that time? Or could things happen secretly, and we wouldn't know about it? Thank you very much. Well, I'll take a very nice question, James. So, so North America in the second half of the year is chasing in low double-digit terms in terms of improvement in volumes versus the same period last year. And all we can say in terms of the position we want to be is that there's a deadline of those in play tomorrow. So, you know, we'll see how that transpires. But some statement will be made by those in play tomorrow. The next question comes from the line of Cole Hathorn from Jefferies. Please go ahead. Good morning. Thank you for taking my follow-up. I'd just like to double-check on the CapEx project. Everything's on track, ongoing. And then, Richard, I'd just like a bit of color. You've been doing a few small closures of, you know, recycling plants, recycled containerboard mills, sheet-fed plants. You know, as you think about the biggest CapEx bigger CapEx, which is ongoing, you're also doing a few things, you know, closing some of the higher-cost capacity. Could you give a little bit of discussion around, you know, what you've been doing to the wider portfolio on the closures side for that higher-cost capacity? And then, Miles, I'd like to follow up on the question on e-commerce. Could you talk a little bit about, you know, your wraparound mailers? You know, maybe the Fordham site is a good example of how investing in efficient packaging line for wraparound rather than focusing on the brown box can be helpful and why the bigger players like yourselves and, you know, even a Smurfit as well would be able to do that rather than some of the smaller competitors. Thank you. So, thank you, Cole. So on the CapEx side, I mean, as you know, the sort of largest projects we have ongoing are the replacement of the paper line in Lucca in Italy, and the replacement of recovery boiler in our craft mill in Viana in Portugal. We've, we've, you know, finalized last year the greenfield box plants in Italy and Poland. They're up and running. And, you know, despite the challenging environment, they're delivering strong returns. And then over and above that, you'll have seen several announcements on LinkedIn otherwise such as, you know, our investments in Austria and Greece and one or two other places. We're improving our capability and capacity in, you know, smaller individual projects across the portfolio. And then in terms of rationalizing other sites, I mean, I think you'll probably see this week that we announced the closure of our last site in the UK. They're modest, you know, moves, as you say, in terms of our less competitive sites. So there's not a massive amount going on in that regard. But there are some focused areas where we're looking to rationalize the portfolio where it makes sense. Yeah. We take, you know, just on the e-commerce, we do provide a range of solutions. Again, we've often talked about customers in e-commerce. I mean, it's, you know, customers like Zalando are very pleased with the relationship they have with us where in the virtual order center their packaging in five ways. And that does include not only boxes but folders where that's appropriate. Where you have a very flat product that you just want to fit in. And again, with this reuse target, a lot of that is still with, you know, fashion and how it's returned and how the product can be delivered and then returned in more of a sort of a folder, a pouch, again, made of fiber. But it's a very dynamic sector. Working with our customers on these solutions, and the concentration is exactly what we want to see. Thank you, everybody, for your time today. And thank you for your questions. You know, I'd just like to say, you know, remind everybody that, you know, we, despite the market conditions, I'm really pleased with the resilient performance across the group. And as we said, our performance to date and our outlook for the rest of the year is fully in line with management's expectations. Thank you very much for your time. Thank you. Thank you for joining today's call. You may now disconnect your lines.