By Mark Rushton, Editor, Pulp & Paper International Magazine, RISI
BRUSSELS,
Jan. 23, 2012
(RISI) -
DS Smith, the UK based recycled packaging supplier, is hot news at the moment. Just last week, the group was on the front pages of the RISI site as it was named as the company that will almost certainly take over SCA's packaging division in the near future, turning it into one of the powerhouse suppliers in Europe. So therefore, it is not by sheer coincidence that Miles Roberts, group chief executive of DS Smith, has been voted for by investment analysts and portfolio managers as the RISI 2012 European CEO of the Year. The award will be presented to Roberts at RISI's 14th European Pulp and Paper Outlook Conference to be held in Amsterdam March 5-7.
The analysts and portfolio managers responded to a survey organized by RISI with the criteria for nomination being leadership, vision and strategic accomplishment. Roberts was selected as the winner due to his significant achievements and overall leadership of DS Smith. Specifically noted in his nomination by a number of analysts was the business strategy that will give a significant return to shareholders, with one analyst commenting: "DS Smith is one of the few companies in the sector that has a good recent track record of generating value with returns greater than capital cost", whilst another commented on the company's "excellent integration of French producer Otor, as well as its exiting of non-core business areas, such as its recent sell off of Spicers, giving shareholders a clear strategy for growth".
DS Smith has a turnover of £2.5 billion ($3.8 billion) and employs around 12.000 people. Roberts was appointed to the position May 2010. Before joining DS Smith, he served as chief executive of McBride, a leading supplier of private label household and personal care products for one of Europe's largest and most successful retailers.
Roberts, who has a degree in civil engineering, has also served as an engineer for Ove Arup, an accountant for Ernst & Young, and group finance director for Costain, the international engineering and construction group.
As PPI found out very recently, Roberts is a hard man to pin down, and the following exclusive interview was conducted as he got off a plane, and headed off to yet another meeting in Europe.
PPI: You have only been in the job since May 2010, and you have already won the RISI CEO of the Year, what would you put that down to in your own words?
Miles Roberts: My guess is it is all about the direction we have chosen, which is undoubtedly the right direction for the company as it is adding value not only for our shareholders, but also our employees and customers. We have been very clear on how we want to develop, and recycled packaging is a major part of that. When you have a clear direction, you are able to put all the resources in the group behind it. As part of this, we have disposed of businesses, and bought others, which all adds to the sense of direction and gives clarity. Getting everybody in the organization behind what we are doing has already shown results, and I think that is why the award has been given.
You talk a lot about "direction", but where is the ultimate destination?
To be the leading - the absolute leading - supplier of recycled packaging, focused on consumer goods in Europe, which of course will take time. But over the next few years we will make significant moves and will be working hard to earn the respect of customers across Europe. We have a long way to go as this is as much about the industry in Europe as it is about DS Smith.
Can you tell us about your experiences at the helm of DS Smith in that short space of time, and what have been the high points?
DS Smith is a very good company with a long tradition and has some really good market positions. I think the issue for the company is really again about giving it that defined and clear sense of direction. It also has to be said that the acquisition of French packaging producer Otor was a super move and that has gone extremely well. Other high points are of course the setting up of all our recycling operations in to Eastern Europe as well. There have been a number of highs since I became CEO.
And the "challenges"?
Well, you can't avoid the impact of the general state of the financial environment in which we all have to operate, there is quite a challenge there. Customers and investors are probably slightly more hesitant than they have been in the past. There have also been challenges around the macro environment and the hesitancy there, but these will be short-lived, as most of the time economies in Europe are in growth. We are still remaining very positive about the medium term.
You were in the private label business before you joined DS Smith, how much does that differ from being in the recycled packaging business?
With private label we were one step closer to the final consumer, we actually made the products they use, which is a major difference. In that situation, you are much more exposed to the daily movement of the consumer, even weather, or things like promotional activity, there could be all sorts of issues in any one day. But the core fundamentals of the businesses are the same; having a product that people want, and having a service people want, and most importantly, developing products and service other companies can't compete with. In a nutshell, it is all about getting closer to the customer, getting everyone in the company to do the same thing, and focusing on what truly are our core strengths.
How would you describe in your own words the performance of DS Smith over the last year?
Very encouraging, we are on the way to building something really significant, and we have had a tremendous start.
It seems that you are exiting non-core areas, i.e., the sale of Spicers, will you be looking to divest of any other businesses?
Spicers represented about 25% of the group in terms of turnover and was reallly no complement to DS Smith at all. We sold it at a premium, meaning that now we have very low debt, a perfect situation when we are looking to grow and develop. We are slimming down some of our paper manufacturing, and we will continue to do so as our focus really is on the recycled packaging market, and will continue to be so.
As you have said, one of the highlights of your time at DS Smith has been the acquisition of Otor, how is the integration going?
We took over Otor 15 months ago; it is the leading French supplier of packaging for consumer goods for the retail market by far, and we are absolutely delighted with it. The combination of DS Smith and Otor from a customer point of view is going to be great, with strong volume growth, and the ability to share knowledge between the different parts of the company. But it is still only 15 months in, and the real benefits are yet to come. The integration has seen a lot of hard work, from a lot of people.
Any more acquisitions on the horizon? Is mainland Europe a happy hunting ground for acquisitions, and if so, why? The recycled packaging industry in Europe is a highly fragmented one and customers have suffered because of that. There will be further consolidation, and we want to play a major role in that considering the advantageous position we are now in. We are actually very excited about mainland Europe, it is a huge potential market for us, and it is not as if it is a 10 hour plane ride away from us in the UK. We see France and Germany in particular as major markets with future potential.
The hot news is that SCA is divesting its packaging operation to DS Smith for Euro 1.7 billion ($2.18 billion), any comments?
I am delighted with the proposed acquisition that will strengthen our customer offering in recycling and packaging businesses. Looking forward to working with the management team of SCA packaging.
What is your feeling about the eurozone and the current crisis?
Well there is no doubt that there is a crisis, and some countries have high debt that they are struggling to finance, and it certainly cannot be glossed over. However at the heart of the eurozone you have economies like Germany and France, and even the northern Italian region, and as an economic zone it is enormous. Here we are talking about companies like Mercedes, BMW, Bosch, VW - these companies are huge. Yes there are some sovereign states' debts that are causing liquidity problems in some banks, but the fundamental strength economies personally I think will be sorted out, it is just a question of time. The fact is the eurozone has always had countries in it that were struggling, and were going to struggle; I am just frankly surprised some countries like Greece could borrow so much. It may take six months, but it will be sorted out, and the real European productive area, which must be among one of the strongest industrial economic regions in the world, will continue to thrive.
Any plans for any major investments going forward?
We are currently investing more than we ever have in terms of capital expenditure new technology and capacity in packaging across Europe. We are also investing heavily in recycling because we are growing, and we believe that recycled packaging will continue to grow and grow.
Any comments about the European paper and board industry? And the global industry in general?
As always, we need to improve recycling rates. But on the broader issues, and commenting as an outsider, one of the things we have done a lot of work on is focusing on the customer, which includes innovation, quality, getting the product right in the forefront of people's minds and of course getting it right. In fact if you are a DS Smith customer now, you are going to see that your service is absolutely excellent, and that our quality control is improving all the time. I am astonished at how much damage there is in this industry, there are far too many returns, far too much out of spec product, we are working on getting it right first time, every time. In the private label business, if we had one failure in 500,000 it was not good enough, in paper and board, the industry seems to work on one on 500 or even worse, one in 300! The paper and board industry is where most industries were 50 years ago. This is something that has to change, and all our employees are getting right behind this.
We have a fantastic opportunity in this line of business which seems to be missing at the moment, probably because of fragmentation, and that is to take the fight to the door of the plastic packaging manufacturers. This is where all our new innovation and investment comes in, we are going to take that battle on.
And finally, what are the things that keep you awake at night?
I am not really a person who lies awake worrying about anything, but if I did, it would be about the eurozone on a macro level, and then getting the customer facing right. In the longer term, it would be how we are going to expand, develop and attract investment. We also need to develop the image of the packaging industry; it needs an image makeover to make it more attractive for the talented young people out there.
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