DS Smith outlined plans to separate from International Paper (NYSE:IP) and list as an independent company, setting out a strategy centered on cost reductions, operational simplification, customer growth and disciplined capital allocation.
At its Capital Markets Day, DS Smith President Tim Nicholls, who is expected to become CEO of the listed company, said the company’s mission is to build “Europe’s most trusted and sustainable packaging business.” The company plans to focus on its European corrugated packaging operations, supported by an integrated network of recycling, paper mills, paper sourcing and converting sites.
Nicholls said DS Smith expects the European corrugated packaging market to grow by 1% to 2% annually over the medium term, supported by GDP, industrial production, population trends, sustainability demand and e-commerce growth. He said the company is positioning itself to outperform when market conditions improve following a period of soft demand, inflation and depressed margins.
Cost program targets €480 million in run-rate savings
DS Smith said it is executing a cost-reset program expected to generate approximately €480 million in run-rate savings by the end of 2027. About €200 million of accumulated savings are expected by the end of 2026, according to CFO Vincent Bonnot.
The program includes site closures, workforce reductions, procurement savings and organizational simplification. The company said it has reduced its footprint by 15% and its workforce by 10% from 2025 levels, with approximately 3,100 positions eliminated to date. DS Smith has announced the closure of 29 packaging sites, in addition to a paper mill and recycling sites, according to the presentations.
Stefano Rossi, CEO of Packaging, said the company is relocating more than 1 billion square meters of volume, or approximately 13% of total production. More than 60% of the planned volume transfer had been completed, he said.
The packaging strategy involves concentrating production in fewer, more efficient sites. DS Smith is creating “lighthouse” or high-runner facilities for large, repeat production runs, supported by more agile plants designed to handle smaller and more complex orders.
Rossi said the program is expected to lift packaging productivity by about 20%, measured in square meters per full-time employee, with the first 10% of that improvement planned for the following year. The company also expects to reduce machine changeovers by 200,000, which it said should lower labor costs and waste while improving machine utilization, quality and customer service.
Paper operations shift toward lower costs and targeted investment
Paul Brown, managing director of Paper, Recycling and Capex, said DS Smith operates 14 mills and 18 paper machines across eight countries, supplying around 4 million metric tons of paper. The company is approximately 75% integrated for its paper needs and remains a net buyer of board, using external purchases to supplement its own output.
Brown said DS Smith’s approach is to own capacity where it provides an advantage and source externally where it offers better value. The company closed its Belišće mill in Croatia, citing the site’s age, cost position, sustainability challenges and investment requirements.
DS Smith highlighted completed and ongoing mill investments, including a €150 million project at its Viana kraftliner mill. The company said the investment increased paper-machine speed by 10%, output per hour by 15% and reduced steam consumption by 20%.
At its Lucca mill in Italy, DS Smith is commissioning a new lightweight paper machine. Brown said the project is intended to support growth in Italy, improve fiber yield and reduce specific pulping energy. The company expects its major standalone mills to move into the first or second quartile of the European recycled-containerboard cost curve as investments and operational initiatives reach full run rates.
Commercial strategy emphasizes strategic customers
Marc Chiron, DS Smith’s sales, marketing and innovation director, said two-thirds of the company’s business is tied to fast-moving consumer goods, with the remainder serving e-commerce, automotive, pharmaceutical and electronics customers.
The company is reducing its long tail of customers while directing greater resources toward strategic pan-European and regional accounts. DS Smith said it has reduced that long-tail customer base by 10%, while year-to-date volume growth with key strategic customers was 3.5%, more than 2 percentage points above the market trend cited by management.
Chiron said DS Smith’s customer proposition centers on reliable quality and service, cost efficiency, sustainability expertise and innovation. The company cited work with Coca-Cola on replacing plastic shrink wrap with paper-based corrugated packaging, and customer projects involving e-commerce packaging, laundry-pod packaging and industrial protection solutions.
Agnieszka Talecka, SMI director for Central EMEA, said DS Smith won significant paper-bag business with Zalando for supply across multiple European countries beginning next calendar year. She also cited DS Smith’s long-running work with Nestlé, including packaging lightweighting efforts for the Dolce Gusto system.
Financial framework and listing timetable
For 2026, DS Smith expects revenue to be slightly lower year over year, reflecting deliberate portfolio choices and softer demand. The company guided for adjusted EBITDA of €730 million to €780 million, representing margins of 9% to 9.7%.
Bonnot said 2026 margins are being pressured by a lag between higher paper prices and packaging-price pass-through. DS Smith expects a material benefit in 2027 from announced paper-price increases as those increases flow through customer contracts.
Over the medium term, DS Smith is targeting adjusted EBITDA margins in the mid-teens and free-cash-flow conversion in the mid-30% range. Capital expenditure is expected to decline from roughly 7% of revenue toward 6%, as major mill investments are completed and future spending shifts toward smaller packaging projects.
The company expects to begin life as a listed business with approximately €1.8 billion in net debt and lease-adjusted leverage of about 2.3 to 2.5 times 2026 EBITDA. It plans a progressive dividend policy targeting a payout ratio of 30% to 50% of adjusted earnings over the medium term, with a first payment expected in the second half of 2027.
DS Smith said it does not expect to pursue mergers and acquisitions during its first 24 months after admission, instead prioritizing organic investment and execution of its transformation plan. Bonnot said the company remains on track to list within or ahead of the previously announced 12- to 15-month timetable disclosed in January.
About International Paper (NYSE:IP)
International Paper (NYSE: IP) is a global producer of sustainable packaging, pulp and paper products. Its offerings include corrugated packaging and containerboard used to protect and transport goods, as well as absorbent cellulose fibers and other fiber-based materials used in personal care, healthcare, foodservice and industrial applications.
The company serves customers across North America and Europe, with products sold to manufacturers, retailers, consumer-goods companies and other commercial customers.
