U.K.-based company cites significant losses at plant as key reason for decision to close the plant.
DS Smith Recycling
has announced plans to close its materials recycling facility (MRF) in Southampton, U.K. In deciding to shutter the MRF, the company notes that the facility had been losing money since it was acquired as part of DS Smith’s acquisition of SCA Packaging July 1, 2012.
In a statement announcing the planned closure, DS Smith says volatility in prices for the recyclables the MRF handled as well as the competitive nature of the industry, resulted in continued losses at the plant over the past several quarters. The company did note that due to the losses it had shifted the MRF’s operations to focus on higher grade materials. Due to the shift to higher grades, DS Smith has reduced the MRF’s operations to a single fixed shift that operated, on average, 48 hours per week.
Despite significant investments in the facility, the plant has not realized an anticipated return. The value of the business, its performance and returns has been poor, which the company deemed unsustainable. Under current and anticipated market conditions, the business expects this position to be exacerbated and this view is supported by unsuccessful attempts to find a potential buyer.
Due to the forecasted scenario, DS Smith has decided to close the MRF. The company says it does not operate large scale MRFs in any other part of its business in the U.K. and continental Europe. DS Smith’s strategy in growing its wider facilities management business has been to secure long-term supply partnerships with organizations that operate a much wider range of recycling and recovery facilities.
In deciding to close the plant, DS Smith will shift to work with the existing network of recycling facilities to ensure the needed amount of clean recovered fiber is obtained to meet the company’s requirements, rather than processing the recyclables needed to meet DS Smith’s mill requirements.
The paper recycling aspect of the Southampton facility can be profitable. However, DS Smith Recycling says the current cost of operating the facility is too difficult. After closing the MRF, DS Smith Recycling says that it in the short term it will service customers of the Southampton facility from other sites. Longer term, the company says it has an opportunity to invest in larger dedicated source segregated recycling facility within the same geographical area.
Peter McGuinness, CEO of DS Smith Recycling, says, “We are conscious that this period of consultation provides for an unsettling period for employees, especially at the Southampton facility. Provisions have been put in place to support staff at this difficult time. We are extremely grateful for the staff’s dedication and ongoing commitment to delivering a high level of service to our customers.”
Following its acquisition of SCA’s U.K. operations, DS Smith has undergone an analysis of its various operations. The company has closed facilities in Croydon and Basildon, U.K., and is in discussions with operations at Stoke-on-Trent and Gosport. Additionally, the company says discussions are ongoing with the company’s operations in Silverton and Plymouth, U.K., where the opportunity to merge the two facilities into a super depot within the same area is being discussed.
Following the closure of the three facilities DS Smith will operate 20 facilities. DS Smith Recycling, a part of DS Smith, recycles around 5.4 million metric tons of recovered fiber per year. Additionally, the company diverts around 250,000 metric tons of waste to alternative technologies. The company operates around two dozen recycling facilities throughout Europe, primarily in the United Kingdom.
DS Smith Paper manufacturers test liner and other paper grades in the U.K., the Netherlands, Germany, France and Italy. In addition to its recycling division, DS Smith also operates DS Smith Packaging and DS Smith Plastics.