DS Smith Recycling has announced that it has launched a consultation on the closure of its materials recycling facility (MRF) in Southampton. The consultation is the result of a strategic review of its business following the acquisition of SCA Packaging on 1st July 2012.
The UK activities in the recycling area of the two businesses were placed within one business division which operates as two employing entities, DS Smith Paper Limited T/A DS Smith Recycling and SCA Recycling UK Ltd.
The MRF at Southampton has made significant losses since 2011 due to the high volatility of recyclable materials’ prices and the highly competitive nature of the industry sector. To alleviate these losses, DS Smith Recycling has been concentrating on changing the MRF operation to focus on securing and processing high quality material in order to increase the potential for sustainable profitability and deliver what the reprocessing industry requires. As a result, the company has reduced the MRF operation processing dry mixed recycling (DMR) to a single fixed shift, operating on average 48 hours per week.
However, for the following reasons, the company has now taken the decision to consult with employees on the closure of the Southampton site:
· DS Smith Recycling does not operate large scale MRFs in any other part of its business in the UK and continental Europe. The company’s strategy in growing its wider facilities management business has been to secure long term supply partnerships with organisations that operate a diverse range of recycling and recovery facilities.
Whilst DS Smith Recycling recognises the need for DMR services as part of a holistic recycling strategy, operational focus must remain on the physical processing of quality recycled fibre to allow it to support the Group strategy to become the leading supplier of recycled packaging for consumer goods. Focus on DMR will remain to utilise established reprocessors across the country rather than developing its own DMR processing offer.
· Despite large investment from the former SCA business the facility has not realised the anticipated return. The value of the business, its performance and returns has been poor and this is unsustainable for the new business. 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.
· The paper recycling aspect of the Southampton facility can be profitable, but not whilst based at the current site due to the high standing costs of rent and rates. The work currently undertaken by the Southampton site for collection and processing of paper grades covers a large geographical area and can be serviced by other sites in the short term. Medium to long term, this gives rise to the opportunity of investing in a new larger dedicated source segregated recycling facility within the same geographical area.
DS Smith Recycling CEO, Peter McGuinness, said: "We are conscious that this period of consultation provides for an unsettling period for employees, especially at the Southampton facility and provision has 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."
Mat Prosser, European Commercial Director, DS Smith Recycling comments: "We remain committed to providing our customers with an integrated recycling and waste management solution on a pan European level and despite the changes arising from the review our commitment to ensuring customer service excellence remains as strong as ever."
The review of the recycling business following the SCA acquisition has resulted in significant synergies being achieved across the sites, with facilities in Croydon and Basildon closed and consultations currently in progress at Stoke-on-Trent and Gosport. Consultations are also in progress with Silverton and Plymouth, where the opportunity to merge the two facilities into a super depot within the same area is being discussed.