Packaging firm DS Smith says firms are back buying its boxes as inflation pressures ease
- The FTSE 100 packaging firm’s customers include Tesco, Nestlé, and Amazon
- DS Smith has offset falling sales volumes by raising prices and mitigating costs
- Its overall turnover rose by 11% on a constant currency basis to £8.2bn last year
DS Smith has revealed that trading since the start of May had been in line with anticipations amidst a more difficult economic backdrop.
The packaging supplier, whose customers include Tesco, Nestlé, and Amazon, said its performance had continued to benefit from price hikes and controlling costs.
It noted that corrugated box volumes had improved on a like-for-like basis, aided by ‘clear signs’ of clients expanding their inventories, even as they remained down on the previous year’s levels.
Delivering well: Packaging supplier DS Smith, whose customers include Tesco, Nestlé, and Amazon, said its performance had continued to benefit from price hikes and controlling costs
Packaging companies gained handsomely during the early stages of the Covid-19 pandemic from a surge in cardboard box orders as consumers across the world ordered more retail goods online.
Trading inevitably slowed as the loosening of curbs resulted in shoppers making more purchases in stores again.
At the same time, DS Smith has been impacted by higher raw material, energy and labour costs and inflationary pressures increasingly affecting consumers.
However, the FTSE 100 company has still managed to offset a drop in sales volumes by raising packaging prices and implementing cost mitigation measures, such as using less cardboard in boxes.
For the financial year ending April, the firm reported a 5.8 per cent decline in organic corrugated box volumes, partly because of much weaker demand in Germany and the UK.
But overall turnover rose by 11 per cent on a constant currency basis to £8.2billion, while pre-tax profits skyrocketed by around £300million to £671million.
Miles Roberts, who has been chief executive of DS Smith since 2010, told investors on Tuesday: ‘While the economic environment in which we operate remains challenging, we have started the financial year well.
‘We continue to work closely with our customers, meeting their evolving needs and are pleased with their positive feedback and the progress we are making.
‘This, together with our ongoing focus on cost and operational efficiencies and our robust and flexible supply chain, positions us well for the remainder of FY24 and beyond.’
Matt Britzman, equity research analyst at Hargreaves Lansdown, said: ‘Selling cardboard boxes might not be the most exciting business model in the world, but DS Smith’s resilience in tough conditions continues to hold it in good stead.’
DS Smith shares were 1.3 per cent, or 4p, lower at 306.3p on Tuesday morning, meaning they have lost about 29 per cent of their value in the past two years.