DS Smith sees second quarter recovery
Packaging group DS Smith has seen “significant improvement” in demand in the past quarter, though half-year profit will still be lower than last year because of the effect of the coronavirus pandemic.
The group, which has two sites in the Black Country, expects corrugated box volumes in the six months to the end of October to be down 1.5 per cent compared to the same period a year ago.
But volumes throughout the second quarter returned to year-on-year growth after a difficult start to its financial year.
DS Smith, Europe's largest recycler of paper and cardboard, said that the regional trends noted in September have continued, with corrugated box growth in both Europe and the US, reflecting further gains in market share, particularly with large fast-moving consumer goods and e-commerce customers.
E-commerce in particular has benefited from very high demand from customers ahead of the festive season.
Looking ahead, due to the improved performance in the second quarter, DS Smith said it remains its intention to declare a dividend for the six-month period.
DS Smith has a packaging site at Langley House in Summit Crescent, Smethwick, and a paper and plastics recycling depot at Rose Hill Industrial Estate, Willenhall.
Miles Roberts, group chief executive, said: “I am pleased with the performance of the group in the first half of the year, in what remains a difficult and uncertain economic environment caused by Covid.
"We continue to be excited by the underlying drivers of demand for our sustainable corrugated packaging and our leading offerings for FMCG and e-commerce customers, together with our focus on cost efficiency and cash generation, give us confidence in the business going forward.”
Nicholas Hyett, equity analyst at Hargreaves Lansdown, said: “The piles of cardboard boxes piling up outside houses up and down the country are testament to the explosion in e-commerce sales this year. DS Smith manufactures those boxes, as well as the boxes you see stacked with products on supermarket shelves. Increased demand from both those customer groups is one reason why DS Smith has so far managed to weather the current storm fairly well.
"The group hasn’t been totally unscathed. Costs have increased, there’s been some disruption to industrial customers and the cost of recycled paper has increased as collection was disrupted. However, generally speaking the group has performed much better than we would have expected of a highly cyclical business. We now have to wait for half year results for a full picture of how the business stands.”
DS Smith will publish its interim results on December 10.
