DS Smith said trading in the second half of its financial year continued to build positively on the trends and momentum that it reported last month.
In a pre-close trading update in respect of the year ending 30 April 2021 released yesterday (29 April 2021), the London-headquartered packaging giant said it had seen this positive trend through all parts of the business in the UK, Europe, and the US.
The company said higher sales volumes, initial price recovery, and an enhanced performance from its US business have been better than expected.
And while its input costs have increased materially in the second half, it said its financial performance for the full year “is anticipated to be line with our expectations”.
DS Smith group chief executive Miles Roberts said: “I am pleased to report continued positive momentum across the business. I am particularly proud that throughout the challenges of the pandemic, our colleagues have responded magnificently, keeping all of our operations open and maintaining the highest standards in service and quality for our customers.”
The company said that as a purely fibre-based business, it is benefiting from accelerating consumer trends in online shopping and the drive for a more environmentally conscious life.
DS Smith’s corrugated box volumes have grown progressively throughout the financial year and in the second half the company expected to achieve a volume increase in excess of 7% over the comparative period last year.
“Our growth in e-commerce continues to be excellent and the roll out of our new digital platform for ordering, supported by our extensive European distribution sites, is going well,” the company stated.
“We are investing in new box plants in Italy and Poland, and we are expanding capacity in Germany. Demand from our industrial customer base has improved in line with our expectation of positive growth in this sector for the coming year.”
The business also reported a resumption of strong growth in its American division, following a period of targeted investment in new packaging capacity.
DS Smith added cash generation continues to be a key area of focus, “and we expect a continued strong free cashflow performance, driven by a significant working capital inflow, with cash conversion of over 100% and a continued reduction in our net debt”.
The company said input costs, including OCC (old corrugated containers), have increased significantly during the second half of the financial year. This was due to a combination of high levels of demand and lower availability of raw materials due to the impact of Covid-19 on the market, which has also resulted in higher paper prices.
“However, we are making good progress in recovering these higher costs through increased packaging prices, with the usual lag, as we move into our next financial year,” it added.
DS Smith’s share price climbed by 3.3% to 427.7p shortly after the release of the pre-close trading update yesterday but had since settled down to 419.8p at the time of writing today. The 52-week high is 435.9p, low: 246p.
The company’s results for the full year to 30 April 2021 will be released on 22 June 2021.