DS Smith Plc (LON:SMDS) has issued a trading update in respect of the period since 1 May 2021.
Miles Roberts, DS Smith Group Chief Executive, said:
“I am very pleased with the progress made during the financial year to date. We have continued to build on our strong customer relationships resulting in excellent volume growth and good progress towards recovering the significant increasing costs of production through higher prices. Consequently overall trading continues to strengthen in line with our expectations.
The long-term structural growth drivers of e-commerce and sustainability have been accelerated by the effects of Covid. Over many years, we have built a business that is ideally positioned to benefit from these growth drivers. Accordingly, while the macroeconomic environment remains uncertain, we remain confident about the prospects for the business in this financial year and beyond.”
Trading overview
Trading continues to progress well, in line with the trends and momentum described in our full year results on 22 June 2021. Driven by our differentiated sustainable packaging offer, box volumes have grown very strongly versus the comparable prior year period and also compared to the comparable period in 2019. Whilst this growth has been across all parts of the group it has been especially strong in the US and Southern Europe and with our large FMCG multi-national customers. Industrial customers have also seen significant increases in demand but this represents a relatively small proportion of our overall customer portfolio given our development in the resilient and growing FMCG customer base.
Input costs have continued to rise with notable increases in the cost of energy and transportation. Combined with the cost of OCC remaining high, this has resulted in further significant increases in the price of paper. Given the strong demand for our packaging we have seen good progress towards recovering these increases.
Strong growth driven by e-commerce, sustainability and innovation
The volume growth has been driven by continued strength in the e-commerce and consumer sectors backed by our long-term commitment to innovation. Our range of products and services to solve our customers’ challenges continues to grow in depth and reach. We have, for example, recently launched our innovative Circular Design Metrics, which are a first for the industry as a way of systematically measuring the environmental impact and efficiency of packaging within supply chains. We are seeing excellent customer feedback from this, as they look for alternatives to single-use plastic and to improve their environmental impact.
E-commerce continues to be a priority and our growth is being supported by investment in technology solutions and the further roll out of our digital platform, underpinned by our extensive European distribution network.
Investing for growth
Construction of the additional packaging manufacturing sites in Italy and Poland is proceeding to plan and they are expected to begin operations in Q4 this financial year. Both plants have already received advanced commitments from customers for over 50% of their capacity. The new sites are in part being funded by the recently announced proposed disposal of our non-core De Hoop paper mill. Our investment plans continue to prioritise meeting the growth of our packaging customers both for the near and medium-term.
Conference Call
A conference call for analysts and investors, hosted by Miles Roberts, will take place today, 7 September 2021 at 8.00am London time. The dial-in number is:
UK/International +44 (0) 33 0551 0200
UK Toll Free 0808 109 0700
Password DS Smith
A play-back facility of this call will be available until 14 September 2021. The dial-in number is: +44 (0) 20 3451 9993, access pin 8543371#. A recording and transcript of the call will also be available through the Investor Relations section of our website: https://www.dssmith.com/investors/results-and-presentations
