Strong demand helps DS Smith cover costs

Strong demand for cardboard boxes and packaging materials is helping DS Smith pass on higher costs for used cardboard, the company said today (7 September).

DS Smith is charging more for cardboard boxes in the face of higher costs for its waste paper and cardboard feedstock (pictured, Kemsley Mill, Kent)

Giving a trading update in respect of the period since 1 May 2021,  Miles Roberts, 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.”

E-commerce

Mr Roberts also highlighted how long-term structural growth drivers of e-commerce and sustainability have been accelerated by the effects of Covid. He said: “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.”

Miles Roberts said the pandemic had boosted online shopping

On trading generally, the company said this continues to progress well and that box volumes have grown strongly versus the comparable prior year period and also compared to the comparable period in 2019. Its investment plans “continue to prioritise meeting the growth of our packaging customers both for the near and medium-term”.

Retail sector

The trading statement commented that cardboard box and packaging demand has been seen across all parts of DS Smith’s reach but has been especially strong in the US and Southern Europe and with large FMCG multi-national customers.

Indicating DS Smith’s strong presence in the retail, consumer and online sector, the business remarked: “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.”

On the growth front, DS Smith pointed to the construction of additional packaging manufacturing sites in Italy and Poland which is proceeding to plan and expected to begin operations in Q4 this financial year. It added that 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 DS Smith’s  non-core De Hoop paper mill in the Netherlands to De Jong Packaging.

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