DS Smith benefits from e-comms boost
Thursday, July 2, 2020
DS Smith has described its business model as “robust” after posting year end results that were boosted by a jump in e-commerce business caused by Covid-19.
FMCG and e-commerce business accounts for around 83% of corrugated box volumes at the UK-headquartered packaging group.
It filed sales on continuing operations in the year to 30 April down slightly with a 2% slip to £6.043bn. However, adjusted operating profit rose by 5% to £660m, as did pre-tax profit at £368m.
The group completed the £400m deal to sell its Plastics division during the period in order to focus on fibre-based packaging; and completed the integration of a previous acquisition, Spanish corrugated packaging and paper firm Europac.
Group chief executive Miles Roberts said he was “extremely proud” of the group’s employees, with every DS Smith factory remaining open during the pandemic “delivering essential supplies with outstanding levels of service in this extraordinary time”.
However, the firm’s share price slipped by nearly 9% on the news to 290.20p after DS Smith announced that it would not resume dividend payments yet due to the current economic uncertainty caused by the pandemic.
Roberts said the group’s business model was “resilient” and commented: “In the short term, however, the impact of Covid-19 on the economies in which we operate is likely to impact volumes to industrial customers and add to operating costs.”
He said prices for old corrugated cases (OCC) had risen, although the impact was expected to be limited to H1 of the new financial year.
“In the medium-term, the growth drivers of e-commerce and sustainability are as strong as ever. The Covid-19 crisis is also expected to accelerate a number of the structural drivers for corrugated packaging and our scale and innovation led customer offering positions us well and gives us confidence for the future.”
The performance at its European business was described as “strong”, but its £600m turnover US wing was held back by “continued weak export paper pricing” and adjusted operating profit there fell by 65% to £39m “largely reflecting the decline in profitability of the paper operations from the export sales pricing and the one-off costs of the Indiana site start up”.
DS Smith has also jumped on the latest trend to fill empty sports stadiums with a new ‘Return to Sport’ range of digitally-printed cut outs of fan faces made from recycled materials, described as “scalable from a lone fan to a full house of up to 100,000 fans and can be on the road within days,” the group said.
In addition, the firm has produced a range of sustainable social distancing products including cardboard separators and barriers.
DS Smith also revealed that its initial actions taken in March and April because of the Covid-19 pandemic had cost the group an estimated £15m, and it expected to spend around £30m this financial year on additional hygiene measures and other costs due to the virus.