In a trading update issued today (3 March) in respect of the period since 1 November 2020, the London-headquartered packaging giant said the trends and momentum that it outlined in its H1 results in December have continued into H2.
It has experienced “particularly strong box volume performance driven by our differentiated offering”, and while its input costs have increased, “overall trading continues in line with our expectations”.
The group said its like-for-like corrugated box volume growth has accelerated compared to Q2 of its financial year, with the expected e-commerce and FMCG strength over the Christmas period continuing into 2021, together with “some encouraging signs of recovery” from its industrial customers.
DS Smith’s Northern European and North American regions have seen the most positive performance, which the group said reflected continued strong growth with its largest customers and increasing utilisation of its plant in Indiana.
The group’s North American performance was also attributed to “good domestic volume growth”, with corresponding reduced exports of paper, and increasing pricing.
DS Smith said input costs, including OCC (old corrugated containers), have increased during the Q3 period which, together with high demand, continues to drive higher paper prices.
The business has started to recover these additional costs through higher packaging prices and said its expectation is, with the customary lag, that they “will be fully recovered and underpin continued momentum into FY22”.
The company added its working capital and cash generation remain key areas of focus “and we anticipate a continued strong free cashflow performance for the full year with cash conversion over 100%”.
DS Smith group chief executive Miles Roberts said: “The group has delivered a robust performance during the period against a challenging macro-economic environment, and I remain immensely grateful and proud of our colleagues for their commitment to keeping our plants safe and operational and continued support from our customers.
“We are seeing excellent demand from FMCG and e-commerce customers for our sustainable packaging products and solutions and we continue to invest for growth in these areas.”
He added: “Covid-19 is accelerating a number of the structural growth drivers and with our leading position in recycling and fibre-based packaging we are well positioned to capitalise and drive further market share gains.
“While the economic environment remains uncertain due to Covid-19, we are experiencing good momentum across the business in both Europe and North America.
“We are confident in delivering results in line with our expectations for the year and showing further good progress and momentum as we move into the next financial year.”
DS Smith’s share price had climbed to 409.8p in early trading this morning but had settled down to 407.8p at the time of writing, up 1.19% on yesterday’s close.
