Miles Roberts, group chief executive of United Kingdom-based DS Smith Plc, points to “continued positive momentum” in the company’s paper and packaging business sectors in a trading update issued before the company’s fiscal year ends April 30.
“I am pleased to report continued positive momentum across the business,” says Roberts. “As a purely fiber-based business we are benefiting from accelerating consumer trends in online shopping and the drive for a more environmentally conscious life,” he adds. DS Smith sold its plastics business in 2020, Roberts notes.
“Higher sales volumes, initial price recovery and an enhanced performance from our United States business have been better than expected and, whilst input costs have increased materially in the second half, our financial performance for the full year ended April 30, 2021, is anticipated to be line with our expectations,” states Roberts.
The reference to input costs refers specifically to the old corrugated containers (OCC) scrap paper consumed by DS Smith containerboard mills, Roberts adds. “Input costs, including OCC, have increased significantly during the second half of the financial year. This is due to a combination of high levels of demand and lower availability of raw materials due to the Covid-19 impact on the market, which has also resulted in substantially higher paper prices.”
DS Smith, Roberts says, is “making good progress in recovering these higher costs through increased packaging prices, with the usual lag, as we move into our next financial year.”
He continues, “Environmental sustainability is at the heart of our strategy and we are excited at the significant opportunities this presents for our packaging solutions and, despite the general macro-economic uncertainty, for sustained growth across the business.”
Looking to the fiscal year starting in May 2021, Roberts says, “Our long-term strategic direction focused on FMCG [fast-moving consumer goods] and consumer markets, embracing e-commerce and technology-based solutions, has been accelerated by consumer trends resulting from the pandemic.”
He continues, “After a period of targeted investment in new packaging capacity, it is pleasing to see the resumption of strong growth in our American division. DS Smith’s offer to our customers, focused on innovation, service and quality, is being recognized through further major contract wins from large global customers, resulting in increased utilization of the new Indiana plant. These increased packaging volumes, together with associated higher domestic utilization of our paper production and improved pricing, has resulted in significantly improved profitability from this division.”