DS Smith cites good box demand in recently completed quarter

United Kingdom-based packaging and containerboard producer DS Smith PLC says its financial quarter that concluded Jan. 31 witnessed “continued momentum [with] good progress in profitability and cash generation.”

In a “trading update” released March 10, the company says the three-month period covering November, December and January was marked by “volume growth and continuing packaging price increases [that] have more than offset ongoing input cost increases with overall trading in line with our expectations.”

The company says its good cardboard box volume growth was “driven by fast-moving consumer goods (FMCG) customers.” DS Smith said it experienced “above-average growth with our larger customers and good momentum behind more sustainable packaging solutions.”

Miles Roberts, group chief executive of the global company, remarks, “We have been shocked and appalled by the Russian invasion of Ukraine and I am very proud of the level of support, focus and performance of everyone who works at DS Smith.”

The company says its “only involvement in these countries is a minority investment in a Ukrainian business, which serves customers predominantly in Ukraine with limited sales in Russia. Production in these operations is currently suspended.”

Within Europe, DS Smith adds, its Eastern region “has been our fastest growing, reflecting business mix and relative growth rates in the comparative period.”

The company says it also is experiencing “continued strong growth in North America has been driven by increased customer demand driving greater utilization of our Indiana plant.”

The company’s fiscal year ends April 30, 2022, and DS Smith states, “We expect mid-single-digit percentage like-for-like volume growth for the year to April 30, 2022.”

Regarding increased input costs, DS Smith points to energy and labor costs that continued to increase, and adds that “OCC (old corrugated containers) prices remain high, reflecting ongoing strong demand levels.”

DS Smith says its costs are being “recovered through increased packaging pricing” and it has access to OCC and other recovered fiber grades thanks to “long-term supplier relationships [that] have ensured security of paper supply throughout the year.”

Adds Roberts, “Despite the increasing macroeconomic and geopolitical uncertainty, the outlook for the year remains unchanged by recent events with the second half of the year continuing to show good momentum. Our geographic footprint, secure supply chain and customer offering focused on innovative sustainable packaging solutions remains compelling to our resilient customer base of FMCG multinational companies and has driven continued good volume growth, despite the strong comparatives.”

He concludes, “We have successfully managed the inflationary cost pressures experienced in the market, and this, together with raising packaging prices and growing volumes, is driving the anticipated increased profitability and cash generation. The structural growth trends for corrugated packaging are stronger than ever, and we have strategically positioned the business well to capture these drivers, underpinning our confidence in progress for the remainder of the period and into our next financial year.”