DS Smith shares jump 10% as FTSE 100 cardboard box maker raises profit expectations on strong sales growth
- The London-based company’s products are used by companies like Amazon and Tesco
- DS Smith expects half-year adjusted operating profit to total at least £400m
- The company’s shares topped the FTSE 100 index on Monday morning
Cardboard packaging supplier DS Smith now expects full-year profits to beat expectations, despite a slowdown in demand for corrugated boxes.
The London-based company, whose packaging, paper and recycling products are used by Amazon and Tesco, said “very strong” revenue growth and good cost mitigation had led to increased profitability.
Its adjusted operating profit for the six months to October 31 is now expected to total at least £400m, up from £276m in the same period last year.
Forecast: DS Smith expects adjusted operating profit for the six months to October 31 to total at least £400m, up from £276m in the same period last year
Shares of DS Smith jumped 9.6% to £2.65 in early trading on Monday after the announcement, making it the first rise in the FTSE 100 index.
Since the start of 2022, however, the company’s share price has fallen by more than a third as cost of living pressures have increased and the pandemic-induced online shopping boom has waned. attenuated.
Businesses have increasingly reported a modest decline or increase in e-commerce sales this year amid a resumption of in-store purchases due to the lack of Covid-related restrictions.
Miles Roberts, Managing Director of DS Smith, nevertheless told investors this morning: “I am very pleased with the performance of the year to date and the momentum of our business.”
“We remain focused on delivering for our customers and managing our costs in an inflationary environment.
“While the macro outlook remains uncertain, this year’s performance has exceeded our previous expectations, and we look to the rest of the year with confidence.”
DS Smith told investors early last month that sales of corrugated boxes fell slightly in the first quarter.
He also reported that nearly all input costs had risen dramatically, especially for energy, which soared as pandemic-related restrictions were eased and the war in Ukraine escalated.
In an attempt to offset these higher costs, it raised packaging prices and sought to limit the amount of cardboard used in products.
The company has also covered over 90% of natural gas costs for this year and approximately 80% for the following 12 months.
Russ Mould, Chief Investment Officer at AJ Bell, said: “Despite declining volumes, DS Smith has demonstrated real pricing power. Innovation in the industry means there’s a little more to what it produces than the soggy old cardboard boxes lying around your attic.
“DS Smith’s ability to control costs, despite significant inflationary pressures, is another tick in the box and shows it is a well-run business.”