New FTSE 100 firm DS Smith's shares rise as it targets growth

 
Courtney Goldsmith
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The rise of e-commerce has boosted packaging firms (Source: Getty)

DS Smith, the packaging giant that is set to be promoted to the FTSE 100, said its half-year profit was hit by rising costs, but shares in the company rose more than four per cent as management cited growth opportunities and sales jumped.

The figures

DS Smith's revenue shot up 19 per cent, or 14 per cent at a constant currency rate, to £2.8bn.

However, profit before tax fell to £144m for the six months to the end of October from £146m the previous year due to the rise in fibre costs and paper pricing.

The firm increased its dividend by seven per cent to 4.9p, and shares in DS Smith rose 4.08 per cent to 561p in morning trading.

Why it's interesting

The firm, which makes corrugated cardboard, recycled paper and plastic packaging, said it experienced "substantial" input cost pressures in the period.

Although the sector has benefited from the rise in e-commerce, soaring costs have weighed heavily, with rival Mondi warning on profits earlier this year.

Higher costs more than offset the gains DS Smith made through the "excellent performance" of the company's first US acquisition and strong revenues in Europe and e-commerce.

Chief executive Miles Roberts gave a positive outlook though, saying strong customer demand drove performance, and the firm's operating margin was in line with expectations. He said DS Smith had also continued to recover higher costs as planned.

Roberts added that he continues to see "exciting opportunities" for growth, both in Europe and North America. "The board remains confident about the outlook for DS Smith," he said.

Read more: DS Smith shares jump on entering the US market with $920m acquisition

What DS Smith said

Roberts said:

We are delighted with our volume growth which has significantly accelerated to over 5 per cent, fuelled by success with e-commerce and pan-European customers.

Structural shifts, including changes in consumer preferences, the increased relevance of our packaging at point-of-sale, and the rise in e-commerce are all underpinning the growth of packaging.

Read more: DS Smith set to wrap up six solid months

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