Packaging giant DS Smith has suffered from weak paper prices and worse-than-expected volumes over the last six months, amid “difficult” market conditions.
It comes as analysts projected that the industry’s momentous growth on the back of online shopping in recent years appears to be losing steam.
Shares in DS Smith fell 7.1 per cent today.
Pre-tax profit grew 31 per cent in the six months to the end of October, to £213m, as revenue climbed 3.9 per cent to £3.2bn.
However, operating profit came in three per cent lower than analyst expectations at £351m, and like-for-like revenue fell five per cent.
DS Smith declared an interim dividend of 5.4 pence a share, up four per cent year-on-year.
Why it’s interesting
DS Smith has made a number of acquisitions in recent months, which it admitted was the “principal” driver of its robust profit and revenue growth.
But investors have not missed the fact that organic volume growth for its corrugated boxes is below forecasts, and pricing is under pressure.
Russ Mould, investment director at AJ Bell, said: “The company argues it has achieved a better performance than the wider market, but even if this is the case it is hardly a reason for investors to get excited.
“The growth of e-commerce, which requires boxes to send goods out to consumers, saw market sentiment towards packaging companies reach fairly elevated levels for a while, but today’s update from DS Smith adds to signs that the growth story is losing momentum.”
DS Smith itself said the e-commerce market would continue to be a key driver of growth.
David O’Brien, analyst at Goodbody, added: “While DS Smith’s broad European footprint and exposure to consumer demand has been resilient, this is offset by weakness in industrial end markets.”
What DS Smith said
Chief executive Miles Roberts said: “Our leadership in e-commerce and sustainable packaging solutions has enabled us to perform well despite a difficult macro environment and volatility in paper pricing.
“The continued growth in margin and strong pricing discipline has been particularly pleasing as we deepen our relationships with fast-moving consumer goods customers and grow market share.”