Packaging giant DS Smith sees profit tumble but e-commerce boom beckons
Packaging giant DS Smith saw its profit slide in the last financial year as the boom in online shopping failed to offset the initial impacts of the Covid-19 pandemic.
Despite record growth in the second half of the year, the cardboard maker said that profit before tax fell 37 per cent to £231m last year.
Full-year revenue fell to £5.97bn from £6.04bn a year ago. Shares in the firm slipped 2.7 per cent as markets opened this morning.
The firm, which supplies e-commerce giants like Amazon, said profits were hit by an initial fall in packaging volumes and volatile raw materials costs in the first quarter of the financial year.
But, as the year went on and sites remained open throughout the pandemic, volume grew as online businesses saw a surge in trade and the demand for boxes increased.
The US business was key to this recovery, with operating profits for the division up 70 per cent for the year.
“It is our highest growth rate ever achieved. We are pleased with that growth in the Covid era,” chief executive officer Miles Roberts said.
The packaging giant has also spiked its investments to set up box plants in Italy and Poland that cater to making materials for e-commerce packaging.
Richard Hunter, head of markets at Interactive Investor, commented “A much stronger second half undid some of the damage caused earlier in the year by pandemic effects, but DS Smith is set fair to capitalise on the changing environment.
“Most positively, DS Smith is exposed to fast-moving consumer goods and the continuing rise of e-commerce in particular. Its previous sale of the Plastics business ticks a box on its ESG credentials, while the company could also benefit from the various packaging alternatives finding their way into the marketplace.”