Packaging company DS Smith (SMDS) reported interim revenues up 3% in constant currencies to £3.2bn and adjusted operating profits up 14% to £351m for six months ended 31 October.

However, the shares traded 2% lower to 370p as investors focused on the fact organic volume growth for its corrugated boxes was below target and pricing is under pressure.


Excluding acquired businesses underlying revenues and profits were 5% lower than the prior year at DS Smith.

Broker Davy had penciled in a £78m contribution from the Europac acquisition compared with the reported £61m, including synergies. The North American business also fell short of expectations impacted by ‘significant reductions’ in the pricing of paper to export markets.

Chief executive Miles Roberts commented, ‘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.’

Organic corrugated box volume growth of 0.7% was actually ahead of the market reflecting gains in market share, driven by the firm’s roughly 70% of volumes going to ‘resilient’ fast moving consumer goods (FMCG) companies, substantially ahead of the industry average.

The company achieved an operating margin of 11%, up from 9.9% and in the middle of the medium-term target range (10% to 12%), while return on capital fell to 11.8% (12% to 15%) reflecting an extra six months inclusion of Europac, which initially diluted DS Smith’s returns.


Management sees an acceleration of volume growth in the second-half assuming that current macro-economic conditions prevail as the business looks to capitalise on strong long-term drivers.

In a demonstration of its confidence in the outlook for the business, DS Smith’s board declared a 4% rise in the dividend to 5.4p.


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Issue Date: 05 Dec 2019