Packaging company DS Smith says companies are buying back its boxes as inflationary pressures ease

DS Smith said trading has been in line with expectations since early May amid a tougher economic environment.

The packaging supplier, whose customers include Tesco, Nestlé and Amazon, said its performance continued to benefit from price increases and cost controls.

The company noted that corrugated box volumes had improved on a like-for-like basis, supported by “clear signs” that customers were building inventories, albeit below prior-year levels.

Good results: Packaging supplier DS Smith, whose customers include Tesco, Nestlé and Amazon, said its performance continued to benefit from price increases and cost controls

Packaging companies benefited significantly from a surge in carton orders during the early stages of the Covid-19 pandemic as consumers around the world ordered more retail goods online.

Trade inevitably slowed as the easing of restrictions caused shoppers to start making more purchases in stores again.

At the same time, DS Smith was impacted by higher raw material, energy and labor costs, as well as mounting inflationary pressures, which increasingly impacted consumers.

However, the FTSE 100 company has nonetheless managed to offset a decline in sales volumes through higher packaging prices and the implementation of cost-cutting measures such as using less cardboard in cartons.

For the fiscal year ended April, the company reported a 5.8 percent decline in bio corrugated box volumes, partly due to significantly weaker demand in Germany and the UK.

But total revenue rose 11 per cent in constant currency to £8.2 billion, while pre-tax profit soared by around £300m to £671m.

Miles Roberts, who has served as DS Smith’s chief executive officer since 2010, told investors on Tuesday, “While the economic environment in which we operate remains challenging, we have had a good start to the fiscal year.”

“We continue to work closely with our customers, responsive to their evolving needs and welcome their positive feedback and the progress we are making.”

“Together with our continued focus on cost and operational efficiencies and our robust and flexible supply chain, we are well positioned for the remainder of FY24 and beyond.”

Matt Britzman, equity research analyst at Hargreaves Lansdown, said: “Selling cardboard boxes may not be the most exciting business model in the world, but DS Smith’s resilience in difficult conditions continues to serve it well.”

DS Smith shares were down 1.3 per cent, or 4 pence, at 306.3 pence as of Tuesday morning, meaning they have lost about 29 per cent of their value over the past two years.