DS Smith shares gained 3.1% to 271.4p in early morning trading on Tuesday following confirmation the firm was trading in line with expectations in its Q1 2022 trading statement.
The packaging products company highlighted pricing momentum and strong cost control as drivers behind its solid trading.
DS Smith reported corrugated box volumes slid marginally in Q1 on a like-for-like basis, as projected against 13% comparative year growth. The group noted an expected 2% increase for the FY.
The group noted the concerning hike in all input costs, including energy across its operations. However, its energy cost rises were “substantially mitigated” by efficiency initiatives and its long-term hedging programme.
The company reported over 90% of its natural gas costs were hedged for FY 2023 and 80% for FY 2024, with expenses currently recovered via increased packaging pricing.
DS Smith commented its long term supplier relationships and other costs management programmes remained ongoing to mitigate inflation.
Meanwhile, the group confirmed maintained strong cashflow generation, alongside an unchanged outlook for FY 2023 with expected “significant improvement” in business performance.
“We have started the financial year very strongly, despite the current macro-economic conditions. We are focusing on ensuring the highest levels of security of supply and customer service and are very pleased with the ongoing support we receive from both our customer and supplier base. Whilst the industrial sector is showing some weakness, our FMCG business remains resilient,” said DS Smith CEO Miles Roberts.
“The increased profitability and cash generation is being driven by improving efficiency and cost increase mitigation as well as successfully continuing to raise packaging prices. Overall returns on capital remain within our medium term target.”
“As we enter the second quarter, we are very mindful of the challenging economic environment in which we operate and the impact it has on both our customers and colleagues. However, our operating plans and progress to date continue to give us confidence in our outlook for FY23.”
