DS Smith PLC (LON:SMDS) said it has seen “significant improvement” in demand in the past quarter, though half-year profit will still be lower than last year because of the effect of the coronavirus pandemic.
The FTSE 100-listed packaging group, Europe’s largest recycler of paper and cardboard, said it expects corrugated box volumes in the six months to end-October to be down 1.5% compared to the same period a year ago.
Volumes throughout the second quarter returned to year-on-year growth after a difficult start to its financial year.
“The step-change in use of e-commerce is clearly established across our territories with very high demand from customers for e-commerce packaging as we head into the festive season,” the company said.
Customers are increasingly looking for sustainable packaging solutions, it added.
“Modest” deflation in box pricing is still in effect, while upward pressure on paper prices is providing support for corrugated box pricing, DS Smith said.
Management’s expectations for overall financial performance remain unchanged and the intention to pay an interim dividend was reiterated.
Shares in the company were up 2% to 295.6p on Tuesday morning, though still down almost a quarter since the start of the year.
Nicholas Hyett, equity analyst at Hargreaves Lansdown, said: “The piles of cardboard boxes piling up outside houses up and down the country are testament to the explosion in e-commerce sales this year. DS Smith manufactures those boxes, as well as the boxes you see stacked with products on supermarket shelves. Increased demand from both those customer groups is one reason why DS Smith has so far managed to weather the current storm fairly well.
“The group hasn’t been totally unscathed. Costs have increased, there’s been some disruption to industrial customers and the cost of recycled paper has increased as collection was disrupted. However, generally speaking the group has performed much better than we would have expected of a highly cyclical business. We now have to wait for half year results for a full picture of how the business stands.”
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