Paper and cardboard packaging group DS Smith has reported a 64% profit increase following strong demand for its products.
The company revealed pre-tax profits had increased to £378 million in its 2020/21 financial year annual results. This was on revenue of £7.2 billion.
In this period, DS Smith saw record like-for-like corrugated box volume growth of 5.4%. In particular, this came from the fast moving consumer goods sector and other consumer related sectors. Plastic replacement with fibre-based packaging helped with this.
US, Southern Europe and Eastern Europe saw especially strong growth performance.
DS Smith noted that its net energy costs had increased by 81% in the period, and the cost of recyclate by 49%. It said that these increases had been mitigated through the size, scale, and expertise of its procurement operations, long-term buying relationships for both recyclate and paper, plus its energy hedging programme.
Group chief executive Miles Roberts said: “It has been another year of volatile trading conditions where we have worked through the tail-end of the pandemic and, more recently, the tragic events of the Russian invasion of Ukraine.
“These difficult periods have again brought the best out of all of our colleagues at DS Smith, demonstrating their resilience, compassion and commitment.
“We have delivered strong operational, environmental and financial results. The actions we have taken, driven by our strategic focus on our customers and their changing needs, including an ever-increasing focus on sustainability, have resulted in record volume growth.
“This, together with price increases which have offset significant cost inflation, has driven a strong improvement in profitability and high cash generation. We continued to recycle capital out of mature, non-core assets with the disposal of the De Hoop paper mill, while reinvesting in new packaging sites that meet customer demand and offer attractive financial returns.
“The new financial year has started well, building on the momentum from the previous year. While there remains considerable uncertainty about the overall economic environment, our expectations remain unchanged. Strong customer demand reinforces our confidence to invest in the business, with capital expenditure expected to further increase in the current year.
“We currently expect to see 2-4 per cent growth in our volumes, aided by our focus on resilient end markets, a strong performance in the US and the opening of new sites in regions where demand is buoyant. This growth, combined with the benefits of ongoing pricing momentum and careful management of our cost base gives us confidence for the year ahead and is expected to result in a further substantial improvement in our performance.”