DS Smith first-half profits slump but divi payments resumed

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Sharecast News | 10 Dec, 2020

Updated : 08:14

11:25 26/11/24

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Packaging company DS Smith reported a slide in half-year profits on Thursday but resumed dividend payments as it sounded an upbeat note on the outlook and demand from online shopping.

In the six months to the end of October, pre-tax profit slumped 54% to £97m on revenue of £2.9bn, down 9% on the same period a year ago. The decline in revenue was attributed to the impact of lower box and paper prices and a drop in both box volumes and other volumes, which includes sheet and externally sold paper.

DS Smith said it "experienced a very difficult economic environment due to the impact of Covid-19" over the period.

"The response of our customers has been significant; after an initial challenging start where many of our customers' operations were either closed or disrupted due to Covid-19, sales volumes recovered strongly throughout the first half of this financial year in both Europe and the US," it said.

"Overall corrugated box volumes in May were 4.7% below May 2019 but recovered to growth of 3% in October resulting in the half year being 1.0% down on the corresponding period last year.

"As a consequence of the above, together with a deflationary pricing environment, overall profitability fell against last year."

However, the group said profitability progressed strongly in the half year and the second-quarter return on sales averaged 9.5% compared to the half year average of 8%.

DS Smith also said it has decided to resume the payment of dividends, declaring a 4p a share dividend for the first half.

The company said the pandemic has accelerated a number of the underlying market trends, in particular towards the use of the online channel, with a spike in online sales of goods - from around 19% to a peak of around 34% in the UK. This is expected to result in a more permanent step-up in this channel, with online sales now representing around 28%.

"This trend is now contributing to the strong volume growth being seen throughout the whole business," it said.

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