DS Smith profits fall on weak demand, inflation

Paper and packaging company DS Smith reported a fall in annual profits driven by weak volumes and high inflation, but said it expected higher prices and demand would boost a recovery in the second half of the current year and into 2026.

Pre-tax profit for the year to April fell by a quarter to £503m, while adjusted operating earnings were down 19% to £701m as customers cleared excess stock after the Covid pandemic.

The company also said its £5.8bn sale to International Paper was still on track, despite the latter being the target of a £12bn takeover bid from Brazil’s Suzano.

“The macro-economic environment has remained challenging with overall market demand continuing to be weak, leading to a decline in like for like box volumes of 2%,” DS Smith said on Thursday.

“Customers are starting to increase promotional activity and stock levels, with like for like volumes in the second half of the year showing positive growth.”

Its medium-term target for box volume growth of 1.8% was “significantly impacted” by inflation, as well as lower production volumes.

“The positive trends in packaging volumes from the second half of last year have continued into the current financial year and we remain focused on pricing, operational efficiency and tight cost control,” the company added.

Reporting by Frank Prenesti for Sharecast.com