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FTSE 100 packaging giant DS Smith has reported a double-digit hike in profits despite falling volumes in key markets as e-commerce growth tailed off last year.

For the 12 months to 30 April, total group revenues grew 11% on a constant currency basis and 14% on a reported basis to £8.2bn.

This was achieved despite a 5.8% reduction in organic corrugated box volumes and a larger drop in volumes than the 5.4% growth recorded last year.

The £295m impact of this volume decline, however, was more than offset by higher selling prices, which generated revenues of £1.2bn.

DS Smith said this gain reflected the lag in recovery of increases in input costs during the period from 2021 to 2023.

Of this £1.2bn pricing gain, slightly over £1bn was due to higher packaging prices, with the remaining £170m due to increases in the price of external sales of paper and energy, offset by a decline in the price of recycling materials.

In Northern Europe, organic corrugated box volumes across the region declined more than the group average due to weaker overall economic conditions and very strong growth in the comparative period. Germany experienced higher levels of decline due to a larger market exposure to the industrial sector, with the UK market impacted by a decline in the e-commerce sector following particularly strong growth over a number of years.

Packaging volumes in the region declined more than the Group average, reflecting the overall economic environment and labour shortages particularly in the first half.

Adjusted operating profits jumped 35% to £861m despite the volume declines, driven by improved product ‘added value’ and effective cost mitigation more than offsetting volume declines and a more challenging inflationary environment

On a statutory basis operating profits were up 65% to £733m.

The group said that while economic conditions have continued to be volatile and box volumes have remained lower than normal, trading in its new financial year to date is in line with expectations.

“Our strong customer relationships in the resilient FMCG sector, together with the investments we are making to drive cost efficiencies and growth, give us confidence for the future,” it stated.

CEO Miles Roberts commented: “The performance of the business during the year has been excellent, despite the challenging economic environment and I am extremely proud of all our colleagues for their dedication and support. We have had an unremitting focus on meeting our customers’ rapidly changing needs with new innovation. This, together with high levels of service and our sustainability performance, has been rewarded through market share gains during the period.

“Our operational, environmental and financial performances have all been strong through the year. Our service levels have remained very high, supporting our customers through our robust and flexible supply chain. We have made excellent progress in reducing the environmental impact of our business, and also helped customers replace 300 million pieces of plastic with fibre-based alternatives during the year. Our cost and risk management, together with price increases to reflect multi-year cost inflation, have more than offset reduced volumes during the year and delivered the excellent growth in profit and returns.

“Our strong customer relationships in the resilient FMCG sector, together with the investments we are making to drive cost efficiencies and growth, give us confidence for the future.”

As a result of the increased profits, the group’s final dividend of 12p per share takes its total dividend for the year to 18p per share, an increase of 20%.

DS Smith shares have edged up 0.1% this morning to 290.5p.

Morning update

Poundland owner Pepco Group has raise €375m of new debt via a corporate bond issue.

It announced this morning it has successfully placed €375m of senior secured notes due in 2028, with the offer “multiple times oversubscribed”.

Strong demand from investors has enabled the group to upsize the offering from the originally proposed €300m.

In connection with the Offering, the revolving credit facility available under the Group’s existing term and revolving facilities agreement is expected to be upsized from €190m to €390m through increased commitments from current lenders to the Group.

The gross proceeds of the bonds are intended to be used to repay and cancel its €300m term facility, €59m of the €90m outstanding on its revolving credit facility and pay certain fees and expenses in relation to the refinancing.

On the markets this morning, the FTSE 100 is down another 1.2% to 7,469.5pts.

Risers include Ocado, which jumped 14.3% to 491.6p on some speculation of bid interest from the US, McBride, up 3.4% to 27.4p and Greencore, up 1.6% to 78.5p.

Fallers include THG, down 3.2% to 75.3p, Tate & Lyle, down 2.4% to 740.5p and Coca-Cola Europacific Partners, down 1.4% to €58.90.

Yesterday in the City

The FTSE 100 dropped 1.1% yesterday on the higher than expected UK inflation figures.

Risers included THG, up 6.8% to 77.8p, Bakkavor, up 3.6% to 98p, PayPoint, up 2.4% to 452p, Greencore, up 1.9% to 77.3p and Premier Foods, up 1.7% to 134p.

The day’s major fallers included DS Smith, which dropped 6% back to 290.2p ahead of this morning’s annual results.

Other fallers included FeverTree, down 3% to 1,264p, WH Smith, down 2.8% to 1,573p, C&C Group, down 2.3% to 127.6p, Pets at Home, down 1.6% to 377.8p, Glanbia, down 1.3% to €13.49 and Greggs, down 1.3% to 2,560p.

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