E-commerce boom doubles demand for DS Smith cardboard boxes

Alan Tovey
·2-min read
Amazon package
Amazon package

Online shopping during lockdowns has given a massive boost to cardboard box manufacturer DS Smith as demand for its packaging rockets.

Miles Roberts, chief executive of the FTSE 100 company that supplies customers across Europe and the US, said: “Every week for the past eight weeks has been busier than in the run up to Christmas despite the massive wider economic damage from coronavirus.”

In the UK, demand for DS Smith’s food and flower packaging has more than doubled, while clothes and leisure products packaging has been up more than 60pc.

Another growth area is medicine packaging, where demand has doubled.

“This is a long-term trend which is not going to go away,” Mr Roberts said. “People are staying out of A&E, doctors are sending out prescriptions and people are ordering medicine online.”

While online shopping has delivered a boost, DS Smith’s industrial clients such as automotive and construction business and which make up about a fifth of the company’s sales, have suffered.

DS Smith said revenue fell by 2pc to £6bn for the year to April 30, while pre-tax profit was 5pc better at £368m, as margins improved.

Revenues were lifted by addition of Europac, which the company purchased for €1.7bn (£1.5bn) last year, but a drop in cardboard offset this.

Markets Hub - DS Smith PLC
Markets Hub - DS Smith PLC

The closure of recycling businesses during lockdowns that generate the feedstock for DS Smith’s products meant materials costs rose, and implementing social distancing and other measures to work through the pandemic also delivered a financial hit.      

Despite the strong performance, DS Smith cancelled the final dividend, having said in April it would not pay an interim one. The decision will save the company more than £200m.

Shares closed 6.9pc lower at 296.7p.

Mr Roberts added: “I know some commentators are not happy about the dividend and accuse us of being over cautious. “But protecting the company is my first priority and there is too much uncertainty to pay it.

The company has proven to be popular among fund managers but less so with DIY investors. Some 20 funds and investment trusts list the stock in their top 10 holdings, with Standard Life Aberdeen, Aviva Investors and Columbia Threadneedle among its largest shareholders.

Meanwhile, just 1.3pc of the company is held by DIY investors using Hargreaves Lansdown, Britain’s largest fund shop, making them the 19th-largest shareholder.

Customers of rival fund shop Interactive Investor, the next largest, own just 0.64pc of DS Smith’s shares. The firm said the stock is the 106th most traded stock among its investors.

Keith Bowman, of Interactive Investor, said: “While fund managers such as Aviva and Standard Life continue to take an interest, its appeal to the retail investor is less obvious.”