DS Smith first-half profits slump but divi payments resumed
DS Smith Plc
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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.
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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.