DS Smith’s profit and revenue decline in fiscal 2021

DS Smith plc (LON: SMDS) said on Tuesday its pre-tax profit and revenue declined in fiscal 2021. Momentum, however, picked up in the fourth quarter and has sustained in fiscal 2020 to date. In the first half, the London-based company’s pre-tax profit had tanked 54%.

DS Smith opened at 435 pence per share in the stock market on Tuesday and is currently exchanging hands at 427 pence per share. This compares to its year-to-date low of 363 pence per share in early February.

Higher packaging prices to offset inflationary cost pressure

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DS Smith attributed the weaker financial performance to higher costs, particularly in energy, transport, and labour. But the recently started rise in packaging prices is expected to help it offset the inflationary cost pressure. According to analysts at Hargreaves Lansdown, however:

“There is a tipping point at which volumes will start to decline if prices rise too dramatically, so DS Smith is on a tricky tightrope, juggling the boxes of trying to maintain margins while keeping volumes up, which is far from an easy place to be.”

The packaging company reported £231 million of pre-tax profit for the year that concluded on 30^th April. In comparison, its profit before tax stood at a higher £368 million in fiscal 2020. On an adjusted basis, DS Smith generated £287 million of pre-tax profit versus the year-ago figure of £580 million.

DS Smith valued its revenue in the recently concluded year at £5.98 billion – a decline from £6.04 billion in fiscal 2020. According to FactSet, experts had forecast the company to post £387.6 million of adjusted pre-tax profit. Their estimate for full-year revenue was for £5.88 billion.

DS Smith declared 8.1 pence per share of a final dividend

The British multinational declared 8.1 pence per share of a final dividend on Monday that pushed the total payment up, to 12.1 pence per share for the year. By 2023, DS Smith has a target of manufacturing 100% recyclable packaging.

Commenting on the financial update, CEO Miles Roberts said on Monday:

“It is our highest growth rate ever achieved. We are pleased with that growth in the COVID era.”

DS Smith performed slightly downbeat in the stock market last year with an annual gain of close to 4%. At the time of writing, the FTSE 100 listed company has a market cap of £5.84 billion and a price to earnings ratio of 13.63.