Packaging firm DS Smith has said in a trading statement that it expects 'good progress' in its FY 2019/20 financial year, despite 'volatility in the macroeconomic environment and input costs'.
The group issued the statement, covering the first quarter of its financial year, ahead of its AGM on 3 September.
Financial Prospects
It said that the business 'continues to progress well' despite the challenges in the marketplace, and its expectations for overall financial performance for the year remain 'unchanged'.
It noted that 'strong pricing discipline', coupled with operating cost efficiencies and focus on cashflow generation, as well as new business wins in Europe and the US, gives the group 'confidence' in its business model.
However, it added that some markets have seen 'ongoing subdued volumes', such as Germany, which it said had 'significant export-led market exposure'.
Underlying Drivers
“The underlying drivers of demand for sustainable corrugated packaging remain strong and our leading offerings for highly resilient FMCG and e-commerce customers give us confidence of volume and market share growth," commented Miles Roberts, the group's chief executive.
"While volatility in the macro-economic environment and input costs remains, our focus on pricing discipline, margin progression, enhanced cost and efficiency improvements, and cash generation, support our expectation of further good progress in the year.”
DS Smith added that the integration of the Europac business, which it acquired last November, is 'progressing very well'.
It is currently constructing a greenfield packaging facility in Indiana, which it said will 'significantly enhance' its capability in the US market. In addition, the business expects to complete the disposal of its plastics division before the end of the calendar year.
Analyst Viewpoint
Commenting on its performance, analyst David O'Brien of Goodbody Stockbrokers said, "The outlook remains unchanged with further good progress expected despite volatility in the macro environment. As reported by peers, calendar Q219 has been reasonably stable from a volume and pricing backdrop.
"While noting the stability in containerboard prices, we maintain our cautious stance with the stock trading on c.8x EV/EBITDA."
© 2019 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: The European Supermarket Magazine
