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ii view: box maker DS Smith optimistic about demand

An attractive dividend yield and offering exposure to e-commence and environmental trends. Buy, sell, or hold?

5th September 2023 11:37

by Keith Bowman from interactive investor

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Early year trading update from 1 May

Chief executive Miles Roberts said:

“We continue to work closely with our customers, meeting their evolving needs and are pleased with their positive feedback and the progress we are making. 

“This, together with our ongoing focus on cost and operational efficiencies and our robust and flexible supply chain, positions us well for the remainder of FY24 and beyond."

ii round-up:

Box and paper products maker Smith (DS) (LSE:SMDS) today flagged early year trading in line with its own expectations despite end markets remaining challenging.

Product pricing had stayed resilient since the start of this financial year in early May, with performance further aided by continued strong cost control measures. 

Shares in the FTSE 100 company eased marginally in UK trading having come into this latest news up by close to a fifth over the last year. That’s similar to rival Smurfit Kappa Group (LSE:SKG), although Russia exposed Mondi (LSE:MNDI) shares are down nearly a tenth. The FTSE 100 index itself is up by 1.5% over the last year. 

DS Smith products include packaging for Fast-Moving Consumer Goods (FMCG) customers including Amazon (NASDAQ:AMZN), Unilever (LSE:ULVR) and Nestle SA (SIX:NESN)

Demand, or volumes of corrugated boxes, had improved since the start of the financial year, with clear signs of a reduction in customer de-stocking, although it remained below the same four months of last year. 

London headquartered DS Smith, whose manufacturing plants are supported by paper and box recycling operations, issued its first green bond in July. The €1.5 billion issuance significantly extends its debt maturity profile at attractive terms.

First-half results are scheduled for 7 December. 

ii view:

Started as a box making business in the 1940’s, DS Smith is today a major provider of sustainable packaging, paper products and recycling services worldwide. It employs around 30,000 people in over 30 countries. 

Structural growth drivers focus on e-commerce expansion and environmental trends to replace plastic packaging. Over 80% of all corrugated packaging sold is sent back to its paper mills for recycling. The UK and France account for its biggest slug of sales at around 15% each, followed by Italy and Iberia at close to 12%, and Germany and the USA at around 8% to 9% each, with the rest of the world the balance of close to 30%. 

For investors, the ongoing challenging economic backdrop for its customers, which has seen the likes of Amazon reducing staff numbers, should not be forgotten. Elevated costs persist, group net debt rose year-over-year during its last financial year, while the suspension of its small operations in Ukraine remains noteworthy.   

More favourably, growth in e-commerce and a continued move towards more sustainable packaging materials provide ongoing potential. Product prices have stayed resilient, volumes have improved from the start of the financial year, while management initiatives have helped counter elevated input costs.

On balance, and despite ongoing risks, a forecast dividend yield of more than 5.5% should keep income investors interested.    


  • Exposure to e-commerce and environmental trends
  • Attractive dividend (Not guaranteed)


  • Elevated input costs
  • Uncertain economic outlook

The average rating of stock market analysts:


These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

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