DS Smith Hikes Dividend 24% as Cardboard Packaging Demand Surges
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DS Smith PLC (LSE:SMDS) packed in a 24% increase in its dividend for the past year after earnings came in much higher than expected, as strong demand allowed it to hike prices to more than offset substantial cost inflation.
The cardboard box maker reported £7.2bn of revenue for the 12 months to 30 April 2022, up 21% on the prior year, with like-for-like box volume up 5.4%.
Profit before tax jumped 64% to £378mln and adjusted operating profit was up 23% to £616mln, beating the top end of guidance of £615mln.
Chief executive Miles Roberts said focusing on customers’ changing needs, including an ever-increasing focus on sustainability amid the switch in packaging from plastic to paper and cardboard led to record volume growth.
“This, together with price increases which have offset significant cost inflation, has driven a strong improvement in profitability and high cash generation.”
He said the FTSE 100 group was moving capital out of mature, non-core assets, such as the disposal of the De Hoop paper mill, and reinvesting in new packaging sites that “meet customer demand and offer attractive financial returns.”
A final dividend of 10.2p was also announced, taking the total dividend for the year to 15p per share, up from 12.1p a year ago.
Roberts said the new financial year has also “started well” and despite uncertainty about the overall economic environment, internal expectations remained unchanged.
“Strong customer demand reinforces our confidence to invest in the business, with capital expenditure expected to further increase in the current year.”
Volumes are expected to grow 2%-4%, aided by a continued strong performance in the US and the opening of new sites in regions where demand is buoyant.
