DS Smith cites higher OCC prices in investor update

United Kingdom-based DL Smith plc has issued what it calls a trading update on packaging industry conditions since its previous financial quarter closed Nov. 1, 2020.

“We are seeing particularly strong box volume performance driven by our differentiated offering, and whilst input costs have increased, overall trading continues in line with our expectations,” says the firm, which produces containerboard and downstream packaging made from board. The company also has a recycling division that collects, sorts and ships paper and plastic scrap.

One trend spelled out by DS Smith involves the rising value of old corrugated containers (OCC). “Input costs, including OCC, have increased during the period which, together with high demand, continues to drive higher paper prices,” writes the company.

DS Smith tells its investors it has “started to recover these additional costs through higher packaging prices, and our expectation is, with the customary lag, they will be fully recovered and underpin continued [earnings] momentum into fiscal year 2022.”

The company says demand for containerboard and corrugated boxes is experiencing volume growth, “with the expected e-commerce and fast-moving consumer goods (FMCG) strength over the Christmas period continuing into 2021, together with some encouraging signs of recovery from our industrial customers.”

Miles Roberts, DS Smith’s group chief executive, says, “We are seeing excellent demand from FMCG and e-commerce customers for our sustainable packaging products and solutions, and we continue to invest for growth in these areas.”

Geographically, the company says its Northern European and North American regions have seen the most positive performance, “reflecting continued strong growth with our largest customers and increasing utilization of our plant in Indiana.”

The firm adds, “Our North American business continues to deliver significantly improving results as a consequence of good domestic volume growth, with corresponding reduced exports of paper, and increasing pricing.”

Globally, DS Smith states, “The volume growth reflects our strong performance across many sectors and customer groups. We are providing our customers with more ways and easier options to do business with us via our leading digital platforms that are proving to be very popular. These platforms are fully aligned with our unique circular design principles, to enhance recyclability and reusability of our products.”

On the recycling front, the firm says it will continue to tie into the sustainability and circular economy trends in the packaging sector. “We are a leader in sustainability and operate a circular business where we collect and recycle more packaging than we produce,” writes DS Smith. “We are focused purely on fiber-based products, and that is why our recycling rates are 99 percent companywide. We build-in recyclability, reuse and plastic replacement into our packaging through our Circular Design principles, at the heart of our ‘Now and Next’ Sustainability strategy, launched in the autumn 2020.”