You are currently viewing Pre-tax profits at DS Smith jump by 75% as prices rise despite falling demand

Pre-tax profits at DS Smith jump by 75% as prices rise despite falling demand

One of the biggest manufacturers of cardboard boxes in the world, DS Smith, has seen its packaging demand fall for the first time in over ten years as the cost of living is impacting how much is spent on online shopping from the US to Europe.

Based on the total area of cardboard sold, the FTSE 100 business, which manufactures packaging for Amazon and other online retailers, reported on Thursday that customers purchased 6% fewer boxes in the year to April.

“Certainly for the last 15 years, it was the first time we’ve had a negative like-for-like volume position,” said CEO Miles Roberts.

“During Covid, we saw demand pick up really strongly, as customers built their stock holdings,” he continued. In the second half of the year, there was a significant amount of de-stocking. Actually, it’s a reaction to the new economic circumstances.

The statistics are the most recent illustration of how swiftly the rising cost of living has reversed an era of spectacular e-commerce growth, when Covid-19 lockdowns encouraged people to indulge on everything from gaming consoles to home gyms.

Investors were drawn to the unglamorous industry of cardboard box production as a result of the increased demand for boxes to transport these items, which changed the outlook for DS Smith and its competitors.

But shares at DS Smith have since fallen to pre-Covid levels after rising by more than 40% between the beginning of the pandemic and 2021. The share prices of competitor companies Smurfit Kappa and Mondi, both listed in the UK, have similarly fluctuated.

However, like other large corporations, these organisations have used price increases that have outpaced inflation to combat both diminishing demand and growing costs.

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