10th Oct 2022 14:51
(Alliance News) - DS Smith PLC received the praise of analysts from Peel Hunt and AJ Bell on Monday after announcing that it anticipates its full financial year performance will be ahead of prior expectations.
Shares in the FTSE-100 listing were 14% higher at 274.90 pence each in London on Monday afternoon. However, the shares remain down 30% so far in 2022.
The London-based packing firm said it was lifting its annual guidance following effective cost mitigation. It now expects adjusted operating profit of at least GBP400.0 million for the six months ending October 31, up 45% from GBP276.0 million a year prior.
DS Smith's total profit for the last financial year was GBP616.0 million.
Peel Hunt expects profit for this year of GBP685.0 million, below the wider market expectation of GBP700.0 million. Its initial prediction for DS Smith's first half was surpassed by the company's own GBP400.0 million forecast.
"Pre-today, our thought for the first half would have been GBP350 million," commented analyst Harry Philips.
Both Peel Hunt and AJ Bell analysts lauded DS Smith's cost management in the face of considerable inflationary pressure.
AJ Bell investment director Russ Mould said it is of no surprise that the company's shares have been weak this year, as green investing has become less fashionable and concerns about a slowdown in e-commerce, linked to the cost-of-living crisis, have had a knock-on effect.
"It's in the context of concerns about demand which DS Smith's lifting of annual guidance has been received so positively," Mould commented.
DS Smith profitability was being driven by "very strong" revenue growth, despite slightly lower like-for-like corrugated box volumes.
Peel Hunt's Philips praised the "resilience" of DS Smith's model in "very uncertain times".
Similarly, AJ Bell's Mould argued that despite falling volumes, DS Smith has demonstrated "genuine pricing power".
"Innovation in the sector means there's a bit more to what it produces than the soggy old cardboard boxes sitting in your attic. DS Smith's ability to keep a tight rein on costs, despite significant inflationary pressures, is another tick in the box and shows this is a well-managed outfit," Mould added.
By Holly Beveridge; [email protected]
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