Rising lumber prices and a possible drop in demand are the focus of box maker DS Smith PLC’s concerns.

Rising lumber prices and a possible drop in demand are the focus of box maker DS Smith PLC’s concerns.
Rising lumber prices and a possible drop in demand are the focus of box maker DS Smith PLC’s concerns.

Elsewhere, drought conditions in Europe and the energy crisis are likely to impact the trio of FTSE-100-listed packaging companies, including DS Smith PLC (LSE:SMDS) to report fiscal first quarter results on Tuesday .

In packaging, while Rhine water levels have “limited direct impact” on the paper and packaging (P&P) sector, broker Jefferies said there are also macroeconomic and potential indirect negative demand.

“Fresh produce represents approximately 11% of boxes, and weather conditions may be slightly negative for box demand in fruit/vegetable harvest regions,” Jefferies analysts said.

Also, as rival Mondi mentioned in their recent update, wood and therefore the cost of paper is rising as Europeans seek new sources of fuel amid a Russian gas shortage.

It was one of many P&P operators who called for rising timber costs and limited availability, also due to reduced availability of wood chips from sawmills, which reduced production volumes and the declining profits from timber harvesting in the event of a calamity in recent years.

“The effect of the Russian pulpwood import ban will be further upward pressure on Nordic timber costs. We expect more debate about the benefits of a reliable timber supply and forest ownership,” Jefferies said.

On the demand side, the continued rise of e-commerce has contributed to strong performance in recent years.

But in addition to the focus on cost inflation, Jefferies said business sentiment was also shaken by investor concerns about how macroeconomic uncertainty could affect demand for industrial and consumer boxes. and paper packaging prices in the second half of 2022 and in 2023.

In June, DS Smith said it expects corrugated box volume growth of 2-4% for the current year, with price increases and cost management offsetting inflationary costs.

Investors will clearly be keen to know if that’s still the expectation, as the company posted a 24% increase in its dividend for the year ending April 30 after earnings were much higher than expected, as strong demand allowed him to raise prices. at levels above inflation.

Chief executive Miles Roberts said three months ago that the new financial year had “started off well” and that despite uncertainty about the global economic environment, internal expectations remained unchanged.

After a big spike during the pandemic, as investors realized demand for boxes was tied to the online shopping boom, stocks have fallen 32% since the start of 2022.

. rise of price wood a possible drop demand are center of concerns manufacturer boxes Smith PLC

. Rising lumber prices drop demand focus box maker Smith PLCs concerns

PREV Bacup Community Center launch program to help with rising energy bills
NEXT Colorado Springs Utilities proposes to raise natural gas rates and lower electricity rates