By Geoffrey Smith
Investing.com -- Shares in DS Smith (LON:SMDS) rose on Tuesday after the packaging company said it had enjoyed a strong start to its new fiscal year, successfully passing its rising costs onto customers.
"We have started the financial year very strongly, despite the current macro-economic conditions," Chief Executive Miles Roberts said in a statement to the London Stock Exchange, without giving precise numbers. "Whilst the industrial sector is showing some weakness, our FMCG business remains resilient," he added.
Providing cardboard boxes for packaging Fast Moving Consumer Goods, or FMCG, is DS Smith's most important business, and has tended to withstand other moments of economic stress - such as at the start of the pandemic - relatively well. However, the business is also relatively energy-intensive, leaving the company exposed to the surge in gas and electricity prices this year.
DS Smith said that since the start of its financial year in May, overall trading had been in line with expectations, "driven by pricing momentum and good cost control."
It noted that it has hedged over 90% of its expected gas needs for the 2023 fiscal year and around 80% for the following year, "with costs being recovered through increased packaging pricing."
Overall returns on capital remain within its medium-term target, the company said, with Roberts adding that "our operating plans and progress to date continue to give us confidence in our outlook for fiscal year 2023."
By 04:30 ET (08:30 GMT), DS Smith stock was up 2.3% at its highest in nearly two weeks. The shares are still down nearly 40% since September, when European energy prices started to rise on fears of Russian action against Ukraine.