DS Smith has posted a fall in its annual adjusted operating profit to £701m, though the packaging business has remained upbeat after the decline was smaller than expected.

The group’s profit in the year to 30 April was down by 18% from £861m in the same period a year earlier, amid a weaker consumer demand environment and high inflation, as well as uncertainty persisting around a potential takeover of the group by International Paper.

DS Smith, which provides sustainable packaging solutions, paper products, and recycling services, oversaw a surge in sales during the lockdowns in the COVID pandemic, but has since seen its trading volumes slide.

Its latest results showed that full-year revenue was down by 16%, ignoring currency, to £6.8bn.

Group chief executive at DS Smith, Miles Roberts, said the firm had still delivered a “robust performance despite the challenging environment”.

“The positive trends in packaging volumes from the second half of last year have continued into the current financial year and we remain focused on pricing, operational efficiency and tight cost control,” Roberts said.

“The increasing demand is resulting in higher paper and other input costs, including OCC. We anticipate this will be reflected in packaging price rises, with the benefits expected to be weighted to the second half of our current financial year and provide further momentum into FY26.”

In April, DS Smith agreed to a £5.8bn all-share takeover by International Paper. However, the US-based firm itself has become a takeover target after Brazilian group Suzano confirmed last month it was interested in assets owned by International Paper.

Despite the uncertainty, Roberts said the planned combination remains an “attractive opportunity” to create an international sustainable packaging solutions leader.

“We are working collaboratively with International Paper to satisfy the offer conditions and bring about the successful completion of the transaction,” he added.

Equity analyst at Hargreaves Lansdown, Matt Britzman, commented: “Takeover talk is driving the stock and will continue to do so unless there’s a material change to the current deal with International Paper Company.

“But with the suitor subject to its own takeover speculation, there is reason to be cautious. There could still be twists in this story, and this will likely be a key talking point for management on today’s results call.”

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