DS Smith : Annual financial and audit reports - Final Results - EN

21 June 2022

DS SMITH PLC - 2021/22 FULL YEAR RESULTS

CONTINUING MOMENTUM

12 months to 30 April 2022		Change	Change
Continuing operations		(reported)	(constant currency)
Revenue	£7,241m	+21%	+26%
Adjusted operating profit(1)	£616m	+23%	+29%
Profit before tax	£378m	+64%	+71%
Adjusted basic EPS(1)	30.7p	+27%	+35%
Statutory basic EPS	20.4p	+53%	+61%
Dividend per share	15.0p	+24%	NA
Return on sales (RoS)(2)	8.5%	+10bps	+10bps
ROACE(3)	10.8%	+260bps	+260bps

See notes to financial table below

Miles Roberts, Group Chief Executive, commented:

"It has been another year of volatile trading conditions where we have worked through the tail-end of the pandemic and, more recently, the tragic events of the Russian invasion of Ukraine. These difficult periods have again brought the best out of all of our colleagues at DS Smith, demonstrating their resilience, compassion and commitment.

We have delivered strong operational, environmental and financial results. The actions we have taken, driven by our strategic focus on our customers and their changing needs, including an ever-increasing focus on sustainability, have resulted in record volume growth. This, together with price increases which have offset significant cost inflation, has driven a strong improvement in profitability and high cash generation. We continued to recycle capital out of mature, non-core assets with the disposal of the De Hoop paper mill, whilst reinvesting in new packaging sites that meet customer demand and offer attractive financial returns.

The new financial year has started well, building on the momentum from the previous year. Whilst there remains considerable uncertainty about the overall economic environment, our expectations remain unchanged. Strong customer demand reinforces our confidence to invest in the business, with capital expenditure expected to further increase in the current year. We currently expect to see 2-4 per cent growth in our volumes, aided by our focus on resilient end markets, a strong performance in the US and the opening of new sites in regions where demand is buoyant. This growth, combined with the benefits of ongoing pricing momentum and careful management of our cost base gives us confidence for the year ahead and is expected to result in a further substantial improvement in our performance."

1

Strong financial performance

• Record like-for-like corrugated box volume growth of +5.4%(4) vs FY 2020/21
• Adjusted operating profit of £616m up 29%
• • Positive profit momentum through the period: H2 EBITA £340m (H1 £276m)
  • Price recovery successfully offsetting increased input costs
• Strong operational and financial performance from Europac (12% ROACE in FY21/22)
• Continued US progress with EBITA growth of +31% and RoS 13.4%
• ROACE +260bps to 10.8% (H2 12.1%)
• Return on Sales +10bps to 8.5% (H2 8.8%)
• Strong cash flow generation driving leverage reduction
• • FCF(8) £519m (+7%)
  • Net debt reduction to £1,484m; 1.6x net debt/EBITDA(6) (2.2x at 30 April 21)
• Statutory profit before tax for year £378m (+71%)

Good strategic and operational progress

• Supporting our customers in a challenging environment o Excellent service levels and security of supply
• Investment in growth projects on track with new greenfield site in Italy now operational and Poland currently being commissioned
  o 80% pre-sold and expected 15-20% ROACE in year 3
• Demand from resilient FMCG focussed customer base supports continued disciplined capital investment for growth

Leading in Sustainability

• Working with our customers to deliver their sustainability goals

• 1. Circular design metrics gaining traction with 2,000 live projects
  1. 313m units of plastic replaced since 2020
• Industry leading CO2 reduction targets
• 1. Science Based Targets initiative approved plan in line with 1.5°C trajectory
  1. Commitment to Net Zero carbon emissions by 2050
• 29% reduction in CO2 per tonne of production vs 2015
• 100 biodiversity projects launched in the year
• Achieved target for producing 100% reusable or recyclable packaging

Positive outlook

• Despite a more challenging backdrop, the structural growth drivers together with a resilient FMCG customer base and our compelling offering underpin our confidence for FY22/23:
  o Corrugated box volume growth currently expected to be 2-4%

2

• 1. Capital expenditure increased to approximately £500 million to invest in customer led growth opportunities, including sustainability, at attractive financial returns
• Continued price recovery and cost management offsetting inflationary costs
• Good early momentum in the current financial year 2022/23

Enquiries
DS Smith Plc	[phone]
Investors
Hugo Fisher, Group Investor Relations Director
Anjali Kotak, Investor Relations Director
Media
Greg Dawson, Corporate Affairs Director
Brunswick	[phone]
Simon Sporborg
Dan Roberts

A presentation for investors and analysts will be held today at 9:00am by webcast.

To access the webcast, please register here. A copy of the slides presented will also be available on the Group's website, https://www.dssmith.com/investors/results-and- presentations shortly before the start of the presentation.

If you would like to ask a question at the end of the webcast, then you will need to dial into the associated conference call using the following details. Please dial in 15 minutes before the start of the webcast to allow for registration.

Dial-in number (UK): [phone]

Dial-in number (US): [phone]

Password: DS Smith

An audio file and transcript will also be available on https://www.dssmith.com/investors/results-and-presentations.

3

Notes to the financial tables

Note 14 explains the use of non-GAAP performance measures. These measures are used both internally and externally to evaluate business performance, as a key constituent of the Group's planning process, they are applied in the Group's financial and debt covenants, as well as establishing the targets against which compensation is determined. Reporting of non-GAAP measures alongside reported measures is considered useful to enable investors to understand how management evaluates performance and value creation internally, enabling them to track the Group's adjusted performance and the key business drivers which underpin it over time. Reported results are presented in the Consolidated Income Statement and reconciliations to adjusted results are presented on the face of the Consolidated Income Statement, in note 2, note 7, and note 14.

1. Operating profit (adjusted EBITA) is before adjusting items (as set out in note 3) and amortisation of £138 million.
2. Operating profit before amortisation and adjusting items as percentage of revenue.
3. Operating profit before amortisation and adjusting items as a percentage of the average monthly capital employed over the previous 12 month period. Average capital employed includes property, plant and equipment, right-of-use assets, intangible assets (including goodwill), working capital, provisions, capital debtors/creditors, biological assets and assets/liabilities held for sale.
4. Corrugated box volumes on a rolling 12 months basis (based on area (m2) of corrugated box sold), adjusted for working days, on an organic basis.
5. GDP growth for rolling 12 months (year-on-year) for the countries in which DS Smith operates, weighted by our sales by country = 8%. Source: Eurostat (17 May 2022) and ONS.
6. EBITDA being operating profit before adjusting items, depreciation and amortisation and adjusted for the full year effect of acquisitions and disposals in the period. Net debt is calculated at average exchange rates as opposed to closing rates. Ratio as calculated in accordance with bank covenants. See note 14 on non-GAAP measures for reconciliation.
7. Free cash flow before tax, net interest, growth capital expenditure, pension payments and adjusting cash flows as a percentage of operating profit before amortisation and adjusting items.
8. Free cash flow is the net movement on debt before cash outflow for adjusting items, dividends paid, acquisitions and divestment of subsidiary businesses (including borrowings acquired) and proceeds from issue of share capital.

Cautionary statement: This announcement contains certain forward-looking statements with respect to the operations, performance and financial condition of the Group. By their nature, these statements involve uncertainty since future events and circumstances can cause results and developments to differ materially from those anticipated. The forward- looking statements reflect knowledge and information available at the date of preparation of this announcement and DS Smith Plc undertakes no obligation to update these forward- looking statements. Nothing in this statement should be construed as a profit forecast.

4

Operating Review

A year of growth and momentum

Organic corrugated box volumes have shown record growth of 5.4 per cent across the year, reflecting continued growth in the resilient fast moving consumer goods (FMCG) and other consumer related sectors, which represent over 80 per cent of our volumes, together with a recovery in the industrial sector following the impact of the pandemic in the prior year. In a challenging supply chain environment, our large scale, security of supply and high service levels have driven ongoing gains with our customers including large multinational companies. Regionally, we have seen particularly good performances in the US, Southern and Eastern Europe.

The structural market drivers of plastic replacement, consumer and retail channel evolution and e-commerce continue to help accelerate growth. We have continued to invest in innovation and have embedded our pioneering Circular Design Metrics across all our packaging sites. We are the only packaging producer to offer this unique tool, which gives our customers across a wide range of sectors such as FMCG, industrial, retail and e- commerce a clear view of their packaging designs' circularity performance and helps them achieve their sustainability goals.

Looking forward, customer demand remains strong and we expect to see continued volume growth of 2-4 per cent in the current financial year.

For the full year, revenue grew by £1.5 billion (26 per cent) on a constant currency basis and 21 per cent on a reported basis, driven by corrugated box volume growth (£203 million) and higher selling prices (£1,279 million) across the Group. External paper, recycling, and other packaging revenues increased (£23 million) as higher pricing more than offset reduced volumes sold externally as the organic growth of our packaging volumes meant we utilised a greater proportion of our paper production internally.

Raw material, energy and transportation input costs all rose significantly over the comparative period. However, these were mitigated by effective supplier arrangements, long-term hedging positions and rising packaging selling prices.

Volume growth combined with increased packaging selling prices, partly offset by the increased input costs, resulted in adjusted operating profit growing by 29 per cent on a constant currency basis and 23 per cent on a reported basis to £616 million. Corrugated box volume growth contributed £65 million and the effect of an increase in the average sales price and mix was £1,279 million versus the comparable period. £714 million of this increase was due to an increase in packaging prices with the remainder of £565 million due to increases in price of external sales of paper, recycling material and energy. These

5