Trading remains testing
Sterling strength hits Devro’s profits as volumes hold
Profits skinned: Devro has had a challenging year
Sausage skin manufacturer Devro said it expects underlying operating profits to suffer from sterling appreciation and to come at between £39 million and £40m.
The Lanarkshire company said in a trading update that after a slower start in the first half of 2019 overall volumes in emerging markets grew 13% in the second half and 7% for the full year.
Overall volumes in North America grew 7%, but growth during Q4 was not as strong as expected, specifically impacted by a longer than anticipated Christmas shutdown at a key customer.
Market conditions in Japan and Europe continued to be challenging as previously guided, as higher pork prices and the impact of de-stocking by distributor partners kicked in and will continue into H1 2020. As a result, overall sales in mature markets declined 3% in the year.
The company will achieve £7m savings in FY 2019 and is on course to close its Bellshill plant.
“Whilst we anticipate a continuation of the challenging market conditions in Europe (particularly in the first half of 2020), we expect overall group volumes to be ahead of 2019,” said the company.
It will announce its results for the year ended 31 December 2019 on 4 March.