City downgrades forecasts for Devro in 2013 and 2014

 Breaking News
  • Ardgowan Unveils Plans For Inverclyde Distillery Ardgowan Distillery has revealed ambitious designs for its new £12 million distillery which is being built on the Ardgowan Estate near Inverkip, 30 miles west of Glasgow. The plans showcase the flagship building which has just secured revised planning consent from Inverclyde Council. The striking new design, by Michael Laird Architects, brings a number of improvements [...]...
  • HKScan Launches Exports of Finnish Poultry Products to Sweden HKScan, the Nordic food and meat group, has started exporting Finnish poultry products to Sweden. They will initially be sold through the largest retailer ICA’s outlets under the Karinäs®(Kariniemen®) brand. The launch gives Swedish consumers access to a new innovation: high welfare farm-born poultry that is hatched on the farm where it is raised. This new concept is [...]...
  • Almonds Retain Top Spot For Nut Introductions in Europe According to Innova Market Research’s latest Global New Product Introductions Report, almonds retain the number one spot for nut introductions in Europe. With a 47% share of global almond product introductions, the region leads globally for the eleventh year running. Europe as a whole saw a total of 5,017 new introductions with almonds – a [...]...
  • Arla Foods UK Launches New Standards Model to Bring Sustainable Change to Dairy Farming With ongoing volatility in the global milk markets, increasing consumer misunderstanding of the sector, polarised levels of support for UK dairy farmers and a new post-Brexit Agriculture Bill the challenges for dairy farmers are mounting. Farmer-owned co-operative Arla Foods has launched ‘Arla UK 360’ – a new standard in UK dairy farming. The Arla UK 360 [...]...
  • €172 Million to Promote EU Agri-food Products In and Outside the EU The European Commission will provide funding of €172.5 million from the EU agricultural budget to promote EU agri-food products in Europe and across the world. 79 campaigns, covering a wide range of products such as dairy products, olives and olive oil, and fruit and vegetables, will be rolled out over the next three years. Agriculture and [...]...

City downgrades forecasts for Devro in 2013 and 2014

July 01
09:56 2013

Sausage casings manufacturer Devro has released a first half year trading update, which reports slower than expected revenue growth, with volumes up just 1%.

The slower growth, together with higher costs over the period and other production issues it experienced in the US in the first quarter (Q1), led the group to forecast a £3M decline in half-year profits. However, it expected a stronger contribution in the second half of the financial year, assisted by price increases and stronger volume growth.

City analyst Investec today (June 24) reduced its forecasts for Devro’s financial year 2013 and 2014 performance by about 4% in response to this news and dropped its target share price to 358p. However, Investec analyst Nicola Mallard said that as Devro’s forecast total return was still over 20%, her recommendation was that the company’s shares “remained comfortably in ‘buy territory”.

Devro employs 2,200 people across four continents, making its casings from five manufacturing sites based in Scotland, Australia, the Czech Republic and the US. It uses collagen from animals to make skins for manufacturers of sausages, salamis, hams and other cooked meats.

Weaker demand in Europe

Over the half-year reporting period, Devro experienced weaker demand in Europe – particularly during April and May – some of which Mallard believed was because of destocking following recent price increases. Sales volumes in Australasia and UK businesses were lower than in the previous year, said the company, in both cases reflecting a slight decline in the general market and particularly challenging trading conditions for customers.

Price rises contributed a further 2% to revenue and these were implemented to recover rising collagen costs, said Mallard. Collagen costs now appeared to be steadying. Mallard went on to say that as a result of this slower revenue advance, coupled with the higher costs and Q1 production problems in the US (now much improved), the group expected first-half profits to be about £3M below the previous year. Profit before tax for the first half of last year was £20.2M.

Better second half

Devro’s Trading has picked up in June and the group anticipates a better second half-year performance as capacity constraints ease – in part because additional volumes from its Czech plant are expected to come on stream a month earlier than expected – and destocking eases.

However, even with improved profitability in the second half of the year, Mallard said Investec’s current forecasts “looks testing” and it has therefore reduced its full year forecasts by £2M each in 2013 and 2014.

Its new profit before tax predictions are £43.1M and earnings per share of 20.9p for 2013 (previously 21.9p) and £47.6M with earnings per share of 23.1p (24.0p) for 2014.

Devro reported there had been some success in product testing on its new development line in the US, enabling management to progress plans for its investment in the coming years.

The firm will release interim results on July 31 2013.

About Author



Related Articles

Food & Drink Business Conference & Exhibition 2016

Upcoming Events

  • October 21, 2018Int'l Food Products Exhibition (Sial)
  • October 25, 2018Italian Espresso Coffee Show (TriestEspresso Expo)
  • October 25, 2018Finnish Food Fair
  • October 31, 2018Int'l exhibition for food products and equipment (Indagra Food)
AEC v1.0.4

find food jobs

The Magazine

F&D Business Preferred Suppliers

New Subscriber

Subscribe Here