City downgrades forecasts for Devro in 2013 and 2014

 Breaking News
  • HKScan Strengthens its Meals Offering With Investment in Estonia HKScan, the leading Nordic food company, plans to invest in its Rakvere unit in Estonia. The €8 million investment will go towards modernising the unit’s frying department, including the expansion of the building and the installation of new cooking and packaging lines enabling implementation of new technologies and packaging solutions. Construction is to commence in [...]...
  • Food and Drink is at the Heart of the UK’s Largest Packaging Show Packaging Innovations, Empack and Label&Print returns to Birmingham’s NEC on 28 February-1 March 2018, and is set to be the most innovative show to date. With over 290 exhibitors already signed up, the UK’s largest annual event for the entire packaging supply chain will feature the latest industry innovations and technologies, alongside a major free-to-attend [...]...
  • AGRO Merchants Group Acquires Grocontinental AGRO Merchants Group, a global leader in cold storage and logistics solutions, announced today the acquisition of UK-based Grocontinental Limited. This transaction reinforces AGRO’s position as the leading cold storage and logistics provider in the United Kingdom and Ireland, deepens its commodity expertise, and substantially enhances its value-added service offerings for customers. David Grocott and Linda Grocott, third generation owners of [...]...
  • Trade Fair and More – The Event and Congress Programme For Anuga FoodTec 2018 Resource efficiency will be the primary focus of Anuga FoodTec 2018, the leading international supplier fair for the food and beverage industry, which will be held in Cologne, Germany from 20 to 23 March 2018. Around 1,700 suppliers from more than 50 countries will be presenting their new products for the production and packing of [...]...
  • TINE to Invest €77 Million in New Jarlsberg Plant in Ireland TINE, Norway’s largest farmer-owned dairy co-operative, is to invest €77 million in a dairy with the capacity to produce 20,000 tonnes of Jarlsberg cheese a year. The goal is to secure and strengthen Jarlsberg sales outside of Norway as export supports are phased out in 2020. This will make export of Jarlsberg from Norway unprofitable. “Jarlsberg [...]...

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

  • January 8, 2018RAI Exhibition
  • January 16, 2018Sival Plant Production Trade Show
  • January 17, 2018Dutch Organic Trade Fair
  • January 17, 2018Anfas Food Product
AEC v1.0.4

find food jobs

The Magazine

F&D Business Preferred Suppliers

New Subscriber

Subscribe Here