FDBusiness.com

Devro, the world’s leading manufacturer of collagen products for the food industry, has reported a 39.4% increase in operating profit before exceptional items to £38.2 m on revenue up 7.5% to £237.0m for the year ended December 31st 2010. Pre-tax profit including exceptional items was £55.2m against £26.9m in 2009.

The two key drivers for Devro’s business remain the growth of meat consumption in emerging markets, and the conversion of sausage casings from gut to collagen in both established and developing markets. These combined gave an estimated growth in the global (excluding China) edible collagen market of approximately 4% in 2010. Devro experienced sales growth in most of its markets, with the exception of China, where the Scottish company took a conscious decision to reduce sales to satisfy strong demand elsewhere. Demand for collagen casings is growing rapidly in China, and Devro is looking carefully at strategic ways to approach the market.

Reflecting the growing demand for its products, of the capital expenditure in the year of £26.9m, £14m related to in increased capacity. New lines have been brought on stream in the Czech Republic and Australia, and existing lines in Scotland are being upgraded. To cope with demand, capital expenditure will increase further in 2011.

“Capital investment of £45m is planned for 2011, which will increase capacity by 8% in both 2012 and 2013, improving efficiency, reducing unit costs, and limiting the consumption of fossil fuels. We plan to invest in additional capacity and to enhance manufacturing efficiencies in both 2012 and 2013. These investments will not require additional shareholder funds,” says Peter Page, chief executive of Devro.