Devro 6-month revenue flat at £113m

Shares of Glasgow-based sausage skin and collagen products company Devro fell 7% after it said revenue for the six months to June 30 was unchanged at just under £113 million and profit before tax fell from £9.6 million to £300,000 amid a restructuring of the company’s manufacturing facilities.

The firm’s new plants in the United States and China started production in the first half of the year.

But Devro warned that “due to complexity in US and current market in China the transition period is expected to be longer than originally planned.”

Devro said its revenue benefited from exchange rates, which offset a 7% reduction in sales volumes.

About 40% of the reduction in sales volumes related to China, “but this had little impact on profit given the low margins earned on products that have historically been imported,” said Devro.

“In addition approximately 40% of the reduction related to the Europe segment, in particular Russia which continues to experience difficult economic conditions. 

“Of the remaining reduction approximately half related to Latin America, which is the region most significantly impacted by our manufacturing transformation programme.”

Underlying operating profit was £18 million, up by £2.4 million on the same period last year. 

Devro said exceptional items totalled £13.4 million for the first half.

In the United States, these exceptional items related mainly to costs associated with the winding down of Devro’s old factory and costs incurred before the start of normal production at its new plant. 

In China, exceptional items were related to costs incurred before the start of normal production at its new plant.

Devro chief executive Peter Page said: “Underlying operating profit was ahead of prior year for the first half.  

“Improved manufacturing efficiencies, lower input costs and exchange rate benefits more than offset the effects of reduced year on year sales volumes.

“The board’s expectations for the full year underlying operating profit remain unchanged.

“The transformation programme has reached its final phase. 

“The next stage of strategic development will focus on growing sales through improved commercial capabilities, introducing the next generation of differentiated products and further improving manufacturing efficiencies.”