Devro to close Bellshill site, focus on Moodiesburn

Glasgow-based sausage skin and collagen products firm Devro said on Tuesday it will close its Bellshill site with the loss of 90 jobs and increase the portfolio of products manufactured at its Moodiesburn site.

“In line with our strategic priorities, the group has undertaken a review of its global manufacturing footprint with the aim to pursue further efficiency improvements, as well as to align available capacity to the group’s growth ambitions,” Devro in a stock exchange statement.

“As a result of this review we are proposing to close our Bellshill site in Scotland and, consequently, to increase the portfolio of products manufactured in our Moodiesburn site in Lanarkshire and relocate some of the Bellshill’s manufacturing assets within the wider group.

“Following consultation, we expect Bellshill to close during 2020 with the loss of c.90 employees. 

“An exceptional cost of £15m (£10m of cash) will be incurred …

“This review has identified annualised cost savings of £5m to be fully realised in FY 2021.”

The news on Bellshill came in a trading update for the period July 1 to September 30, 2019.

Devro said: “Sales momentum improved during Q3 2019 with 1% volume growth in collagen casings (H1 2019: -1%).

“During the period we saw good trading in North America, where we benefited from continued growth in snacking categories, and also in China, due to continued strong growth albeit at margins below the average for the Group.

“These positive performances were offset by a further deterioration in market conditions in Continental Europe and weaker than expected sales in Japan.

“As anticipated, UK & Ireland and Australia saw similar trends to H1 2019. 

“We continue to expect a modest acceleration of volume growth in Q4 2019 with full year volume growth expected at c.1%.

“Our cost saving initiatives are progressing well and we are confident of achieving our guidance of £7 million in FY 2019.  

“We continue to expect the covenant net debt / underlying EBITDA ratio to be around 2x at 31 December 2019. 

“Our expectations for the full year remain broadly unchanged as growth in underlying operating profit through higher volumes, delivery of costs savings and positive FX will be offset by adverse country/product mix, lower revenues from other products and energy and wage inflation which was highlighted in previous announcements.”