3rd Mar 2015 09:42
LONDON (Alliance News) - Devro PLC shares fell Tuesday after the sausage-casings manufacturer revealed a hefty drop in both profit and revenue in 2014 and a flat dividend for the year.
The company reported a pretax profit of only GBP2.2 million for 2014, compared with a GBP37.5 million profit the year before, amid a 4.3% fall in revenue to GBP232.2 million from GBP242.7 million and big exceptional costs.
As it did in the first half, Devro said it booked exceptional costs associated with its investment projects and restructuring, a total of GBP23.9 million in the year - GBP16.9 million from restructuring and GBP7.0 million due to investment projects. Devro also said its profit was hit by GBP4.3 million due to adverse foreign exchange movements.
However, even stripping out exceptional costs, Devro's operating profit was still lower than last year, down 28% at GBP30.3 million.
Devro left its total dividend for the year at 8.8 pence per share, in line with last year's.
The group's shares were trading 7.5% lower Tuesday morning, at 268.50 pence.
In early 2014, Devro decided to accelerate the restructuring of its existing manufacturing footprint, which included taking out production of older, less efficient technology at one of its factories in Scotland. The move hit its 2014 profit, but it said it will improve manufacturing efficiency from 2015 onwards.
The group also made significant progress on its two strategic investment projects in China and the US, both of which are on track to commence production in 2016 and start delivering benefits, it said.
Devro said its operating cash flow before exceptional items improved, up 10% year-on-year, as inventory levels were reduced following actions taken to manage production capacity together with improved sales.
The group said that sales continue to grow in its "strategically important" markets - China, Japan and Germany - with China sales having already reached 50% of its new plant capacity.
Devro said that despite facing challenging economic conditions in some regions, it will start to see the benefit this year of some of the restructuring actions it took in 2014.
"Devro has started 2015 with good order levels and momentum in sales growth. Cost reductions from the restructuring programmes in Scotland and Australia will be achieved at the same time as a slowing of input cost increases compared with recent years," said Chief Executive Peter Page in a statement.
"2015 is an important year in the development of Devro, with the construction of the two new plants in the US and China reaching completion, whilst continuing to decommission the older, less efficient capacity," Page added.
By Rowena Harris-Doughty; [email protected]; @rharrisdoughty
Copyright 2015 Alliance News Limited. All Rights Reserved.
Related Shares:
DVO.L