14th Nov 2013 10:06
LONDON (Alliance News) - Devro PLC Thursday said that it now expects its full-year trading outcome to be at the lower end of market expectations, due to flat sales volumes and weakness in some developed markets in the third quarter.
The collagen-products manufacturer for the food industry said that it remains confident in its longer-term opportunities, despite difficult trading in the second-half period from July 1 to date.
Devro said that revenue continued to grow in the third quarter, helped by price increases in the first half of the year.
The group said that sales volumes were flat in the quarter, but trading profits and margins have improved in the second half of the year, due to increased capacity at its Czech plant.
It said it has seen strong sales in emerging markets, in particular Latin America, China and South East Asia, while both Germany and Japan continued to grow volumes across all major product categories.
By contrast, the group said trading slowed more than expected in the UK, Continental Europe, Australia and North America, and was below expectations.
Devro said that Select, which is a thin-walled sausage casing introduced in 2010 to replace top-quality sheep gut, continues to make a significant contribution to sales, now accounting for 8% of overall sales.
Devro also said that the board has approved capital expenditure for a GBP40 million project to construct a new manufacturing hall at its site in South Carolina in the US, which it said will reduce manufacturing costs by around GBP8 million per year from 2016 onwards.
It said that the investment will be funded from its existing banking facilities and future cash flow, and is part of its ongoing manufacturing improvement programme, which it hopes to boost profits for sales into the Americas.
The manufacturer said that it is currently evaluating capacity expansion options in China, although a decision won't be made until early 2014.
The group said its gross debt is broadly in line with the half year level, and continues to be well within its banking facilities.
Share in Devro were down 4.3% Thursday morning at 306.13 pence per share.
By Rowena Harris-Doughty; [email protected]; @rharrisdoughty
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