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Devro First-Half Profit Hit By Lower Revenue, Investments

30th Jul 2014 10:15

LONDON (Alliance News) - Sausage-casings manufacturer Devro PLC Wednesday posted a significant drop in profits for the first-half of the year, hit by muted sales volumes, slowing demand and huge exceptional costs as it pumps money into restructuring and major investment projects.

The group reported a pretax profit of GBP1.6 million for the six months to June 30, compared with a pretax profit of GBP16.2 million a year earlier.

Devro said profits in the first-half were hit by lower revenue and GBP10.8 million in exceptional costs associated with its investment projects and restructuring.

The company maintained its interim dividend at 2.70 pence per share.

"In order to add capacity, align products with market opportunities and reduce unit costs, all our manufacturing operations are in the midst of a significant transformation process which is impacting current year profits but will enhance earnings in the future," said Chief Executive Peter Page in a statement.

Devro is currently embarking on a number of major investment projects for new plants in the US and China, together costing around GBP90 million in capital investment. The group said both projects are advancing as planned, with expenditure on budget and on track for completion in 2016.

Revenue in the six month period fell to GBP109.7 million, down 8% on a reported basis from GBP118.9 million the prior year, hit flat sales volumes and weakness in several developed and emerging markets, including the UK and Russia.

"Sales volumes improved in the second quarter... Strong volume growth continued in China, Japan and Germany and there was also an increase in volumes sold in the USA. Sales volumes in the UK and Russia improved in the second quarter," the company said.

"Volumes declined in several emerging markets but longer term demand remains strong and we are taking actions to benefit from this growth," it added.

Despite the profit and revenue fall, the collagen-products manufacturer for the food industry said its expectations for the full-year remain unchanged.

"Based on current conditions, we expect that sales volumes in key markets will continue to grow, offsetting slower trading in other markets, resulting in similar overall volumes to 2013. We will continue to balance supply with demand to manage inventories in line with our expectations for future sales with some capacity reductions planned for the second half," Devro said.

Devro shares were trading 3.9% higher Wednesday morning at 252.50 pence.

By Rowena Harris-Doughty; rowenaharrisdoughty@alliancenews.com; @rharrisdoughty

Copyright 2014 Alliance News Limited. All Rights Reserved.


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