17th Jan 2020 08:39
(Alliance News) - Sausage casings maker Devro PLC on Friday said it is expecting no profit growth in 2019 with a stronger sterling hindering potential foreign exchange benefits and lower than expected collagen volumes during the second half.
Underlying operating profit for the year to December 31 is expected to be between GBP39 million and GBP40 million.
Last year, it reported underlying operating profit of GBP40 million, meaning at best, it could stay flat year-on-year or at worst, represent a 2.5% fall.
Full-year edible collagen sales were flat with the 1% volume growth in the second half being "lower than anticipated".
Also weighing on Devro was a "strengthening sterling" which means it its foreign exchange benefit will be smaller than expected. Aside from a site in Scotland, Devro also has manufacturing facilities in the US, the Netherlands, China, Czech Republic and Australia.
In its 2018 report, the company said that "almost 90% of the group's revenues are invoiced in currencies other than sterling".
In emerging markets, volumes grew by 7% in the full-year, amid its "3Cs strategy" programme, geared at building a stronger market share in the region.
In the US, a longer than expected "Christmas shutdown" at a key customer lead to Devro's volume growth of 7% in the fourth quarter being lower than planned.
Devro added: "Market conditions in Japan and Europe continued to be challenging as previously guided. In Europe, we saw weak market sentiment, with lower promotional activity due to higher pork prices and the impact of de-stocking by some of our distributor partners, which we expect to continue into the first half of 2020. As a result, overall sales in mature markets declined 3% in the year.
"In 2020 we expect to achieve strong volume growth in emerging markets. In our mature markets we expect good volume growth in the North American snacking market and, whilst we anticipate a continuation of the challenging market conditions in Europe, particularly in the first half of 2020, we expect overall group volumes to be ahead of 2019."
The company added it delivered GBP7 million in cost savings in 2019 and the proposed closure of a site in Bellshill, Scotland, is on track.
Devro shares were 3.2% lower at 168.81 pence each in London on Friday morning.
By Eric Cunha; [email protected]
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