28th Apr 2014 08:11
LONDON (Alliance News) - Devro PLC, which makes collagen products for the food industry, Monday warned that lower-than-expected sales and the acceleration of the restructuring of its manufacturing facilities would knock about GBP8 million off its 2014 profits.
In a statement, the company said sales volumes were down on the year in the first quarter, although there were signs of improvement in March that have continued into April. It said sales were strong in some key markets like Germany, Japan, China and the US, but it was hit by currency restrictions and devaluations in Latin America, weakness in European retail markets, the EU pork meat import ban in Russia and by price increases it made in Europe last year.
"On account of the current market situation, the board has taken a more prudent view such that volumes and prices in 2014 are currently expected to be flat and, for that reason, has decided to bring forward immediately strategic plans to streamline Devro's manufacturing footprint," the company said in a statement.
It said it will move to a greater proportion of its manufacturing being on its most cost efficient technology over the next year, a move that will reduce manufacturing costs by GBP4 million in 2015. It expects to book exceptional cash costs of about GBP6 million for the revamp over the next two years and non-cash costs of about GBP10 million.
"Our investment projects in the USA and China are progressing according to plan which will help reduce the group unit cost of manufacture still further from 2016," it added.
The company said the hit it expects this year from currency movements remains as it previously indicated: the forex movements will hit operating profit by GBP5 million and revenue by GBP13 million.
Devro shares were down 13.4% at 205.25 pence Monday morning, one of the biggest declines on the London market.
By Steve McGrath; [email protected]; @SteveMcGrath1
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