Devro eyes fresh export growth after 22% surge in profits

By PETER RANSCOMBE
Published on Wednesday 22 February 2012 00:00

SAUSAGE skin maker Devro is targeting further growth in Germany, Japan and Latin America this year after posting a 22 per cent rise in full-year profits.

The Moodiesburn-based firm, which has a market value of more than £450 million, has installed more efficient equipment at its factory in Bellshill and is looking to do the same at its facility in the Czech Republic.

Group finance director Simon Webb stressed the efficiency savings had not involved redundancies, adding that the firm had in fact taken on an extra 12 staff at the Scottish plant to boost its headcount to around 200.

Replacing the older machines helped Devro to post a 22.4 per cent rise in profits before exceptional items to £43m in 2011, on the back of a 6.6 per cent increase in turnover to £227.7m.

The rise in profits triggered a 14.3 per cent increase in the total dividend to 8p a share.

Webb told The Scotsman: “We’ve seen a 30 per cent rise in sales in Japan in the past year and that’s a very profitable market for us. We’re also still seeing double-digit growth in China and we’ve opened a sales and marketing office in Beijing.”

Devro and its peers have enjoyed rising sales in China and other developing markets in south-east Asia as the growing middle-classes spend more money on processed meat.

But Devro is also looking to grow its profits in developed markets such as Germany and Japan after introducing its higher-quality “Select” product about 18 months ago.

The firm sells cases made from collagen, the same material that makes up the connective tissue found in all mammals, which is designed to replace sausage skins made from animals’ guts.

Clive Black, an analyst at Shore Capital, said: “Devro had a very good year indeed. Whilst not a bargain basement stock of any sort, we do continue to see value in Devro’s shares.”

Numis Securities analyst Charles Pick cut his recommendation on Devro from “add” to “hold” following a good run for the shares. But Pick added: “The fundamentals remain good for Devro, with increased consumption of processed meats in emerging markets and manufacturing savings for sausage makers switching to edible collagen from gut.”

Charles Hall, an analyst at Peel Hunt, said: “Devro has strong long-term growth prospects due to population growth, demand for protein and gut conversion with the potential for ‘Select’ to improve margins.”

Devro’s bottom-line profits fell from £54m to £43m after there was no repeat of 2010’s £18.8m pensions credit.

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