Rising costs dent Devro’s profit expectations

By DOMINIC JEFF
Published on 22/10/2012 10:54

Shares in sausage skin-maker Devro fell this morning after it said rising raw material costs and adverse currency movements would eat into this years profits.

The Moodiesburn-based firm said that although sales volumes continued to grow across a wide range of markets, raw material prices had been rising since July and the trend is expected to continue into next year.

It said: “As a result of the combination of adverse currency movements, continuing increases in raw material costs and extended plant commissioning periods, overall full year operating profits are expected to be slightly below our original expectations but ahead of last year.”

The firm is investing £35 million to increase capacity and enhance productivity, and said new production lines are already running successfully in Scotland, Australia, the Czech Republic and the USA. Further capacity is on track for completion in 2013.

The company said it remains confident in the continuing growth of the business.

Chief executive Peter Page said: “Our business is well positioned for the future, with good demand from a global customer base, an experienced management team, and a proven product portfolio.”

However, the shares fell by more than 5 per cent in early trading.

Analyst Charles Pick, at Numis, said: “This could present a buying opportunity at lower levels, although the shares had enjoyed a strong recent run.”