Weir and Devro set to reveal eastern profits

Published on Friday 30 July 2010 11:24

TWO Scottish companies will this week unveil the benefits of growing activity in emerging markets.

Engineering group Weir and the meat casings producer Devro have seized on opportunities in the Far East, particularly China, where the economy has weathered the global downturn better than most.

Rising affluence accompanied by continuing urbanisation in those markets is driving demand for an array of products and services which include meat, power and raw materials.

This has helped boost Glasgow-based Weir, which has issued three positive trading updates in recent months. Chief executive Keith Cochrane is expected on Tuesday to confirm analysts' predictions for first-half profits in the region of 140 million, a roughly 5 per cent increase on last year.

This is expected to be followed by even stronger profits growth in the second half.

The situation is in stark contrast to the beginning of this year, when Weir reported uncertainty over the outlook for orders. The FTSE 250 firm has since seen a dramatic rise in demand: its shares surged last month after reporting that order input during the 22 weeks to the start of June had risen by 25 per cent year-on-year.

"A lot of the activity we have seen in the first half has been driven by China," said Michael Blogg, analyst with Arbuthnot Securities.

"The rate at which the Chinese have been consuming materials is exceptional, and that is creating demand for Weir's equipment."

Also on Tuesday, the sausage skin firm Devro, based north of Glasgow, is expected to report a robust increase in interim profits after trading in the first half of the year came in ahead of initial expectations.

The company cheered shareholders last month with an update in which Devro reported "continuing progress in sales, pricing, volume growth and manufacturing efficiency". In a note to investors, house broker Nicola Mallard at Investec said profits in the first half of this year should be at least 65 per cent higher than the 9.2m made last year before tax and exceptionals.

Devro makes collagen casings used in sausages, salami, ham and other cooked meats from four major facilities spread across three continents. It dominates its sector, which is expected to continue annual growth of about 5 per cent as sausage makers steadily move away from using traditional gut casings.

Demand is also being driven by changing tastes in emerging markets, where increasingly prosperous consumers are favouring more meat. Devro's sales into China rose 21 per cent last year.