Devro warns of higher costs linked to US shake-up

Sausage skin maker Devro today warned that costs linked to the shake-up of its US manufacturing operation will be higher than previously expected.

Devro is facing higher-than-expected exceptional costs. Picture: Jeff Holmes

The Moodiesburn-based firm said the “complex” process of transferring customers to other manufacturing sites as it switches to its new US plant was taking longer than planned, while it has also been hit by the strengthening of the dollar against sterling.

As a result, Devro said exceptional costs for the full year were now forecast to come in at about £20 million – some £6m higher than previously indicated.

The warning came as the company reported an underlying operating profit of £18m for the six months to the end of June, up from £15.6m a year earlier, on revenues broadly flat at £112.9m.

Chief executive Peter Page said: “Improved manufacturing efficiencies, lower input costs and exchange rate benefits more than offset the effects of reduced year-on-year sales volumes. The board’s expectations for the full-year underlying operating profit remain unchanged.”

He added: “The transformation programme has reached its final phase. The next stage of strategic development will focus on growing sales through improved commercial capabilities, introducing the next generation of differentiated products and further improving manufacturing efficiencies.”

Devro also announced an unchanged interim dividend of 2.7p a share, to be paid on 7 October.

On a statutory basis, pre-tax profits plunged to £300,000, down from £9.6m a year ago, after taking account of £13.4m in exceptional items.