Sales sizzle but Scottish sausage skin maker Devro takes action over Covid-19

Devro, the Scottish ­sausage-skin and food ­casings maker, said it was “working hard” to service its customers in the food supply chain as it reported healthy volume growth in the first quarter.

Moodiesburn-based Devro told investors that it had a robust balance sheet leaving it well positioned to succeed in uncertain times. Picture: John Devlin

In a trading update, the firm noted that all of its sites were currently operating during the global coronavirus emergency, with bosses focused on protecting the well-being of “employees, their families and the wider community”.

“Our teams have responded well to the Covid-19 crisis and their efforts and dedication have resulted in us being able to maintain the safety and continuity of our global operations,” Devro added.

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The group has instigated “cash mitigation actions” in response to the outbreak, including cutting all discretionary capital and operating expenditure. It is currently not taking advantage of any UK government support schemes.

Like many other stock market-listed companies, Devro is delaying the payment of its final shareholder dividend “as a precautionary measure”, which would have cost it £10.5 million. It intends to pay an additional interim dividend of the same amount in the second half of 2020, though the board will keep that decision under review “as the Covid-19 pandemic unfolds”.

On current trading, the group said first-quarter edible collagen volumes had increased by about 2 per cent compared to the prior year, driven by various growth initiatives and “elevated short-term demand” relating to coronavirus.

Emerging markets were up 13 per cent led by strong growth in Latin America, Russia and east and south-east Asia. Mature markets fell by 3 per cent, partly due to a weaker demand environment during January and February in the UK and Ireland, while North America continued to grow.

In recent weeks some suppliers have experienced disruption in their end markets but the firm has “acted decisively” to secure supply, resulting in some raw material inflation.

Devro told investors: “Despite our good volume growth performance in Q1, we do not envisage any change to prior volume guidance for 2020. As such, and absent any negative Covid-19 impact, the board’s expectation for good progress in 2020 is unchanged.

“Devro is a global business, integrated into the crucial food supply chain and has a robust balance sheet leaving it well positioned to succeed in these uncertain times.”

Damian McNeela, an analyst at Numis Securities, described the update as “encouraging”, noting: “There has been some supply chain disruption due to the closure of tanneries leading to inflation in hide prices but the company is confident that it can offset these. As such the company is maintaining [full-year] 2020 guidance.”

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