Sausage-skin maker Devro sees trading sizzle

The firm said the closure of its Bellshill site, a move cutting some 90 jobs, remains on track. Picture: John Devlin.The firm said the closure of its Bellshill site, a move cutting some 90 jobs, remains on track. Picture: John Devlin.
The firm said the closure of its Bellshill site, a move cutting some 90 jobs, remains on track. Picture: John Devlin.
Moodiesburn-based sausage-skin and food ­casings maker Devro is keeping its full-year expectations unchanged despite some Covid headwinds.

It said trading between July 1 to October 31 remained “robust,” despite the impact of coronavirus on the food service channel, with headway in both collagen volumes and group operating margins.

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Devro added that most mature markets grew in the period, but this was more than offset by declines in Continental Europe and the UK and Ireland, mainly reflecting a weaker food service channel. “For the full year, we still expect good growth in emerging markets to offset a decline in our mature markets leading to broadly flat collagen volumes, with an estimated 2 per cent net negative impact from Covid-19,” the firm said.

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It added that the closure of its Bellshill location and transfer of production lines to the Czech site remain on track.

As of November 13, group net debt was £123.8 million, and the firm expects net debt to improve by year-end, to a similar level as of June 30. “We expect strong cash generation in 2021 to drive leverage down further.”

The interim dividend, announced in July, of 2.7p will be paid to shareholders on 15 January.

Chief executive Rutger Helbing said: "We continued to make good underlying progress in the period. While we expect market conditions to remain challenging for the rest of the year, we remain on track to deliver against our expectations.” He also stressed that all of the firm’s sites remain open.

Shore Capital analysts Darren Shirley and Clive Black said: “We view Devro as a very well-invested global business, with strong market positions, healthy and attractive margins and robust underlying cash generation that can support healthy deleverage over time, such traits are clearly undervalued at

current levels. We also highlight the attractive and increasingly sustainable income credentials.”

They added that after what they see as “a resilient update against demonstrably challenging and volatile market conditions, and in unprecedented times, we leave our slightly-above-consensus FY2020 profit forecast unchanged for the time being”.

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