Scots sausage skin maker Devro sees profits sizzle

Devro, the Moodiesburn-based sausage-skin and food ­casings maker, is on track to hit the upper end of profit expectations.

Scottish group Devro is a leading global manufacturer of collagen products for the food industry. Picture: John Devlin

In a brief stock market update, the firm told investors that trading in the final months of 2020 was slightly ahead of management expectations, driven by higher volumes and margins.

As a result, group underlying operating profit will now be towards the upper end of current analyst forecasts of between £38 million and £40.5m.

The group said it had delivered strong cash generation in the final quarter. Net debt at the end of December 2020 stood at about £110m.

Devro is scheduled to announce its 2020 full-year results on March 2.

Damian McNeela, an analyst at brokerage Numis, noted: “Following a positive end to the year, Devro has indicated that adjusted operating profit will be slightly ahead of current expectations for FY2020. This drives modest upgrades of circa 3.5 per cent at adjusted EPS [earnings per share].

“We think that this is an excellent outcome given the market and operational challenges presented by the pandemic. We believe that the improving financial metrics of the group are compelling.

“We maintain current forecasts for the outer years to reflect the uncertainty brought about by the pandemic. We have also updated our cash flow assumptions to reflect the better net debt outturn.”

Towards the end of November, the firm said trading between July 1 and October 31 had been “robust,” despite the impact of coronavirus on the food service channel, with headway in both collagen volumes and group operating margins.

It 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 noted at the time.

In October, Devro hired a brewing industry high-flyer as its new finance boss.

Rohan Cummings joined the board as executive director and chief financial officer at the start of December. He replaced Jackie Callaway, who announced during the summer that she was leaving the group to take up the same post at Coats Group.

Devro chief executive Rutger Helbing said: “I am delighted to welcome Rohan to Devro. With his broad finance and international background, as well as his strong track record of helping businesses to grow, I look forward to Rohan using that experience to contribute towards delivering Devro’s ‘3Cs’ strategy and growth ambition.

“I would also like to thank Jackie for her contribution over the last few years and wish her well in her future endeavours.”

At the time of November’s trading update Helbing noted: “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.”

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