Scottish sausage skin maker Devro flags higher profits after overcoming inflation pressures

Devro, the Scottish sausage-skin and food ­casings maker in the process of being taken over by a German firm, is forecasting healthier profits than previously expected.

The group said it had traded well throughout 2022 with reported revenue of about £290 million reflecting growth of around 15 per cent , or 11 per cent at constant currency rates, compared with the year before. It noted that revenue growth had been underpinned by higher pricing, reflecting successful recovery of cost inflation, as well as good volume increases particularly in mature markets.

Releasing a short trading update, the firm said the second half of the year delivered strong operating margins, reflecting the benefits of management’s pricing actions, operating efficiency and “foreign exchange tailwinds”. As a result, adjusted operating profit is anticipated to be ahead of the board’s expectations.

Moodiesburn-based Devro added that cash generation in the period remained robust, despite higher working capital and expenditure to facilitate further growth, with group covenant net debt of around £90m at the year end.

The firm looks set to be taken over by a German company that has pledged to retain Devro’s Moodiesburn HQ and invest in its seven global manufacturing sites. Privately owned Saria is focused on the agriculture, food and biofuels sectors and operates from more than 200 locations in 26 countries employing some 10,500 workers. Its cash offer in November placed an enterprise value of £667m on Devro.

Saria said it would look to invest in and grow Devro and pointed to its strong track record of integrating and investing in acquisitions, including several in the UK. It described Devro’s product offering as “highly complementary” to Saria’s existing product portfolio, particularly in the sausage casings market. The acquisition is being implemented by indirect subsidiary Saria Nederland - Bidco. The firm said it planned to undertake a “detailed review” of Devro's research and development function, with the potential for additional investment.

Steve Good, chairman of Devro, said at the time: “The board believes that the offer from Saria reflects the strength of Devro, our medium-term prospects, and recognises the substantial improvements made to the company through the successful implementation of our growth strategy.”