Bellshill plant closure on track as sales fail to sizzle at sausage skin firm Devro

Sausage-skin and food casings maker Devro said plans to closure its Bellshill site in Lanarkshire with the potential loss of scores of jobs remain on track after it reported cooling sales.

The firm is one of the largest manufacturers of collagen food casings in the world. Picture: Contributed

The group, which is one of the world’s top manufacturers of collagen products for the food industry, said full-year edible collagen volumes were flat, with the group delivering overall volume growth of just 1 per cent in the second half.

In its trading update, the firm pointed to “slightly lower than anticipated” second-half volumes. It said that a less favourable country mix combined with a smaller-than-expected currency exchange benefit, due to a strengthening pound, meant that it now expects to report underlying operating profits for the year of between £39 million and £40m – roughly flat on 2018.

Devro said that after a slower start in the first half of 2019, overall volumes in emerging markets grew 13 per cent in the second half and 7 per cent for the full year.

While overall volumes in North America grew 7 per cent, growth during the fourth quarter was not as strong as expected, being impacted by a longer-than-anticipated Christmas shutdown at a key customer.

Challenging

Market conditions in Japan and Europe continue to be “challenging”, the firm added. In Europe, the group reported “weak market sentiment”, with lower promotional activity due to higher pork prices and the impact of de-stocking by some of its distributor partners. As a result, overall sales in mature markets fell by 3 per cent in the year.

The group said cost cutting initiatives “continued to deliver well” with savings likely to amount to £7m savings in the 2019 financial year. “Our proposed plans for the closure of the Bellshill site in Scotland remain on track,” it added.

In October, Devro announced plans to shut its Bellshill site with the loss of some 90 jobs. The group said it had undertaken a review of its global manufacturing footprint in an effort to obtain “further efficiency improvements”.

While the firm proposes to close its Bellshill operation, it is looking to increase the range of products manufactured at its nearby Moodiesburn site, also in North Lanarkshire, and relocate some of the manufacturing assets from Bellshill within the wider group.

The Moodiesburn operation, where the group is headquartered, recently received a £2m investment.

In its latest trading update, Devro told investors: “In 2020 we expect to achieve strong volume growth in emerging markets. In our mature markets we expect good volume growth in the North American snacking market and, whilst we anticipate a continuation of the challenging market conditions in Europe (particularly in the first half of 2020), we expect overall group volumes to be ahead of 2019.”

The firm is due to announce its full-year results on 4 March. In February last year, it reported an underlying operating profit of £40m for 2018.