UK: Sausage skin firm Devro to cut production
Devro cautious over demand in markets including the UK
UK-based Devro, which makes casings for sausage makers, said it would lower production this year amid concerns over demand in some markets.
Chairman Steve Hannam said today (4 March) Devro expected sales to grow in 2014 thanks to Germany, China, Japan and parts of Latin America.
However, Hannam said the outlook for the UK, the US, Russia and Australasia was "less clear".
He said: "In order to limit any further increase in the inventory levels that had been increased during 2013 in anticipation of stronger demand in 2014, Devro will lower production volumes during the year to balance short-term supply and demand."
Devro shares were down 9.97% at 274.6p at 10:05 GMT.
However, Devro, which reported its results for 2013 today, was "confident in the opportunity" of supplying "a dynamic and growing global market for edible casings", Hannam insisted.
The company is upping investment at a plant in the US and building a new factory in China. "These two projects represent an unprecedented level of investment for Devro and demonstrate both the board's confidence in the opportunities before us, and the company’s ability to address them," Hannam said.
Devro reported mixed financial results for 2013. Revenue was up 1% at GBP242.7m. However, pre-tax profits slipped from GBP39.3m to GBP37.5m. Nevertheless, Devro booked a higher net profit, which increased from GBP32m to GBP33.6m.
Hannam, who is stepping down as chairman after five years in the role, said Devro made "considerable progress in 2013 despite a more difficult trading background".
Panmure Gordon analyst Damian McNeela cut his rating on Devro's shares to 'hold'. He said: "Medium to long term we remain attracted to the macro drivers of rising per capita meat consumption, particularly in developing economies, and believe that Devro is well-placed capitalise on this growth. However, given the lack of near term visibility in developed market volumes and the magnitude of the downgrades we reduce our recommendation from buy to hold".
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